Audit 393939

FY End

2025-06-30

Total Expended

$1.42M

Findings

1

Programs

1

Organization: Morning Calm Apt (WA)

Year: 2025 Accepted: 2026-03-24

Auditor: SQUIRES MADDUX & COMPANY PLLC

Organization Exclusion Status:

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ID	Ref	Severity	Repeat	Requirement
1182523	2025-001	Material Weakness	Yes	N

ALN	Program	Spent	Major	Findings
14.157	SUPPORTIVE HOUSING FOR THE ELDERLY	$90,557	Yes	0

Contacts

Name	Title	Type
VA5DLTMDADG4	Susan Meyers	Auditee
2064418866	John Maddux	Auditor
No contacts on file

Notes to SEFA

The preceding schedule of expenditures of federal awards includes the federal grant activity of Morning Calm Apt (formerly Morning Calm, Inc.), HUD Project No. 127-EE017 and is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance); the financial statements have been prepared and presented based upon accounting principles generally accepted in the United States of America (US GAAP); therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. Because the Schedule presents only a selected portion of the operations of Morning Calm Apt (formerly Morning Calm, Inc.), it is not intended to and does not present the financial position, change in net assets, or cash flows of Morning Calm Apt.

Expenditures reported on the Schedule are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Morning Calm Apt has elected not to use the ten percent (10%) de Minimis indirect cost rate allowed under the Uniform Guidance.

Morning Calm Apt has received a U.S. Department of Housing and Urban Development capital advance pursuant to Section 202, of the National Housing Act. The capital advance outstanding at the beginning of the year is included in the federal expenditures presented in the Schedule. Morning Calm Apt received no additional capital advance proceeds during the year. The balance of the capital advance outstanding at June 30, 2025 consisted of: Assistance Listing Number 14.157 Supportive Housing for the Elderly $1,325,200.

Finding Details

Finding 2025-001

FINDINGS – FINAINCAL STAEMENT AND MAJOR FEDERAL AWARD PROGRAMS AUDIT S3800-010 Finding Reference Number: 2025-001 S3800-011 Title and Assistance Number of Federal Program: 14.157 Supportive Housing for the Elderly S3800-015 Type of Finding: Federal Program Finding (FP) S3800-016 Finding Resolution Status: IN PROCESS S3800-017 Information on Universe Population Size: N/A - Not detected as a result of sampling procedures and testing. S3800-018 Sample Size Information: N/A - Not detected as a result of sampling procedures and testing. S3800-019 Identification of Repeat Finding and Finding Reference Number: 2024-002 S3800-020 Criteria: The HUD regulatory agreement requires monthly deposits to the replacement reserve account of $1,351. S3800-030 Statement of Condition: Previous management only made nine (9) of the twelve (12) monthly required reserve deposits, leaving the account underfunded by $4,053 at June 30, 2022; for the year ended June 30, 2023, only $2,702 of the required $16,212 in deposits were made, leaving the account behind schedule by another $13,510, for a total deficiency of $17,563; for the year ended June 30, 2024, only $5,404 of the required $16,212 in deposits were made, leaving the account behind schedule by another $10,808, for a total cumulative deficiency of $28,371. S3800-032 Cause: Previous management had properly designed controls to ensure all monthly deposits are made; however, the control was not functioning as intended, and the project began experiencing liquidity problems. S3800-033 Effect or Potential Effect: The replacement reserve account is underfunded by $28,371. S3800-035 Auditor Non-Compliance Code: N – Reserve for Replacements Deposits S3800-040 Questioned Costs: $28,371 Details – Questioned Costs by Property S3800-037 FHA/Contract Number: 127-EE017 S3800-038 Questioned Costs: $28,371 S3800-045 Reporting Views of Responsible Officials: As a result of liquidity problems as reported last year in Finding 2024-001, property management will be unable to make the required reserve deposits and pay all vendors without a rent increase from HUD. Management has developed a plan with the HUD Project Manager to pay all vendors for amounts owed and fund the reserve account. Part of that plan includes a suspense of required reserve deposits to allow liquidity to pay past due amounts with vendors. A rent increase will also be necessary. S3800-050 Context: See statement of condition. S3800-080 Recommendation: Management has developed a plan with HUD to pay all past due amounts with vendors and eventually fund the reserve account. Management should continue to work with HUD to resolve the reserve funding deficit and apply for rent increases to fund those deficits. S3800-090 Auditor’s Summary of the Auditee’s Comments on the Findings and Recommendations: As a result of liquidity problems reported last year in Finding 2024-001, property management will be unable to make the required reserve deposits and pay all vendors without a rent increase from HUD. Management has developed a plan with the HUD Project Manager to pay all vendors for amounts owed and fund the reserve account. Part of that plan includes a suspense of required reserve deposits to allow liquidity to pay past due amounts with vendors. A rent increase will also be necessary. S3800-0130 Response Indicator: Agree (A) S3800-0140 Completion Date: March 12, 2026 S3800-0150 Response: Management plans to continue to work with HUD to resolve liquidity issues and the funding deficit in the replacement reserve account.