Audit 368721

Finding 2024-002 - Material Weakness - Special Tests and Provisions Delinquent deposits to the replacement reserve Name of Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Section 8 Housing Choice Vouchers Assistance Listing Number: 14.871 Criteria In accordance with the HUD regulatory agreements, the Projects are required to make monthly deposits to its replacement reserves. Condition During the year ended June 30, 2024, the Projects did not make the required monthly deposits to the replacement reserves in the amount of $96,360. The Projects were required to make monthly deposits to the reserves in the amount of $144,539 and only $48,179 was deposited during the year ended June 30, 2024. Cause Management's internal controls over monitoring of the replacement reserves did not function consistently throughout the year ended June 30, 2024. Effect or Potential Effect Failure to make monthly payments resulted in an underfunding of the replacement reserve and a violation of the regulatory agreements. Questioned Costs Not applicable. Context Of the 12 monthly deposits that are required, management provided support for 3 monthly deposits. Identification as a Repeat Finding This is not a repeat finding from 2023. Recommendation Management should establish or undertake a review of internal controls over monitoring of the replacement reserve requirements to ensure deposits are made as required. Views of Responsible Officials Management acknowledges that certain internal controls did not operate effectively during the year ended June 30, 2024. This is attributed to an unusually high level of staff turnover within the finance team during the year. We have since supplemented our team with new senior leadership and experienced resources to ensure the replacement reserve is properly funded. The replacement reserve underfunded balances have been deposited subsequent to year end.

Finding 2024-003 - Material Weakness - Special Tests and Provisions - Tenant rent payments not deposited timely Name of Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Section 8 Housing Choice Vouchers Assistance Listing Number: 14.871 Criteria In accordance with the HUD regulatory agreements, Project funds should be immediately deposited in the Projects' bank accounts. Condition During the year ended June 30, 2024, Bay Cove Human Services, Inc., an affiliate and sponsor agency for Juliette Corporation, collected rent and other client fees related to its clients who are also tenants in the Projects. Bay Cove Human Services, Inc. did not timely remit the tenant rent portion of these payments to the Projects which resulted in a total balance owed to the Projects of $161,053 as of June 30, 2024. Cause Management's internal controls over monitoring of the tenant rent deposits did not function consistently throughout the year ended June 30, 2024. Effect or Potential Effect Failure to deposit the tenant rents into the Project accounts timely resulted in a violation of the regulatory agreements. Questioned Costs Not applicable. Context N/A Identification as a Repeat Finding This is not a repeat finding from 2023. Recommendation Management should establish or undertake a review of internal controls over monitoring of the tenant rent deposits to ensure deposits are timely made into the Project accounts. Views of Responsible Officials Management acknowledges that certain internal controls did not operate effectively during the year ended June 30, 2024. This is attributed to an unusually high level of staff turnover within the finance team during the year. We have since supplemented our team with new senior leadership and experienced resources to ensure the tenant receipts are timely remitted to the Project accounts. The due from affiliate balance of $161,053 was fully refunded into the Project accounts subsequent to year end.