FAC Explorer

Audit 382220

FY End
2025-09-30
Total Expended
$2.52M
Findings
1
Programs
2
Organization: Covenant Homes, Inc. (NC)
Year: 2025 Accepted: 2026-01-16
Auditor: SHARPE PATEL PLLC

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
1169257 2025-001 Material Weakness Yes N

Programs

ALN Program Spent Major Findings
14.155 MORTGAGE INSURANCE FOR THE PURCHASE OR REFINANCING OF EXISTING MULTIFAMILY HOUSING PROJECTS $1.90M Yes 1
14.195 PROJECT-BASED RENTAL ASSISTANCE (PBRA) $617,801 Yes 0

Contacts

Name Title Type
GUSNEFFJZJ32 Debbie Morris Auditee
2524432323 Jay Sharpe Auditor
No contacts on file

Notes to SEFA

The accompanying schedule of federal awards ("schedule") includes the federal award and loan activity of the Organization under programs of the federal government for the year ended September 30, 2025. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards ("Uniform Guidance"). Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements.
For the year ended September 30, 2025, the Organization provided no funds to subrecipients.
The note payable is provided by HUD, under the Section 202 Housing Act of 1959, and bears interest at an annual rate of 3.23%. The project is pledged as collateral for the note. As of September 30, 2025, the balance of the note was $1,897,674.

Finding Details

Finding 2025-001
HUD requires properties to fund the Replacement Reserve in accordance with the HUD-approved monthly deposit schedule. Effective July 1, 2025, the required monthly deposit increased from $2,941 to $3,217. The Property continued depositing $2,941 per month after July 1, 2025, rather than the HUD-required amount of $3,217, resulting in the Replacement Reserve being underfunded during the fiscal year. Management became aware of the issue during the audit and plans to make catch-up deposits after year end. Although management sent the HUD increase notice to the bank responsible for automatic deposits, the bank did not update the deposit amount. Management also did not detect the error during the year. The Property was not in compliance with HUD reserve funding requirements during the year under audit. We recommend that management verify monthly that reserve deposits agree to the HUD-approved schedule and obtain confirmation from the bank when deposit amounts are changed. Management should also complete the catch-up deposit and retain documentation.