Audit 394285

Finding 2025-002 - Special Tests and Provisions - Significant Deficiency Name of Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Section 223(f) HUD-Insured Mortgage Assistance Listing Number: 14.155 Federal Award Identification Number and Year: Not available Name of Pass-through Entity (if applicable): Not applicable Criteria: In accordance with §891.400(e), Responsibilities of owner, the owner must make required deposits to the residual receipts account. Additionally, in accordance with §891.600(e), Responsibilities of borrower, the borrower must make required deposits to the residual receipts account. Additionally, residual receipt account balances in excess of the retained balance must be remitted to HUD. Condition: During the year ended October 31, 2025, management was required to deposit $1,703 from 2023's surplus cash, as required by HUD. As of October 31, 2025, the $1,703 deposit was not deposited resulting in an underfunding of the residual receipts account of $1,703. Additionally, the Project did not remit excess receipts during 2025, resulting in overfunding of the residual receipts account in the amount of $2,558. In addition, the $1,703 late deposit will need to be remitted once made. Cause: The Corporation did not have internal controls in place to ensure that required residual receipts reserve deposits are made timely. The procedures to request approval from HUD to remit excess residual receipts were not followed. Effect or Potential Effect: The Corporation is not in compliance with the requirements of the regulatory agreement or Uniform Guidance. Questioned Costs: Not applicable. Context: During the year ended October 31, 2025, management did not make any deposits from prior years surplus cash. However, management was required to deposit $1,703 into the residual receipts account. Additionally, during the year ended October 31, 2025, management did not remit any excess receipts to HUD. Identification as a Repeat Finding: This is a repeat finding (see prior year finding number: 2024- 001). Recommendation: We recommend that the Corporation establish internal controls over its residual receipts compliance requirements to ensure that the Corporation is in compliance with Uniform Guidance and its regulatory agreement. Views of Responsible Officials: Management agrees with the finding and is in the process of revising internal controls to address this issue. Additionally, subsequent to year-end, on February 9, 2026, management deposited $1,703 into the residual receipts reserve.

Finding 2025-003 - Tenant Lease Files - Material Weakness Name of Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Section 223(f) HUD-Insured Mortgage Assistance Listing Number: 14.155 Federal Award Identification Number and Year: Not available Name of Pass-through Entity (if applicable): Not applicable Criteria: In accordance with §891.410, Selection and admission of tenants, the owner is responsible for determining tenant eligibility and maintaining lease files. Condition: During the procedures applied to a sample of 8 tenant lease files, we noted the following instances of noncompliance with HUD regulations regarding tenant eligibility and the maintenance of lease files. • 2 instances where the project did not perform timely income verification using the EIV system and this data was not maintained in the lease file. • 1 instance where the project did not obtain tenant’s consent to release income information and this data was not maintained in the lease file. • 1 instance where the project did not send the required recertification notifications to the tenant and this data was not maintained in the lease file. Cause: The Corporation failed to follow the policies and procedures which have been established for proper tenant file maintenance and determining tenant eligibility in accordance with HUD guidelines. Effect or Potential Effect: Noncompliance with HUD guidelines could result in units being rented to ineligible tenants or errors in the rent subsidies paid by HUD. Questioned Costs: Not applicable. Context: During the year ended October 31, 2025, management did not maintain the required documentation associated with making tenant eligibility determinations. Identification as a Repeat Finding: N/A Recommendation: Management should establish procedures and monitor compliance with those procedures to ensure that the determination of tenant eligibility and the maintenance of lease files are in accordance with guidelines specified by HUD. Views of Responsible Officials: Management agrees with the finding and is in the process of revising internal controls to address this issue.