Audit 381685

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Section 223(f) Mortgage Insurance for the Purchase or Refinance of Existing Multifamily Housing Projects Assistance Listing Number: 14.155 Award Period: October 1, 2024 through September 30, 2025 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: HUD guidelines require cash to be maintained in financial institutions which meet minimum GNMA ratings when balances exceed federally insured limits. Financial institution ratings are to be monitored by management on a quarterly basis and documentation maintained for at least three years as required by the HUD Handbook 4350.1. Condition: The Organization had cash balances that exceeded federally insured limits and management did not monitor or maintain documentation of the financial institutions’ ratings. Questioned costs: None. Context: The Organization had cash balances that exceeded federally insured limits. Controls to monitor and maintain documentation of the financial institutions’ ratings were not in place. The Organization’s cash is held at a financial institution that does not meet the minimum GNMA ratings. Cause: The cause of this issue was the absence of established procedures requiring periodic review of cash balances exceeding federally insured limits and the lack of a documented process for monitoring and retaining financial institution rating information. Effect: There were no negative effects on the Organization. Repeat finding: No. Recommendation: Funds should be transferred to a financial institution that meets minimum GNMA ratings and management should implement internal controls to monitor ratings on a quarterly basis for depositories where cash balances exceed FDIC limits and maintain that documentation for at least three years. Views of responsible officials: The Organization has maintained a strong partnership with our banking institution for several years, and this relationship continues to provide meaningful support to our residents and community. Management acknowledges that certain cash balances exceeded federally insured limits and that documentation of financial institution ratings was not consistently monitored or maintained. To address this, management will (1) evaluate opportunities to rebalance cash holdings to remain within insured limits where feasible, and (2) implement a formal process to review, document, and retain financial institution credit ratings on at least a quarterly basis. This process will be incorporated into the Organization’s ongoing treasury and risk-management procedures to ensure compliance going forward.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Section 223(f) Mortgage Insurance for the Purchase or Refinance of Existing Multifamily Housing Projects Assistance Listing Number: 14.155 Award Period: October 1, 2024 through September 30, 2025 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: HUD requires the Organization to maintain fidelity bond coverage of at least two months cash collections. Condition: The Organization’s fidelity bond was below the requirement for the period under audit. Questioned costs: None. Context: The Organization’s resident service revenue increased in the current year to an amount that is higher than historical fidelity bond coverage. Cause: Following completion of the 2025 Mark-to-Market process for HRCA Housing for Elderly Inc., we failed to update our fidelity bond coverage to reflect the revised requirements. Effect: There were no negative effects on the Organization. Repeat finding: No. Recommendation: We recommend that the Organization obtain the requisite fidelity bond coverage and to monitor the coverage to ensure it is in compliance with HUD requirements. Views of responsible officials: Once the finding was identified, we immediately contacted our insurance broker and requested an increase to the fidelity bond coverage. The bond has since been raised to a $2M limit, and the updated policy became effective on 11/14/25. Going forward, the fiscal team will incorporate an annual verification of bond coverage into its routine monitoring procedures to ensure timely updates after significant organizational or regulatory changes. In addition, we are implementing an internal audit component to enhance our review of all HUD requirements. This added oversight will help mitigate future risk and ensure continued compliance with all applicable regulations