Audit 383143

Internal Control over Financial Reporting and Closing Criteria: Management is responsible for the preparation of the basic financial statements and all accompanying information as well as representations contained therein, and the fair presentation in conformity with U.S. GAAP. This requires management to perform a year-end closing process to accumulate, reconcile and summarize information for inclusion in the annual financial statements. Condition: Monthly review of transactions posted to Yardi and the general ledger system was not implemented properly to detect discrepancies or errors in a timely manner. We identified numerous adjustments, which were posted as part of the audit. Effect: Journal entries were posted, and adjustments made to the financial statements, in order to fairly present the financial statements. Further, the internal control environment is weakened. Cause: The entity’s procedures did not allow for the proper classification or timely reporting of information required for financial reporting. The entity’s process did not allow for evidence to support internal controls in place over the preparation of the financial statements. Recommendation: We recommend staff training at the property level to perform monthly review of accounting records and reconciliations between Yardi and general ledger system to ensure amounts are properly captured, reconciled, classified, and reported in a timely manner. Views of Responsible Officials and Planned Corrective Actions: Management agrees. The Accounting Manager and Executive Director for the year ended June 30, 2025 were terminated in October 2025, and the former Executive Director has returned to assist in implementing necessary controls and processes and train property level staff. Context: The condition was noted during our audit of the entity for the year ended June 30, 2025.

Compliance Requirement: Timely reporting of Annual Financial Statements in PIH-REAC Type of Finding: Significant deficiency in Internal Control and Instance of Noncompliance Criteria: The Uniform Guidance Compliance Supplement requires timely filing of annual financial statements in PIH-REAC system no later than 90 days after year end. Condition: Monthly review of transactions posted to Yardi and the general ledger system was not implemented properly to detect discrepancies or errors in a timely manner, which delayed timely filing of required submission. Context: The condition was noted during our testing over the entity’s accounting records and financial statement reconciliations that required additional time to determine that the books and records were not materially misstated which delayed timely filing of required submission in PIH-REAC system. Effect: Certain financial statement and reporting requirement deadlines were missed creating the potential for lost federal awards. Cause: Lack of knowledge and insufficient skills surrounding financial statement review processes. Recommendation: We recommend staff training at the property level to perform monthly review of accounting records and reconciliations between Yardi and general ledger system. This should improve internal controls over financial reporting sufficient to allow for timely submission of required filings and reduce risk of losing Federal Awards. Views of Responsible Officials and Planned Corrective Actions: Management agrees. The Accounting Manager and Executive Director for the year ended June 30, 2025 were terminated in October 2025, and the former Executive Director has returned to assist in implementing necessary controls and processes and train property level staff.

Compliance Requirement: HAP project funds may be used only for expenses that are reasonable and necessary to the operation of the project as provided for in the HAP contract. Type of Finding: Significant deficiency in Internal Control and Instance of Noncompliance Criteria: The Uniform Guidance Compliance Supplement requires only expenditures of the entity be included in project costs. Condition: Internal controls over payables were not implemented to detect that vendor invoices of a related party were recorded to the books of the entity which resulted in an overstatement of gas expense. Context: Expenses for gas expense billings of a related party were posted to the books and records of Jefferson East, Inc. And gas expense billings of Jefferson East, Inc. were not recorded. Effect: This resulted in an overstatement of gas expense of $7,857. Cause: Lack of attention to the vendor invoice as it related to the entity’s gas expenses, and not investigating with the gas company when the expenses posted averaged three times the normal monthly charges before the energy provider switch. Recommendation: We recommend controls over review and approval process surrounding allowable costs that are reasonable and necessary for the operation of the project should be emphasized with appropriate personnel. Views of Responsible Officials and Planned Corrective Actions: Management agrees. The Accounting Manager and Executive Director for the year ended June 30, 2025 were terminated in October 2025, and the former Executive Director has returned to assist in implementing necessary controls and processes and train property level staff.