Audit 399608

Federal Program – U.S. Department of Housing and Urban Development Assistance Listing Number 14.157 – Supportive Housing for the Elderly (Section 202) Material Weakness & Noncompliance Category of Finding – Eligibility Criteria - The Compliance Supplement requires owners and management agents of properties with Section 202 project rental assistance contracts to complete annual income recertifications for all tenants. These recertifications must be conducted timely, with notices sent at least 120 days prior to the effective date and all required documentation collected to ensure accurate rent calculations and continued eligibility. Condition - During the audit, a review of tenant files revealed that income recertifications were either not completed or not completed in a timely manner. Specifically, 1 out of 4 tenant files reviewed lacked completed income recertifications within the required timeframe. Context - Of the total population of 35 units, 4 were tested. Questioned costs are not applicable to this finding. Based on our sample, inquiry of employees and a master list of late annual recertifications provided by management, we understand this finding to be prevalent at Garden Terrace Commons throughout the year. Cause - The identified deficiencies appear to be due to inadequate oversight and ineffective tracking of the recertification process by property management. Factors contributing to the issue include not utilizing a tracking system to track recertification deadlines and timely distribution of recertification notices; insufficient staff training on federal compliance requirements; and staff turnover resulting in inconsistent adherence to required procedures. Effect (Potential Effect) - Failure to perform annual recertifications on a timely basis increases the risk that ineligible tenants may continue to receive assistance or that assistance amounts may not be properly calculated based on current income and family composition. This could result in questioned costs and potential repayment of HUD assistance related to periods in which recertifications were late. Identification of repeat finding - Yes Recommendation - To ensure compliance with HUD recertification requirements, management should utilize available tracking systems to monitor and enforce recertification deadlines; provide staff training on HUD Handbook 4350.3 recertification procedures and requirements; establish a quality control process to verify recertifications are completed on time and properly documented in tenant files; and conduct periodic internal audits to identify and correct any deficiencies in the recertification process. Views of responsible officials and planned corrective actions - Garden Terrace Commons agrees with the finding and has continued to implement strategies to address the finding. To address this finding, ownership has moved its portfolio, with the exception of one project, to third party property managers as of January 1, 2026. These agents have a track record of completing certifications on time and in accordance with applicable regulations. Ownership periodically reviews the agents’ procedures to ensure that they complete tenant files on time and have routine internal audits of tenant files to ensure compliance with HUD regulations.