Audit 398305

Material Weakness – Reserve for Replacement Criteria The Program is required to make monthly deposits to a Reserve for Replacement account in accordance with their regulatory agreement. Condition: The Program did not comply with requirement related to deposits into the reserve for replacement account. The Program made no deposits in the current year, the required deposits in to the reserve for replacement account for the year ended December 31, 2023 were $31,440. Per Rural Development, the ending balance as of December 31, 2023 should be $481,077. Cause: The Program has been unable to provide enough cash flow to make the required reserves and a waiver was not obtained. Questioned Costs: Not Applicable. Effect: Non-compliance with Reserve for Replacement requirements. Repeat Finding: This is a repeat of prior year finding 2022-001. Recommendation: The Program should work with its lender to ensure compliance with the replacement reserve in future periods. Response: The Program agrees with the finding and is trying to work with USDA Rural Development to find ways to increase the cash flows of the property and lease more units.

Material Weakness – Reporting Criteria All borrowers who have a Section 515 Rural Rental Housing (RRH) loan or a Section 514 Off-Farm Labor Housing loan must comply with the financial reporting requirements of the Guide. Year-end reporting requirements include the use of Forms RD 3560-7, Multiple Family Housing Project Budget/Utility Allowance Budget Actuals and Form RD 3560-10, MFH Borrower Balance Sheet. Condition: The Program did not submit the required Form RD 3560-7 or 3560-10 reports in a timely manner. Cause: Lack of internal controls to ensure timely submission. Questioned Costs: Not Applicable. Effect: Non-compliance with reporting requirements. Repeat Finding: This is a repeat of prior year finding 2022-002. Recommendation: We recommend the Program review its internal control policies and procedures to ensure timely reporting. Response: The Program agrees with the finding and will implement controls to ensure timely reporting for future submissions.

Material Weakness– Reporting Criteria The Uniform Guidance requires that all entities that expend in excess of $750,000 to file audited financial statements and Data Collection Form within 9 months of year-end. (2 CFR Section 200.512). Condition: The Program’s December 31, 2023 audited financial statements were not filed with the Federal Audit Clearinghouse within nine months of year-end. Cause: Turnover in staffing and lack of oversight led to information not being ready for audit in a timely manner. Questioned Costs: Not Applicable. Effect: The Program could have had federal funding delayed or reduced. Repeat Finding: This is not a repeat finding. Recommendation: We recommend the Program review its internal control policies and procedures to ensure timely reporting. Response: The Program agrees with the finding and will implement controls to ensure timely reporting for future submissions.