Audit 370993

FINDING No. 2025-001: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: Residual receipts account. Sample Size Information: Residual receipts account. Identification of Repeat Finding and Finding Reference Number: No. Criteria: As required by HUD regulations, residual receipts account balances in excess of $250 per unit must be applied on a monthly basis to offset Section 8 HAP payments up to the full amount of the monthly subsidy request, depending on the amount of residual receipts available for the offset. Monthly offsets must continue until the residual receipts account reaches the retained balance level of $250 per unit. Statement of Condition: The Project did not offset monthly Section 8 HAP with excess residual receipts in the amount of $494 in a timely manner. Cause: The Project did not abide by the HUD requirement for offsetting Section 8 HAP payments with excess residual receipts in a timely manner. Effect or Potential Effect: The Project received excess Section 8 HAP payments and is liable for the residual receipts available for recapture at year end. Auditor Non-Compliance Code: R – Section 8 Program Administration. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations will be adopted. Recommendation: Management should keep track of the balance in the residual receipts account available for offsetting Section 8 HAP payments. Also, management should ensure timely submission of payment requests through the contract administrator upon discovery of residual receipts available for recapture. Response Indicator: Agree. Completion Date: 03/31/2026 Response: Property accountants will notify the Community Managers and Regional Managers of any residual receipt excess funds monthly to ensure proper and timely payment requests. Management will submit the excess funding in September of 2025 to rectify the current situation.

FINDING No. 2025-002: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: HAP revenue. Sample Size Information: Monthly HAP requests. Identification of Repeat Finding and Finding Reference Number: Yes, 2024-002. Criteria: As required by HUD regulations, a HUD approved rent change must be executed as of its effective date. Statement of Condition: The Project did not implement the HUD approved rent change to its monthly HAP requests in a timely manner upon approval of the rent schedule. Cause: The Project did not follow HUD regulations for timely applying the gross rent change, resulting in an underpayment of HAP for each unit. Effect or Potential Effect: The Project did not request $7,220 of HAP funding in the audit period. Auditor Non-Compliance Code: R – Section 8 Program Administration. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations will be adopted. Recommendation: The Project should comply with HUD regulations for executing the rent change timely upon approval of the rent schedule. Response Indicator: Agree. Completion Date: 03/31/2026 Response: Management involved with implementing the rent increase has been notified and will ensure timely implementation moving forward.

FINDING No. 2025-003: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: Forty-one tenants. Sample Size Information: Five tenants. Identification of Repeat Finding and Finding Reference Number: No. Criteria: In accordance with HUD, tenants in properties subsidized through the Section 8 program must pay a minimum total tenant payment (TTP) of $25. In any property in which the utility allowance is greater than $25, the full TTP is applied toward the utility allowance, and the amount the allowance exceeds $25 is reimbursed to the tenant as a utility reimbursement. Additionally, HUD regulations require timely collection and retention of all initial and ongoing tenant eligibility documentation. Completed lease addendums are required, and both initial and current tenants must be timely verified using the Enterprise Income Verification (EIV) report. Statement of Condition: The Project did not: •Remit a $44 per month utility reimbursement owed to one tenant. •Maintain all required lease addendums for one tenant. •Obtain the required EIV report for one tenant. Cause: The Project failed to remit the utility reimbursement to the applicable tenant and did not maintain appropriate tenant eligibility documentation as required by HUD. Effect or Potential Effect: One tenant is not receiving required financial assistance. Additionally, unable to verify tenant eligibility and cost of assistance may be disallowed. Auditor Non-Compliance Code: R – Section 8 Program Administration. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations will be adopted. Recommendation: Management should implement procedures to ensure proper adherence to Section 8 program administration by remitting the utility reimbursement to the tenant each month, and the Project should implement procedures to ensure that all initial and ongoing tenant eligibility documentation is obtained timely and maintained in tenant files as required by HUD. Response Indicator: Agree. Completion Date: 03/31/2026 Response: Management involved with remitting the utility reimbursements has been notified and will ensure timely implementation moving forward.