Audit 399180

Finding 2025-001: Failure to Submit Required Single Audit Reporting Package to the Federal Audit Clearinghouse Federal Agency: U.S. Department of Housing and Urban Development Assistance Listing Number: 14.181 Federal Program: Supportive Housing for Persons with Disabilities Type of Finding: Material Weakness in Internal Control Over Compliance; Noncompliance Compliance Requirement: Reporting Criteria: In accordance with 2 CFR § 200.512, the Uniform Guidance requires a non-Federal entity that expends $1,000,000 or more in Federal awards during its fiscal year to have a Single Audit performed and to submit the reporting package and data collection form to the Federal Audit Clearinghouse within the earlier of 30 calendar days after receipt of the auditor’s reports or nine months after the end of the audit period. The auditee is responsible for following up and taking corrective action on audit findings and for preparing and submitting the required reporting package. Condition: The Organization has not submitted required Single Audit reporting packages and related data collection forms to the Federal Audit Clearinghouse, despite participating in a Federal program subject to Single Audit requirements. Cause: During our testing of compliance with reporting requirements for the Section 811 program, we reviewed available records related to prior Single Audit submissions. Based on those procedures, we noted no evidence that the Organization had submitted the required reporting package to the Federal Audit Clearinghouse. Effect: As a result, the Organization is not in compliance with Federal reporting requirements. In addition, the absence of controls over Single Audit reporting creates a reasonable possibility that noncompliance with Federal program reporting requirements would not be prevented, or detected and corrected, on a timely basis. Federal awarding agencies, pass-through entities, and oversight bodies may not be provided with the required audit reporting information through the Federal Audit Clearinghouse. Questioned Costs: None noted. Recommendation: We recommend management implement formal controls to ensure compliance with Single Audit reporting requirements on the Federal Audit Clearinghouse such as 1) retaining annual documentation of whether the Organization meets the Federal expenditure threshold requiring a Single Audit, 2) assignment of responsibility for submitting the reporting package and data collection form, 3) use of a compliance calendar to monitor deadlines, and 4) retention of documentation evidencing timely submission to the Federal Audit Clearinghouse. Management should also consult with the appropriate Federal program oversight personnel to determine whether any remedial action related to prior-year non-filings is necessary or appropriate.

Finding 2025-002: Failure to Maintain a Required Interest-Bearing Project Fund Account Federal Agency: U.S. Department of Housing and Urban Development Assistance Listing Number: 14.181 Federal Program: Supportive Housing for Persons with Disabilities Type of Finding: Significant Deficiency in Internal Control Over Compliance; Noncompliance Compliance Requirement: Special Tests and Provisions Criteria: Pursuant to 24 CFR § 891.400(e), the Organization is required to maintain a separate interest-bearing deposit account and deposit all tenant payments, charges, income, and revenues arising from project operation or ownership. The interest-bearing project fund account should be in a federally insured depository that is a member of the Federal Deposit Insurance Corporation or National Credit Union Share Insurance Fund. Condition: During testing of cash accounts, we reviewed the project operating account and noted the account was maintained as a non-interest-bearing account rather than a separate interest-bearing project fund account as required. Cause: Management did not establish and maintain effective controls to ensure project funds were deposited and maintained in an account structure that complied with HUD requirements applicable to the Section 811 program. Effect: As a result, the Organization was not in compliance with HUD requirements governing project funds. In addition, the lack of appropriate controls over the establishment and monitoring of required project bank accounts increases the risk that project funds may not be administered in accordance with applicable HUD regulations, including the treatment of interest earnings and year-end residual amounts. Questioned Costs: None noted. Recommendation: We recommend that management establish and maintain a separate interest-bearing, federally insured project fund account in compliance with 24 CFR § 891.400(e) and implement review controls to verify that account terms remain compliant with HUD requirements.

Finding 2025-003: Failure to Maintain Required Hazard Insurance Endorsement Naming HUD as Mortgagee/Loss Payee Federal Agency: U.S. Department of Housing and Urban Development Assistance Listing Number: 14.181 Federal Program: Supportive Housing for Persons with Disabilities Type of Finding: Significant Deficiency in Internal Control Over Compliance; Noncompliance Compliance Requirement: Special Tests and Provisions Criteria: In accordance with the project Mortgage, Deed of Trust, or Security Deed and Regulatory Agreement, the HUD project property must maintain hazard insurance, and the policy should be endorsed with a standard Mortgagee Clause with loss payable to HUD in the event of a covered claim. Condition: We inspected the most current insurance documentation maintained by the Organization for the project property. The policy documentation reviewed did not reflect HUD as mortgage holder/loss payee. Cause: Management did not establish and maintain effective controls to ensure that required insurance coverages and endorsements were obtained, reviewed, and kept current in accordance with HUD program and financing requirements. Effect: As a result, the Organization was not in compliance with the project’s insurance requirements. In addition, the omission of HUD as mortgage holder/loss payee increases the risk that the property’s insurance coverage may not fully protect HUD’s secured interest in the event of a covered loss. Questioned Costs: None noted. Recommendation: We recommend that management work with its insurance carrier and agent to revise the policy and related endorsements to name HUD as required under the applicable mortgage and regulatory documents. Management should also implement procedures to review all insurance renewals for compliance with HUD requirements before coverage is finalized.