Audit 38582

FEDERAL AWARD FINDINGS: 2022-001 Residual Receipts Deposits CONDITION: Required end of year deposit to the residual receipts reserve was not made 60 days following the year end. CRITERIA: The Project is required to make a deposit to the residual receipts reserve based upon the amount computed in the surplus cash calculation. EFFECT: The Project is not in compliance with award requirements. CONTEXT: Surplus cash at January 31, 2022 was recalculated as part of the audit once all adjusting journal entries had been approved and made. One of the adjusting journal entries included accruing a receivable for back due tenant subsidies from July 2021 to January 2022 that were outstanding as of January 31, 2022. The additional subsidies were awarded based on the results of a rent comparability study that was performed during the year under audit. The inclusion of this receivable for additional tenant subsidies drastically changed the surplus cash computation, taking the Project from a significant cash deficit to a cash surplus. CAUSE: The Project was unable to make the required surplus cash deposit within 60 days because the surplus was a result of back due subsidies that were not received until April 2022 (after the 60-day deadline had passed). The Project did not have the required funds available to make the deposit before these funds were received in April 2022. RECOMMENDATION: The finding was a result of an unusual situation regarding tenant subsidies, and the timing of when those subsidies were received. Furthermore, the Project has not had any prior compliance issues with surplus cash deposits. Accordingly, based on the facts and circumstances listed above and our discussions with the Project?s HUD account executive, we have no recommendations for this finding. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS: Management acknowledges the finding, but believes it was the result of unfortunate timing surrounding an unusual situation. Accordingly, management concludes that corrective action is not necessary and does not expect this situation to arise again in the future.

FEDERAL AWARD FINDINGS: 2022-001 Residual Receipts Deposits CONDITION: Required end of year deposit to the residual receipts reserve was not made 60 days following the year end. CRITERIA: The Project is required to make a deposit to the residual receipts reserve based upon the amount computed in the surplus cash calculation. EFFECT: The Project is not in compliance with award requirements. CONTEXT: Surplus cash at January 31, 2022 was recalculated as part of the audit once all adjusting journal entries had been approved and made. One of the adjusting journal entries included accruing a receivable for back due tenant subsidies from July 2021 to January 2022 that were outstanding as of January 31, 2022. The additional subsidies were awarded based on the results of a rent comparability study that was performed during the year under audit. The inclusion of this receivable for additional tenant subsidies drastically changed the surplus cash computation, taking the Project from a significant cash deficit to a cash surplus. CAUSE: The Project was unable to make the required surplus cash deposit within 60 days because the surplus was a result of back due subsidies that were not received until April 2022 (after the 60-day deadline had passed). The Project did not have the required funds available to make the deposit before these funds were received in April 2022. RECOMMENDATION: The finding was a result of an unusual situation regarding tenant subsidies, and the timing of when those subsidies were received. Furthermore, the Project has not had any prior compliance issues with surplus cash deposits. Accordingly, based on the facts and circumstances listed above and our discussions with the Project?s HUD account executive, we have no recommendations for this finding. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS: Management acknowledges the finding, but believes it was the result of unfortunate timing surrounding an unusual situation. Accordingly, management concludes that corrective action is not necessary and does not expect this situation to arise again in the future.