Audit 399366

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Section 811 – Capital Advances, Section 811 – Project Rental Assistance Assistance Listing Number: 14.181 Federal Award Identification Number and Year: N/A Award Period: January 1, 2025 through December 31, 2025 Type of Finding: Significant Deficiency in Internal Control over Compliance Finding Noncompliance: Description of Universe Tested: Reviewed the monthly deposits to the reserve for replacement account. Criteria or specific requirement: Management of the Project is required to make 12 monthly payments totaling $18,764. Condition: According to HUD Regulations, the Organization is required to maintain a certain level of funding in their reserve for replacement accounts to ensure the availability of funds for future repairs and replacements. Questioned costs: N/A Context: Management of the Project is required to make 12 monthly payments totaling $18,764. Cause: The Reserve for Replacement account was underfunded by $84 during the year. The organization failed to adjust the monthly deposit amounts to meet the funding requirement for the year. Effect: The Organization is not in compliance with the Reserve for Replacement funding requirements. Repeat Finding: No. Recommendation: The Organization should review its budgeting process to ensure compliance with HUD funding requirements for the reserve for replacement account. Additionally, they should implement regular monitoring to prevent future underfunding. Views of responsible officials: Management agrees with the finding and will take steps to adjust the budget and ensure the Reserve for Replacement account is adequately funded moving forward.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Section 811 – Capital Advances, Section 811 – Project Rental Assistance Assistance Listing Number: 14.181 Federal Award Identification Number and Year: N/A Award Period: January 1, 2025 through December 31, 2025 Type of Finding: Significant Deficiency in Internal Control over Compliance Finding Noncompliance: Description of Universe Tested: Reviewed compliance around reserve account withdrawals. Criteria or specific requirement: Management of the Project is required to obtain written HUD approval before withdrawing any funding from the reserve account. Condition: According to HUD Regulations, the Organization is required to request and receive permission for any withdrawals from the replacement reserve account. Questioned costs: N/A Context: Management of the Project is required to obtain written HUD approval before withdrawing any funding from the reserve account. Cause: There were withdrawals from the Reserve and Replacement account during the year totaling $22,516 which did not receive proper HUD approval. Effect: The Organization should comply with HUD requirements and wait until receipt of HUD approval before withdrawing any funding from the Reserve for Replacement account. Repeat Finding: No. Recommendation: The Organization should comply with HUD requirements and wait until receipt of HUD approval before withdrawing any funding from the Reserve for Replacement account. Views of responsible officials: Management agrees with the finding and will take steps to adjust the budget and ensure there is proper approval before withdrawing any funds from the R&R account moving forward.