Audit 398716

U.S. Department of Housing and Urban Development Federal Financial Assistance Listing #14.134 Mortgage Insurance Rental Housing Project Number: 091-11022 HUD Regulatory Agreement Dated July 1, 2016 Special Test and Provisions: Property, Operations and Distributions Significant Deficiency in Internal Control over Compliance Criteria: 2 CRF 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: Our testing of property, operations, and distributions detected one instance of underpayment of an expense based upon review of supporting invoices and the allocation of the expense. Cause: There was a lapse in oversight of the internal control process designed to ensure disbursement of funds are adequately supported. Effect: Inadequate controls over this area of compliance may result in a reasonable possibility that the Project would not have the required documentation in place and would not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None Context/Sampling: A nonstatistical sample of 60 out of more than 250 payroll and nonpayroll disbursements, were selected for testing, which accounted for approximately $382,800 out of approximately $1,403,000 of disbursements. Repeat Finding from Prior Year: Yes, Finding 2024-002 Recommendation: We recommend management review policies and procedures with applicable employees and remind them of the importance of established review and monitoring processes to ensure disbursements have appropriate documentation to support the amount funds disbursed. Views of Responsible Officials: Management agrees with the finding and recommendation.

U.S. Department of Housing and Urban Development Federal Financial Assistance Listing #14.134 Mortgage Insurance Rental Housing Project Number: 091-11022 HUD Regulatory Agreement Dated July 1, 2016 Special Test and Provisions: Replacement Reserve Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria: The Project’s regulatory agreement with HUD requires monthly deposits into the replacement reserve. Condition: The Project made twelve monthly deposits into the replacement reserve account; however, the deposits were not at the amount identified and required by HUD. Cause: The increase in the monthly deposit for the replacement reserve was overlooked by management due to employee turnover and knowledge of the required deposits. Effect: The Project underfunded its replacement reserve by $4,962 which includes $1,140 as it relates to the year ended December 31, 2024. Questioned Costs: None Context/Sampling: Sampling was not used. Repeat Finding from Prior Year: No Recommendation: We recommend the Project transfer $4,962 to its replacement reserve. Views of Responsible Officials: Management agrees with the finding and the recommendation.