Finding No.: 2021-002 Federal Agency: U.S. Department of Housing and Urban Development CFDA Program: 14.239 HOME Investment Partnerships Program Federal Award No: M02ST690203, M03ST690203, M04ST690203, M05ST690203, M06ST690203, M07ST690203, M08ST690203, M09ST690203, M10ST690203, M11ST690203, M12ST690203, M14ST690203, M15ST690203, M16ST690203 Area: Eligibility Questioned Costs: $146,636 Criteria: In accordance with applicable eligibility requirements, existing borrowers must satisfy annual requirements, and initial applicants must be qualified homebuyers or homeowners in order to review HOME funds. For homeownership housing projects imposing recapture/resale restrictions, records must be retained for five (5) years after the affordability period terminates. Annual Requirements: 1. Upon completion of the HOME assisted project and during the term of the loan, the homebuyer shall be required to maintain, at personal expense, property insurance on the mortgaged property for fire, earthquake, typhoon, and flood damage covering the replacement value of all properties at a minimum equal to the loan amount. 2. All HOME-assisted borrowers, regardless of the type of assistance provided, shall be recertified annually to demonstrate compliance with the affordability restrictions. 3. All existing borrowers whose loans have been partially or entirely deferred prior to or on December 31, 2007, shall cease to be recertified for financial and eligibility requirement purposes. This provision shall apply and be made effective after each borrower(s) has/have been recertified for his/her/their last annual recertification due date and completed prior to or on July 28, 2018; and shall therefore be considered the last and final financial and eligibility recertification. Application Requirements: 4. NMHC must perform income eligibility prior to providing HOME loan assistance and must use verification methods that are acceptable to HUD. Verification must be made in writing, from a reliable third party, including verification of birth, unemployment status, monthly income, social security income, income from assets and tax compliance. Such verifications shall be considered valid for a period of ninety (90) calendar days from the date the verification was completed for loans executed prior to July 23, 2009 or one hundred eighty (180) calendar days for loans executed on or after July 23, 2009. In addition, prior to verification, NMHC shall obtain written authorization from the applicant through the HOME Eligibility Release form or Authorization to Release Information. 5. NMHC must determine an applicant's credit worthiness and repayment ability. NMHC shall request and obtain a written credit report from a recognized credit bureau. Poor repayment of credit obligations shall be considered a credit risk and shall be a reason for denial of assistance. 6. All approved applicants must attend a counseling session that will be provided by NMHC. The counseling session shall coincide with the day that NMHC issues a Commitment Letter to the applicant. Failure to attend a counseling session is grounds for denial of the assistance. 7. HOME rehabilitation activities to be undertaken by NMHC are subject to the environmental review requirements at 24 CFR Part 58. Environmental review and assessment forms must be documented in the Environmental Review Record as evidence of compliance before HOME funds are committed to a specific project site. Condition: Of twenty (20) loans files tested for compliance with annual requirements, aggregating $676,359 of a total population of $6,990,789, we noted deficiencies, as enumerated below. Questioned costs, if any, are based on outstanding loan balances as of September 30, 2021 for loan files that lack sufficient documentation to demonstrate compliance with Federal requirements and therefore, might no longer satisfy conditions to continue as a Federal investment. 1. For seven (or 35%), the homeowner's property insurance coverages were not on file. 2. For one (or 5%), the homeowner's property insurance coverage was obtained; however, the property was partially insured. No questioned costs are presented for HP-722, as the insurance policy was subsequently amended on 4/7/2022 to increase the insurance coverage to $85,470. 3. For one (or 5%), the homeowner's property insurance coverage was obtained; however, the property was partially insured. No questioned costs are presented for HP-722, as the insurance policy was subsequently amended on 4/7/2022 to increase the insurance coverage to $85,470. 4. For three or 15%, the homeowner’s property insurance was obtained; however, the property was uninsured as 9/30/2021, as follows: Property insurance coverage for HP-367, HNC-403 and HNC-534 were subsequently renewed on 4/28/2022, 8/30/2022 and 11/16/2021, respectively. 5. For three or 15%, affidavits of principal residence signed by the borrowers or the borrower's surviving relatives were not on file. For PIHL-33, borrower has been incarcerated since January 2018 and as such, is unable to sign the affidavit of principal residence. Documentation to substantiate that the surviving household member has legal rights to the property and/or whether the surviving household member can assume the HOME grant assistance was not on file. Loan PIHL-33D of the same borrower has been forwarded to legal counsel for collection. 6. For two or 10%, the Letter of Tax Compliance was not on file for the following: 7. For one or 5%, the credit report was not on file as follows: 8. For four or 20%, documentation for the counseling session and/or commitment letters were not on file. 9. For one (or 5%), the environmental review and assessment forms were not on file. Cause: There was a lack of effective internal controls related to the review and monitoring of applicable program eligibility requirements. Effect: NMHC is not in compliance with the applicable program requirements resulting in the questioned costs as follows: Identification as a Repeat Finding: Finding No. 2020-005 Recommendation: NMHC should strengthen its internal control procedures to ensure compliance with applicable eligibility requirements. This includes establishing formal review and monitoring processes to verify that all participants meet program criteria prior to approval. Views of Responsible Officials: Condition 1: Response: This finding is a stay. However, we respectfully request for removal of question costs; MCD concurs that the homeowner’s property insurance was not in file. However due to circumstances at the time; such as natural disasters, like the Covid-19 pandemic (Mar. 28, 2020 to May 11, 2023), it negatively impacted clients in securing coverage and in MCD's immediate enforcement. Subsequently, after exhausting efforts, MCD eventually forwarded certain accounts to collection to the attorney. Corrective Action: The MCD has been sending notices to borrowers as a reminder to update or renew their homeowner insurance policy. We have created a monitoring spreadsheet to ensure that the insurance policies are being updated and that notices to homeowners are being sent to remind them of their insurance status. Moving forward, we will be sending out demand notices to those listed accounts that were affected. Condition 2: Response: This finding is a stay, however we respectfully request to remove the question cost. Corrective measure was taken on the renewal of insurance by adjusting the coverage to the loan amount of $85,470 with the same insurance carrier. Corrective Action: This loan account is noted and being monitored to ensure that future policy coverage accurately reflects the loan amount as cited. Condition 3: Response: This finding is a stay. However, due to circumstances at the time; such as natural disasters, like the Covid-19 pandemic (Mar. 28, 2020 to May 11, 2023), it negatively impacted clients in securing coverage and in MCD's immediate enforcement. Corrective Action: Property insurance coverage for HP-367, HNC-403 and HNC-534 were subsequently renewed on 4/28/2022, 8/30/2022 and 11/16/2021, respectively. MCD will ensure that these account policies are being monitored for subsequent updates and renewals. Condition 4: Response: This finding is a stay. However, we respectfully request for removal of question costs; MCD concurs that the homeowner’s property insurance was not in file. However due to circumstances at the time; such as natural disasters, like the Covid-19 pandemic (Mar. 28, 2020 to May 11, 2023), it negatively impacted MCD's immediate enforcement and ability to conduct home site visits for follow-ups. Corrective Action: MCD will ensure moving forward that these accounts are carefully monitored and in compliance with required annual recertifications. Condition 5: Response: This finding is a stay MCD affirms that the documents are presently not in file. Corrective Action: The two loan accounts, HL-178 and HL-196 were underwritten twenty years ago; therefore, corrective action regarding these two accounts would not be applicable. MCD verified and confirmed that the required document was not in the respective files. It is also possible the document was received but might have been misplaced or got lost in the process. Condition 6: Response: This is a stay-MCD affirms that the credit report is presently not in file. And will be unable to perform any corrective action to obtain such document as account is nearly twenty years old. It should be noted that the account has been referred for collection. Request to remove question costs. Corrective Action: MCD will be unable to perform any corrective action to obtain such document as account is nearly twenty years old. It should be noted that the account has been referred for collection. Condition 7: Response: Request to remove finding and question costs. The Home Counseling Certificate and educational course checklist is provided for clients after 2012. HL-178, HL-196, HR-461, PIHL-33 Stay documents are not in the file and MCD will be unable to perform any corrective action to obtain such documents as the accounts are about twenty years old. Request to remove question costs. Response: This is a stay-MCD affirms that the environmental assessment forms are presently not in file. And MCD will be unable to perform any corrective action to obtain such document as nearly twenty years has lapsed (possible misfiling). Request to remove question costs. Corrective Action: MCD will be unable to perform any corrective action to obtain such document as nearly twenty years has lapsed (possible misfiling or misplaced).
Finding No.: 2021-003 Federal Agency: U.S. Department of Housing and Urban Development CFDA Program: 14.871 Section 8 Housing Choice Vouchers Area: Eligibility Questioned Costs: $-0- Criteria: The Uniform Financial Reporting Standards require PHAs to submit timely GAAP-based unaudited financial information electronically to HUD that is accurately prepared. Condition: Tests of the unaudited single audit information for the year ended September 30, 2021 that was electronically submitted to HUD noted the following: Program Balance Sheet Summary: Program Revenue and Expense Summary: For the amount reported in line item 124, the account pertains to 14.EHV Emergency Housing Voucher (EHV) program in the General Ledger, not the 14.871 Housing Choice Voucher (HCV) program per the REAC submission. For the $422,949 reported under 14.EHV Emergency Housing Vouchers Funding column for FDS line 70600, amount pertains to EHV funding that NMHC received in FY 2021, however, NMHC only incurred $23,392 in EHV expenses. The variance should not be reported as grant revenue but rather as unearned revenue at FDS line 342 per the revenue recognition guideline on HUD’s Notice PIH-2020-24. For the variance reported in line 166, this pertains to the FY 2021 adjustment to reconcile accumulated depreciation as of 09/30/2021. Cause: The cause of the above condition is the lack of monitoring controls over the Uniform Financial Reporting Standards reporting and untimely reconciliation of its general ledger accounts. In addition, NMHC not including accrued revenues at FDS Line 70600 is due to comments that NMHC received from REAC reviewer that the FDS and VMS should totally agree or closely match. Accordingly, as the VMS reporting is on a cash basis, amount reported at FDS Line 70600 was based on a modified cash basis to agree amounts to the VMS reporting and facilitate approval from the REAC reviewer. Effect: NMHC is in noncompliance with the Uniform Financial Reporting Standards reporting requirements. Identification of Repeat Finding: Finding No. 2020-009 Recommendation: NMHC should strengthen controls over compliance with applicable Uniform Financial Reporting Standards reporting requirements and the timely reconciliation of its general ledger accounts. Views of Responsible Officials: NMHC agrees with this finding. Corrective Action: NMHC will strengthen controls over compliance with applicable Uniform Financial Reporting Standards reporting requirements and the timely reconciliation of its general ledger accounts. NMHC will make sure to distinguish the reporting between the VMS and FDS for reporting purposes only. Finding No.: 2021-003 Federal Agency: U.S. Department of Housing and Urban Development CFDA Program: 14.871 Section 8 Housing Choice Vouchers Area: Eligibility Questioned Costs: $-0- Criteria: The Uniform Financial Reporting Standards require PHAs to submit timely GAAP-based unaudited financial information electronically to HUD that is accurately prepared. Condition: Tests of the unaudited single audit information for the year ended September 30, 2021 that was electronically submitted to HUD noted the following: Program Balance Sheet Summary: Program Revenue and Expense Summary: For the amount reported in line item 124, the account pertains to 14.EHV Emergency Housing Voucher (EHV) program in the General Ledger, not the 14.871 Housing Choice Voucher (HCV) program per the REAC submission. For the $422,949 reported under 14.EHV Emergency Housing Vouchers Funding column for FDS line 70600, amount pertains to EHV funding that NMHC received in FY 2021, however, NMHC only incurred $23,392 in EHV expenses. The variance should not be reported as grant revenue but rather as unearned revenue at FDS line 342 per the revenue recognition guideline on HUD’s Notice PIH-2020-24. For the variance reported in line 166, this pertains to the FY 2021 adjustment to reconcile accumulated depreciation as of 09/30/2021. Cause: The cause of the above condition is the lack of monitoring controls over the Uniform Financial Reporting Standards reporting and untimely reconciliation of its general ledger accounts. In addition, NMHC not including accrued revenues at FDS Line 70600 is due to comments that NMHC received from REAC reviewer that the FDS and VMS should totally agree or closely match. Accordingly, as the VMS reporting is on a cash basis, amount reported at FDS Line 70600 was based on a modified cash basis to agree amounts to the VMS reporting and facilitate approval from the REAC reviewer. Effect: NMHC is in noncompliance with the Uniform Financial Reporting Standards reporting requirements. Identification of Repeat Finding: Finding No. 2020-009 Recommendation: NMHC should strengthen controls over compliance with applicable Uniform Financial Reporting Standards reporting requirements and the timely reconciliation of its general ledger accounts. Views of Responsible Officials: NMHC agrees with this finding. Corrective Action: NMHC will strengthen controls over compliance with applicable Uniform Financial Reporting Standards reporting requirements and the timely reconciliation of its general ledger accounts. NMHC will make sure to distinguish the reporting between the VMS and FDS for reporting purposes only. Finding No.: 2021-003 Federal Agency: U.S. Department of Housing and Urban Development CFDA Program: 14.871 Section 8 Housing Choice Vouchers Area: Eligibility Questioned Costs: $-0- Criteria: The Uniform Financial Reporting Standards require PHAs to submit timely GAAP-based unaudited financial information electronically to HUD that is accurately prepared. Condition: Tests of the unaudited single audit information for the year ended September 30, 2021 that was electronically submitted to HUD noted the following: Program Balance Sheet Summary: Program Revenue and Expense Summary: For the amount reported in line item 124, the account pertains to 14.EHV Emergency Housing Voucher (EHV) program in the General Ledger, not the 14.871 Housing Choice Voucher (HCV) program per the REAC submission. For the $422,949 reported under 14.EHV Emergency Housing Vouchers Funding column for FDS line 70600, amount pertains to EHV funding that NMHC received in FY 2021, however, NMHC only incurred $23,392 in EHV expenses. The variance should not be reported as grant revenue but rather as unearned revenue at FDS line 342 per the revenue recognition guideline on HUD’s Notice PIH-2020-24. For the variance reported in line 166, this pertains to the FY 2021 adjustment to reconcile accumulated depreciation as of 09/30/2021. Cause: The cause of the above condition is the lack of monitoring controls over the Uniform Financial Reporting Standards reporting and untimely reconciliation of its general ledger accounts. In addition, NMHC not including accrued revenues at FDS Line 70600 is due to comments that NMHC received from REAC reviewer that the FDS and VMS should totally agree or closely match. Accordingly, as the VMS reporting is on a cash basis, amount reported at FDS Line 70600 was based on a modified cash basis to agree amounts to the VMS reporting and facilitate approval from the REAC reviewer. Effect: NMHC is in noncompliance with the Uniform Financial Reporting Standards reporting requirements. Identification of Repeat Finding: Finding No. 2020-009 Recommendation: NMHC should strengthen controls over compliance with applicable Uniform Financial Reporting Standards reporting requirements and the timely reconciliation of its general ledger accounts. Views of Responsible Officials: NMHC agrees with this finding. Corrective Action: NMHC will strengthen controls over compliance with applicable Uniform Financial Reporting Standards reporting requirements and the timely reconciliation of its general ledger accounts. NMHC will make sure to distinguish the reporting between the VMS and FDS for reporting purposes only.