Audit 368750

Finding Number 2024-001 • Federal Grantor – U.S. Department of Housing and Urban Development • Federal Program Name – Section 202 Supportive Housing and Capital Advance • Assistance Listing Number – 14.157 • Finding Type – Significant Deficiency in Internal Control over Compliance • Criteria – According to the Regulatory Agreement, the Project is required to make monthly payments into the reserve for replacement account at a monthly amount specified by HUD. • Condition – The Project was required to increase the monthly amount to be paid into the reserve for replacements account when HUD approved a rate increase for the project. The Project did not increase the amount of the payments. The Project also did not make deposits for the months of November and December 2024. • Cause – The project is experiencing a cash flow issue as a result of not receiving all amounts due under the HUD-authorized rent increase. However, the Project did not request a change in the amount due while the payment issues continued. • Effect – Funds were not deposited in the amount required by HUD. Therefore, the Project was not in compliance with its Regulatory Agreement. • Context – The Project did not make monthly payments for the months of November and December 2024. In addition, the monthly contribution amount was not increased to the amount required by HUD as the result of a rate increase. • Questions Costs – The reserve for replacement account was underfunded by $72,548 as of December 31, 2024. • Repeat Finding – No • Recommendation – We recommend that management discuss this issue with HUD and request approval retroactively to fund the reserve account at a lower amount until the funds due to the Project are paid in full by HUD. • Views of Responsible Officials – Management acknowledges the finding and will deposit the full amount due to the Replacement Reserve account once the retro rent increase is received in the operating account.

Finding Number 2024-002 • Federal Grantor – U.S. Department of Housing and Urban Development • Federal Program Name – Section 202 Supportive Housing and Capital Advance • Assistance Listing Number – 14.157 • Finding Type – Significant Deficiency in Internal Control over Compliance • Criteria – In accordance with the Regulatory Agreement between the Project and HUD, the Project is required to deposit surplus cash, as defined by HUD, existing at the end of the fiscal year into a residual receipts account in the name of the Project with within 90 days subsequent to the end of the fiscal year. • Condition – The Project did not make the required deposit for fiscal year 2023. • Cause – Management failed to compute surplus cash on a timely basis. • Effect – The Project is in violation of its HUD Regulatory Agreement. • Context – The Project failed to make the required deposit for fiscal year 2023. • Questions Costs – The amount of surplus cash computed for 2023 was $12,433. • Repeat Finding – No • Recommendation – The Project should ensure the surplus cash calculation is made in a manner that allows for a timely deposit of any required deposit to the residual receipts account. If there are cash flow issues preventing the deposit from taking place, the Project needs to contact HUD and request a waiver if allowed. • Views of Responsible Officials – Management acknowledges the finding and will open a Residual Receipts account and deposit the full amount once the retro rent increase is received in the operating account.