Audit 387767

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: - One out of one new tenants tested did not have EIV in file and performed move in inspection late; - One out of nine existing tenants tested had incorrect income calculated for form 50059; - One out of nine existing tenants tested the EIV report was provided to the accountant via email which is not permitted by EIV guidelines. 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 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. Questioned Costs N/A 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. Auditor Noncompliance Code Z. Other. View 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 The regulatory agreement requires that the project make monthly deposits to its replacement reserve. Condition During the year ended June 30 2025, the project did not make the required monthly deposits to the replacement reserve in the amount of $6,414 The project is required to make monthly deposits to the reserve in the amount of $3,207. Cause The project does not generate sufficient cash flow to make the required monthly deposits. Effect or Potential Effect Failure to make monthly payments resulted in an underfunding the replacement reserve and a violation of the regulatory agreement. Questioned Costs $6,414 Identification as a Repeat Finding This is not a repeat finding. Recommendation Management should review the project budget to determine if nonessential costs can be cut to ensure that the replacement reserve is funded in accordance with the terms of the regulatory agreement. Auditor Noncompliance Code N. Reserve for replacements deposits Views of Responsible Officials Management has reviewed the current nonessential costs that have resulted in the community not being able to fund the replacement reserve in accordance with the regulatory agreement. We have suspended services that will be maintained by the site staff. These services includes the common area cleaning and unit turn overs. Finding Resolution Status: Unresolved