Finding 2024-001 - U.S. Department of Housing and Urban Development, Mortgage Insurance Rental and Cooperative Housing for Moderate Income Families and Elderly, Market Interest Rate, CFDA #14.135 Statement of Condition: Internal control processes over financial accounting did not ensure that all transactions were properly recorded. Internal control processes over financial accounting did not ensure that key accounts were reconciled or reviewed on a periodic basis. Criteria: The HUD Handbook 4370.2 REV-1, Chapter 2 requires the books and accounts to be complete and accurate. HUD Handbook 4370.2 REV-1, Chapter 2, Section 12 requires monthly reconciliations of all cash accounts. Additionally, 2 CFR Part 200 Section 200.302 Financial Management states that the financial management system of each non-federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award in accordance with the reporting requirements. Additionally, 2 CFR Part 200 Section 200.303(a), Internal Controls, requires that non-federal entities must establish and maintain effective internal controls over the federal award that provides reasonable assurance that the non-federal entity is managing the award in compliance with federal statutes, regulations and the terms and conditions. Effect: Noncompliance with HUD and Uniform Guidance requirements and the possibility of undetected material misstatements and/or undetected misappropriation of assets. Cause: Prior management oversight. Context: An understanding of processes and internal controls was performed with the Corporation's management and tests were performed to determine if the processes and internal controls were implemented and effective. As part of this process we noted the following processes and internal controls were not effective and/or implemented. 1) Only two of the six bank accounts were reconciled. The outsourced bookkeeper only performed a bank reconciliation for the operating and security deposit cash accounts. 2) The accounts receivable, tenants and accounts receivable, HUD were not reconciled. 3) The monthly review process of the Corporation's financial information is not fully supported by evidence of such review. Questioned Costs: N/A Recommendation: We recommend management review/enhance its accounting and internal control procedures to ensure that all key accounts are reconciled and reviewed with supporting evidence of such review. Views of Responsible Officials and Corrective Action Plan: Management agrees with the finding and will review the accounting and financial procedures, system of internal controls and policies. The Corporation has executed a new management agreement with Remnant Management Inc. effective October 1, 2024. Remnant Management Inc. will ensure that all transactions are properly recorded and that key accounts are reconciled and reviewed on a periodic basis beginning October 1, 2024 and going forward.
Finding 2024-002 - U.S. Department of Housing and Urban Development, Mortgage Insurance Rental and Cooperative Housing for Moderate Income Families and Elderly, Market Interest Rate, CFDA #14.135 Statement of Condition: During the year ended December 31, 2024, supporting documentation was not available for some requested disbursements. Criteria: The HUD Handbook 4370.2 REV-1, Chapter 2 Section 12 states a request for a check must have supporting documentation (i.e., invoice itemizing amount requested with an authorized signature) in order for approval to be obtained to make the disbursement. Checks must be approved by an individual authorized to approve checks. Effect: Noncompliance with HUD regulations. Cause: Prior management oversight. Context: A sample of fifty cash disbursements totaling $101,224 were tested to determine if the cash disbursements were in accordance with HUD Handbook 4370.2. Of the fifty cash disbursements, twenty-nine cash disbursements, totaling $30,994, tested did not have supporting documentation or included late fees, therefore were unable to be tested for compliance with HUD Handbook 4370.2 and deemed noncompliant. By extrapolating our identified error rate on cash disbursements tested that were noncompliant (30.62%) over the total population of cash disbursements for the year ended December 31, 2024 of $891,736, $273,050 of cash disbursements could be noncompliant based on the above error rate. Questioned Costs: $273,050 Recommendation: We recommend that management ensure supporting documentation is maintained for all disbursements from project operations. Views of Responsible Officials and Corrective Action Plan: Management acknowledges the requested disbursements did not have supporting documentation available. The Corporation has executed a new management agreement with Remnant Management Inc. effective October 1, 2024. Remnant Management Inc. will ensure supporting documentation is maintained for all disbursements from project operations beginning October 1, 2024 and going forward.
Finding 2024-003 - U.S. Department of Housing and Urban Development, Mortgage Insurance Rental and Cooperative Housing for Moderate Income Families and Elderly, Market Interest Rate, CFDA #14.135 Statement of Condition: During the year ended December 31, 2021, the Corporation did not make the required mortgage payments on the second mortgage or surplus cash note from available surplus cash at December 31, 2019 as defined by the Loan and Regulatory Agreements. Based on surplus cash of $69,197 at December 31, 2019, mortgage payments were due as follows: $62,277 of interest and principal on second mortgage and $5,190 of interest and principal on the surplus cash note. Criteria: The Loan Agreement and the Regulatory Agreement with HUD requires the Corporation to distribute surplus cash as follows: 1) Payment of incentive performance fee of 3.82%; 2) 90% of the remaining balance to pay interest and principal on the second mortgage; 3) 75% of the remaining balance to pay interest and principal on the surplus cash note; 4) any remaining amount as a distribution to the sponsor. Effect: Noncompliance with HUD regulations and mortgage default. Cause: Calculation of surplus cash for December 31, 2019 was not made until 2021 and there was no cash available for payments. Context: A test to compare the required mortgage payments to the actual mortgage payments was performed. Based on surplus cash of $69,197 at December 31, 2019, mortgage payments were due as follows: $62,277 of interest and principal on second mortgage and $5,190 of interest and principal on the surplus cash note. Questioned Costs: $0 Recommendation: We recommend that management monitor the annual surplus cash and all required payments from any surplus cash. Views of Responsible Officials and Corrective Action Plan: Management acknowledges the required mortgage and surplus cash note payments were not made. Management will submit a request to re-evaluate payments due based on no surplus cash available at December 31, 2020 - December 31, 2024.
Finding 2024-004 - U.S. Department of Housing and Urban Development, Mortgage Insurance Rental and Cooperative Housing for Moderate Income Families and Elderly, Market Interest Rate, CFDA #14.135 Statement of Condition: The Corporation did not submit the data collection form and required reporting package to the Federal Audit Clearinghouse (FAC) for the year ended December 31, 2023 by the required due date. Criteria: The Uniform Guidance, 2 CFR Part 200 Section 200.512(d), Report Submission, requires any non-federal entity that expends Federal awards which must be audited under Subpart F of 2 CFR to electronically submit to the FAC the data collection form and the reporting package described in 2 CFR Part 200 Section 200.512. The Uniform Guidance, 2 CFR Part 200 Section 200.512(a)(1), Report Submission, requires the data collection form and the reporting package described in 2 CFR Part 200 Section 200.512 to be submitted within the earlier of 30 calendar days after the receipt of the auditor's report(s) or nine months after the end of the audit period. Effect: Noncompliance with Uniform Guidance regulations. Cause: Limited available cash flow. Context : A test was performed to review the two most recent fiscal year audits performed under the Uniform Guidance and the required data collection forms were submitted to the FAC by the required due dates to determine if the Corporation qualified as a low-risk auditee. For the year ended December 31, 2022, an audit was performed under the Uniform Guidance and the data collection form was submitted January 17,2024 which is after the due date of September 30, 2023. For the year ended December 31, 2023, an audit was performed under the Uniform Guidance and the data collection form was submitted December 29, 2025 which is after the due date of September 30, 2024. Questioned Costs: N/A Recommendation: We recommend management ensure that the data collection forms are submitted electronically to the FAC each fiscal year going forward. Views of Responsible Officials and Corrective Action Plan: Management acknowledges the data collection form for the years ended December 31, 2022 and 2023 were submitted late. The project was unable to pay the prior audit fees timely due to limited available cash flow causing a delay in the audits. Management will work to improve cash flow for timely payment of the required annual audits.
Finding 2024-005 - U.S. Department of Housing and Urban Development, Mortgage Insurance Rental and Cooperative Housing for Moderate Income Families and Elderly, Market Interest Rate, CFDA #14.135 Statement of Condition: The Corporation did not submit the annual financial report to HUD for the year ended December 31, 2023 by the required deadline. Criteria: The Regulatory Agreement requires the Corporation to submit to HUD the annual financial report within 90 days following the end of each fiscal year. Effect: Noncompliance with Regulatory Agreement, monetary penalties and default under the note and mortgage. Cause: Limited available cash flow. Context: A test was performed to review the prior year submission of the annual financial report to HUD was submitted to HUD within 90 days following the end of the prior fiscal year. For the year ended December 31, 2023, the annual financial report to HUD was submitted on December 16, 2025, which is after the due date of March 30, 2024. Questioned Costs: N/A Recommendation: We recommend management ensure that the annual financial reports to HUD are submitted by the required due dates. Views of Responsible Officials and Corrective Action Plan: Management acknowledges the annual financial report to HUD for the year ended December 31, 2023 was submitted late. The project was unable to pay the prior audit fees timely due to limited available cash flow causing a delay in the audits. Management will work to improve cash flow for timely payment of the required annual audits.
Finding 2024-006 - U.S. Department of Housing and Urban Development, Mortgage Insurance Rental and Cooperative Housing for Moderate Income Families and Elderly, Market Interest Rate, CFDA #14.135 Statement of Condition: During the year ending December 31, 2024, supporting documentation did not reconcile to the deposits for some of the requested deposits. Criteria: The HUD Handbook 4370.2 REV-1, Chapter 2 Section 12 states that all cash receipts must deposited in the name of the project, numbered rent receipts shall be used and reconciled to actual collections, an adequate recording system shall be employed to note all checks received and deposited and all collections shall be promptly deposited on the day received. Effect: Noncompliance with Regulatory Agreement. Cause: Prior management oversight Context: A sample of two months of cash receipts totaling $94,317 were tested to determine if the cash receipts were in accordance with HUD Handbook 4370.2. A total of $11,481 of cash receipts tested had supporting documentation that did not reconcile to the actual deposits and therefore deemed noncompliant. By extrapolating our identified error rate on cash receipts tested that were noncompliant (12%) over the total population of cash receipts for the year ending December 31, 2024 of $1,024,846, $124,752 of cash receipts could be noncompliant based on the above error rate. Questioned Costs: N/A Recommendation: We recommend that management ensure supporting documentation is maintained and reconciled for all cash receipts of the project. Views of Responsible Officials and Corrective Action Plan: Management acknowledges the requested disbursements did not have supporting documentation available. The Corporation has executed a new management agreement with Remnant Management Inc. effective October 1, 2024. Remnant Management Inc. will ensure supporting documentation is maintained for all disbursements from project operations beginning October 1, 2024 and going forward.
Finding 2024-007 - U.S. Department of Housing and Urban Development, Mortgage Insurance Rental and Cooperative Housing for Moderate Income Families and Elderly, Market Interest Rate, CFDA #14.135 Statement of Condition: During the months January through August 2024, the tenant security deposit account for the Corporation was underfunded. The account balance ranged from $18,270 to $17, 874, while total tenant security deposits per the tenant ledger totaled $20,037 to $21,656, resulting in an average monthly underfunded amount $3,278. Criteria: Title 24 CFR § 891.435(b)(1) requires owners of HUD‑insured multifamily housing to maintain tenant security deposits in a segregated account and to ensure that the account balance equals the total amount of tenant security deposits held at all times. In addition, HUD Handbook 4370.2 REV‑1, Financial Operations and Accounting Procedures for Insured Multifamily Projects, Chapter 2, Paragraph 2‑8, requires tenant security deposits to be recorded as a liability and maintained in a segregated bank account equal to the related tenant security deposit balances, separate from operating funds. Effect: Noncompliance with Uniform Guidance and HUD requirements. Cause: Prior management oversight Context: A test was performed to compare the monthly ending balances per the bank statements to recorded security deposit liabilities for the project at each month-end to determine if at the end of the reporting period and throughout the period under review the amount on deposit was at least equal to the outstanding obligations. Questioned Costs: N/A Recommendation: We recommend that management ensures the tenant security deposit bank account equals the tenant deposit liability at all times. Views of Responsible Officials and Corrective Action Plan: Management stated that the underfunding of the tenant security deposit account occurred prior to the transition to the current management company. Upon assuming management responsibilities on October 1, 2024, Remnant Management Inc. reviewed the tenant security deposit records and funded the tenant security deposit account in full at year‑end to ensure that the account balance equaled the total tenant security deposit liability.