Audit 369603

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 comply with the requirements regarding the maintenance of the reserve for replacement account. • Condition – The Project received permission from HUD to borrow $27,513 from the reserve for replacement account which was to be repaid upon receipt of the September 2024 voucher from HUD. However, the Project did not repay the loaned funds in a timely manner. • Cause – Management did not monitor the cash flow in order to comply with the agreement. • Effect – Funds were not repaid in accordance with the terms of the agreement. • Context – Funds were not repaid to the reserve for replacement account as required. • Questions Costs – $27,513 • Repeat Finding – No • Recommendation – Management needs to monitor the reserve for replacement account and when funds are borrowed, they need to comply with the terms of the agreement. • Views of Responsible Officials – Management acknowledges the finding and has reimbursed the funds. Management has set up additional internal controls to monitor any loans from the reserve 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 or 2024. • 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 and 2024. • Questions Costs – The amount of surplus cash computed for 2023 was $49,678. The amount of surplus cash computed for 2024 was $92,940. • 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 once the retro rent increase is deposited into the operating account.