Audit 383306

Finding No. 2025-001 - Material Weakness - Special Tests and Provisions - Tenant rent payments not deposited timely Name of Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Project-Based Rental Assistance Assistance Listing Number: 14.195 Criteria In accordance with the HUD regulatory agreements, Project funds should be immediately deposited in the Projects' bank accounts. Condition During the year ended June 30, 2025, Bay Cove Human Services, Inc., an affiliate sponsor agency for Juliette Corporation and management agent, collected rent and other client fees related to its clients who are also tenants in the Projects. For a portion of the year ended June 30, 2025, Bay Cove Human Services, Inc. did not timely remit the tenant rent portion of these payments to the Projects. Delinquent rent payments for the period July 2024 through February 2025 amounted to $104,547 and were deposited in February and March 2025. Additionally, June 2025’s rents were outstanding and owed to the Projects as of June 30, 2025 in the amount of $19,785 and were deposited in July 2025. Cause Management's internal controls over monitoring of the tenant rent deposits did not function consistently throughout the year ended June 30, 2025. Effect or Potential Effect Failure to deposit the tenant rents into the Project accounts timely resulted in a violation of the regulatory agreements and put the Project at risk of not meeting Project obligations. Questioned Costs Not applicable. Context N/A Identification as a Repeat Finding This is a repeat finding from 2024. Recommendation Management should establish or undertake a review of internal controls over monitoring of the tenant rent deposits to ensure deposits are timely made into the Project accounts. Views of Responsible Officials Management acknowledges that certain internal controls did not operate effectively during the year ended June 30, 2025. This is attributed to an unusually high level of staff turnover within the finance team during the year. We have since supplemented our team with new senior leadership and experienced resources to ensure the tenant receipts are timely remitted to the Project accounts. Outstanding tenant rents for the period July 2024 through February 2025 in the amount of $104,547 were deposited into the Project accounts in February and March 2025, and the June 2025 outstanding balance of $19,785 was fully deposited into the Project accounts in July 2025.

Finding No. 2025-002 - Material Weakness - Mortgage/Reserves: Replacement reserves not deposited timely Name of Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Project-Based Rental Assistance Assistance Listing Number: 14.195 Criteria In accordance with the HUD regulatory agreements, Projects are required to make monthly deposits to its replacement reserves. Condition During the year ended June 30, 2025, the Projects were delinquent in making the required monthly deposits to the replacement reserve. BC HUD I required deposits for the period July 2024 through February 2025 in the amount of $60,928 were funded in February 2025. BC HUD II required monthly deposits for the period July through September 2024 in the amount of $7,278 were funded in February 2025, for the period October through December 2024 in the amount of $7,416 were funded in March 2025, and for the period January through April 2025 in the amount of $9,888 were funded in April 2025. BC HUD III required monthly deposits for the period July 2024 through May 2025 in the amount of $26,015 were funded In May 2025. Cause Management's internal controls over monitoring of the replacement reserves did not function consistently throughout the year ended June 30, 2025. Effect or Potential Effect Failure to deposit the replacement reserve timely resulted in a violation of the regulatory agreements. Questioned Costs Not applicable. Context N/A Identification as a Repeat Finding This is a repeat finding from 2024. Recommendation Management should establish or undertake a review of internal controls over monitoring of the replacement reserve deposits to ensure deposits are timely made as required. Views of Responsible Officials Management acknowledges that certain internal controls did not operate effectively during year ended June 30, 2025. This is attributed to an unusually high level of staff turnover within the finance team during the year. We have since supplemented our team with new senior leadership and experienced resources to ensure the replacement reserve is properly funded.

Finding No. 2025-003 - Material Weakness - Mortgage/Reserves: Delinquent deposits to the residual receipts reserve Name of Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Project-Based Rental Assistance Assistance Listing Number: 14.195 Criteria Residual receipts reserve deposits should be made within 90 days of year end. Additionally, residual account balances in excess of the retained balance must be applied on a monthly basis to offset Section 8 HAP payments. Condition During the year ended June 30, 2025, management did not make the required residual receipts reserve deposit in the amount of $117,570, within 90 days of year end as required by HUD. The residual receipts amount was deposited in June 2025. Additionally, residual receipt offsets for balances in excess of the retained balance are not being offset on a monthly basis. Cause Controls are not in place to ensure that required residual receipts reserve deposits are made timely and residual receipt offsets are requested on a monthly basis. Effect or Potential Effect The Corporation is not in compliance with the requirements of the Regulatory Agreement. Questioned Costs Not applicable. Context N/A Identification as a Repeat Finding This is not a repeat finding from 2024. Recommendation Management should establish internal controls and procedures to ensure that required residual receipts reserve deposits are made timely and residual receipt offsets are requested on a monthly basis. Views of Responsible Officials Management acknowledges that certain internal controls did not operate effectively during year ended June 30, 2025. This is attributed to an unusually high level of staff turnover within the finance team during the year which delayed financial reporting. We have since supplemented our team with new senior leadership and experienced resources to ensure the residual receipts required deposits are timely made within 90 days of year end.