Audit 387763

Criteria Tenant lease files are required to be maintained and tenant eligibility determined in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. Condition In connection with our lease file review we noted the following deficiencies: - Two out of three new tenants tested did not have EIV in file. - One out of three new tenants tested did not include correct income on 50059 form. - One out of 10 existing tenants tested did not include medical deductions as part of the income calculation on the 50059 form. Cause Management's policies with respect to the maintenance of tenant lease files in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs were not consistently followed. Effect or Potential Effect The procedures for determining tenant security deposits and eligibility and maintaining tenant lease files were not consistently applied in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. This could result in units being rented to ineligible tenants or errors in the rent subsidies paid by HUD. Identification as a Repeat Finding This is a repeat finding. Recommendation Management should establish procedures and monitor compliance with those procedures to ensure that tenant eligibility is correctly determined and that tenant lease files are properly maintained in accordance with the requirements of HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. Views of Responsible Officials FG Companies has a procedure in place that requires all tenant files to be reviewed by the compliance team that is in line with the community’s tenant selection plan that outlines the tenant eligibility requirements. All annual certifications are submitted and reviewed by compliance in accordance with the requirements of the HUD Handbook4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. FG Companies has also implemented a bi-weekly file audit system that will continue to be completed by the Regional Manager. This system is to ensure all files are current with certifications and all required state and local forms are completed and filed accordingly. Finding Resolution Status: Resolved

Criteria Management fee payments are limited to amounts determined in accordance with the terms of the HUD-approved management agreement. Condition During the year ended June 30, 2025, the Project paid management fees of $6,475 in excess of the amount approved by HUD. Cause The prior management company did not apply cash received prior to June 30, 2024 to individual tenant subledgers and when the new management company made those entries during the year ended June 30, 2025, the cash receipts were inadvertently counted again as part of cash receipts when computing management fee. Effect or Potential Effect The overpaid amount is an unauthorized distribution and therefore considered to be questioned costs. Identification as a Repeat Finding This is a repeat finding. Recommendation The management company should reimburse the Project for overpaid management fee in the amount of $6,475 and implement procedures to ensure that the management fee paid does not exceed the amount determined in accordance with the HUD-approved management agreement. Views of Responsible Officials Management agrees with the finding and is working with ownership on reimbursement to the property. Management will collect in accordance with HUD going forward. Finding Resolution Status: In process