Audit 399313

Criteria: Financial statement data is required to be submitted electronically to the Real Estate Assessment Center (REAC) within 90 days after their fiscal year-end. If the Project is not prepared to submit the audited financial information, then an owner-certified report must be submitted within 90 days of fiscal year-end. Condition: Due to delays in account reconciliations, the audited annual financial statement data for the year ended June 30, 2023 was not submitted to HUD via the Real Estate Assessment Center REAC system within the required time frame. Effect: The Project is not in compliance with HUD requirements regarding the timely submission of financial information to the REAC. Questioned Costs: $0 Cause: The Project experienced turnover resulting in delays in account reconciliations for audit completion and submission of data to the REAC. Recommendation: The Project should consider reevaluating their established procedures and controls in place to ensure full compliance regarding the reporting requirements required by HUD. Views of Responsible Officials: Management agrees with the findings. There was significant turnover during and subsequent to the audit period resulting in a lack of controls. Controls have been re-evaluated and implemented under new management. Further response is included in the Corrective Action Plan.

Criteria: Internal controls are required to be in place to ensure proper procedures are being followed and the Project is in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Condition: During the eligibility testing of the audit, we identified tenant files were missing documentation required to be maintained to support tenant eligibility, income verification and rent determination. We consider this finding to be a significant deficiency with the Eligibility Compliance Requirement. Effect: The Project is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided. Questioned Costs: $0 Cause: The Project experienced turnover resulting in inconsistent file management practices and ineffective internal review procedures to ensure that all required eligibility documentation is obtained and retained. Recommendation: The Project should consider reevaluating their established procedures and controls currently in place to ensure full compliance regarding eligibility and documentation retained in tenant files. The Project needs to correct the deficiencies noted in the tested files. Views of Responsible Officials: Management agrees with the findings. There was significant turnover during and subsequent to the audit period resulting in a lack of controls. Controls have been re-evaluated and implemented under new management. Further response is included in the Corrective Action Plan.

Criteria: The Project is required to maintain tenant security deposits in a separate FDIC insured account. The balance in the bank account is required to cover the tenant security deposit liability. Condition: The balance in the Project’s tenant security deposit bank account at June 30, 2023 was not sufficient to cover the tenant security deposit liability. We consider this finding to be an instance of noncompliance regarding the Special Tests and Provisions compliance requirement. Effect: By not holding tenant security deposits in a separate account, the Project may have insufficient funds when the deposits are required to be refunded. Questioned Costs: $3,408 Cause: The Project experienced turnover on the finance team which resulted in funds not being transferred to the security deposit account when collected. Recommendation: The Project should consider reevaluating their established procedures and controls currently in place to ensure full compliance regarding special tests and provisions. Views of Responsible Officials: Management agrees with the findings. There was significant turnover during and subsequent to the audit period resulting in a lack of controls. Controls have been re-evaluated and implemented under new management. Further response is included in the Corrective Action Plan.

Criteria: Internal controls are required to be in place to ensure proper procedures are being followed and the Project is in compliance with HUD requirements regarding disbursements from the replacement reserve. Condition: During the testing of the replacement reserve it was noted the Project made unauthorized disbursements from the replacement reserve. We consider the finding to be a significant deficiency with the Special Tests and Provisions compliance requirement. Effect: The Project is not in compliance with HUD requirements regarding special tests and provisions which could result in inadequate reserves and unauthorized disbursements from the replacement reserve. Questioned Costs: $20,000 Cause: The Project experienced turnover resulting in inconsistent file management practices and ineffective internal control review procedures to ensure that all required eligibility documentation is obtained and retained. Recommendation: The Project should consider reevaluating their established procedures and controls currently in place to ensure full compliance regarding replacement reserve funding and disbursements. The Project should return the unauthorized disbursements to the replacement reserve account. Views of Responsible Officials: Management agrees with the findings and a response is included in the Corrective Action Plan. The unauthorized disbursements were deposited back to the replacement reserve account on March 3, 2026.