Audit 391021

Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Program Name: Supportive Housing for Persons with Disabilities (Section 811) Assistance Listing Number: 14.181 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement: Deposits required by HUD were not made in full during fiscal year 2025 to the reserve fund. Condition: During the 2025 audit, we noted that the Project had not deposited the full amount required by HUD to be deposited monthly in the reserve fund. Questioned Costs: $3,137 in reserve fund deposits not made. Context: Through audit compliance testing procedures, three months of bank reconciliations were tested and it was identified that the required monthly deposit was not made during one of the months. Through further inquiry and review it was identified that a portion of the deposits of fiscal year 2025 were not made. Cause: Due to cash constraints caused by rental income delays the Project was unable to make the deposits. Effect: The Project did not make sufficient deposits. Repeat Finding: None. Recommendation: We recommend the Project make all fiscal year 2025 deposits as soon as funds allow. Views of Responsible Officials: There is no disagreement with the audit finding. During fiscal 2026, management deposited the remaining funds.

Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Program Name: Supportive Housing for Persons with Disabilities (Section 811) Assistance Listing Number: 14.181 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement: Reserve for replacement funds and project funds were not maintained in interest bearing bank accounts. Condition: During the 2025 audit, we noted that the reserve for replacement and project funds bank accounts were deposited into non-interest bearing accounts. Questioned Costs: None. Context: Bank reconciliations tested identified that the reserve for replacement and project fund accounts were in non-interest bearing bank accounts. Cause: Due to change in management company during 2024, the Project changed its bank accounts. Effect: The Project did not properly deposit the reserve for replacement funds and project funds accounts into interest bearing accounts. Repeat Finding: None. Recommendation: We recommend withdrawing the reserve for replacement funds and project funds and depositing into interest bearing accounts. Views of Responsible Officials: We agree with the above recommendation. During fiscal 2026, the funds were withdrawn and deposited into interest bearing accounts.

Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Program Name: Supportive Housing for Persons with Disabilities (Section 811) Assistance Listing Number: 14.181 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement: Ineligible Resident Condition: During the 2025 audit, an ineligible resident was residing at the property. Questioned Costs: None. Context: Through audit compliance testing procedures, it was identified that one resident tested was not eligible to reside in the Project. Cause: Due to change in property manager and that an existing resident was using improper eligibility requirements. Effect: The Project allowed an ineligible resident to rent from the Project. Repeat Finding: None. Recommendation: We recommend enforcing control procedures over resident eligibility. Views of Responsible Officials: Management identifies that the resident move-in was conducted by the prior management company. The management company will recommunicate their policies and ensure proper controls over eligibility are enforced.

Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Program Name: Supportive Housing for Persons with Disabilities (Section 811) Assistance Listing Number: 14.181 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement: Ineligible Resident Condition: During the 2025 audit, we were unable to obtain proper review over eligibility certification. Questioned Costs: None. Context: Through audit compliance testing procedures, it was identified that one individual tested was unable to be identified as eligible due to lack of support. Cause: Due to change in property manager and that the resident was unresponsive. Effect: The Project allowed an ineligible resident to continue to rent from the Project. Repeat Finding: None. Recommendation: We recommend enforcing control procedures over resident eligibility. Views of Responsible Officials: Management identifies that the resident move-in was conducted by the prior management company. The Management company will recommunicate their policies and ensure proper controls over eligibility are enforced.

Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Program Name: Supportive Housing for Persons with Disabilities (Section 811) Assistance Listing Number: 14.181 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement: Approved expenditures of federal awards that were not for the Project. Condition: During the 2025 audit, we noted that the Project approved expenditures of federal awards that were not for the Project. Questioned Costs: $3,587 in expenses approved. Context: Invoice tested found to not be for the Project. Cause: Due to change in management company during 2024 and being the first full year under new management. Effect: The Project did properly approve expenditures of federal awards. Repeat Finding: None. Recommendation: We recommend enforcing control procedures over expenditures of federal awards. We also recommend performing an additional year-end review of accounts payable to confirm that expenditures are appropriately classified and allocated to the correct sites. Views of Responsible Officials: There is no disagreement with the audit finding. The Management company will recommunicate their policies and ensure proper controls over expenditures of federal awards are enforced.