Audit 400790

FINDINGS - MAJOR FEDERAL AWARD PROGRAMS AUDIT Department of Housing and Urban Development Finding 2025-001: Major Program: Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Federal Assistance Listing Number 14.155 STATEMENT OF CONDITION One tenant file, out of four files reviewed, did not refund a security deposit within thirty days of the tenant moving out. CRITERIA HUD Handbook 4350.3 Revision 1 for HUD Subsidized Multifamily Housing Programs requires owners to refund the tenant’s security deposit within thirty days after the move out date. EFFECT OF CONDITION The tenant was not refunded their security deposit within thirty days of their move out. CONTEXT During audit fieldwork, four tenant files from a statistically valid sample were examined for compliance with tenant eligibility criteria and HUD lease requirements. Of the four tenant files examined, one tenant moved out during 2025. The tenant who moved out was not refunded their security deposit within thirty days of the move out date. CAUSE OF CONDITION Management mistakenly did not ensure that the security deposit was refunded within thirty days of the tenant moving out. RECOMMENDATION The auditor recommends implementing greater oversight over HUD tenant compliance and proper employee training on HUD move out procedures. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS The Project will monitor tenant move outs to ensure security deposits are refunded within the thirty-day period specified by HUD and review the HUD move out procedures with their employees.

FINDINGS - MAJOR FEDERAL AWARD PROGRAMS AUDIT (CONTINUED) Department of Housing and Urban Development Finding 2025-002: Major Program: Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Federal Assistance Listing Number 14.155 STATEMENT OF CONDITION One tenant file, out of four files reviewed, had incorrectly accounted for tenant’s income, which resulted in undercharging the tenant $104 a month in rent. CRITERIA HUD Handbook 4350.3 Revision 1 for HUD Subsidized Multifamily Housing Programs requires owners to properly calculate tenants rent derived from the appropriate documents on file for tenants. EFFECT OF CONDITION The tenant was improperly undercharged $312 of rent for the year ended December 31, 2025. HUD was overcharged $312 of additional tenant assistance payments for the year ended December 31, 2025. CONTEXT During audit fieldwork, four tenant files from a statistically valid sample were examined for compliance with tenant eligibility criteria and HUD lease requirements. Of the four tenant files examined, income for one tenant was incorrectly accounted for, resulting in the wrong calculation of tenant rent and HUD tenant assistance payments. CAUSE OF CONDITION Management mistakenly did not ensure the proper income was used to calculate the tenant’s rent. RECOMMENDATION The auditor recommends ensuring all tenant’s paperwork is thoroughly reviewed and accurately used in the calculation of the tenant’s required monthly rent and HUD’s tenant assistance payments. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS The Project will be billing the tenant for the $312 and reimbursing HUD for the additional tenant assistance payments of $312 due to the Project.

FINDINGS - MAJOR FEDERAL AWARD PROGRAMS AUDIT (CONTINUED) Department of Housing and Urban Development Finding 2025-003: Major Program: Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, Federal Assistance Listing Number 14.155 STATEMENT OF CONDITION The Project improperly paid for one expense in the amount of $1,320 on behalf of another project during the year ended December 31, 2025. CRITERIA HUD Handbook 4350.3 Revision 1 for HUD Subsidized Multifamily Housing Programs requires owners to use funds in accordance with the Regulatory Agreement. EFFECT OF CONDITION The Project used funds to pay for an expense related to another project, which is on an adjacent property to the Project. CONTEXT During audit fieldwork, a sample size of 40 cash disbursements were tested to determine if the funds were properly disbursed in accordance with the Regulatory Agreement. One out of the 40 cash disbursements was not properly disbursed. CAUSE OF CONDITION Management mistakenly did not ensure the correct project was paying the appropriate share of a vendor’s invoice resulting in a payment on behalf of another project of $1,320. RECOMMENDATION The auditor recommends ensuring all disbursements are thoroughly reviewed prior to authorizing the expense to be paid. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS The Project will be reimbursed by the other project for the expense paid on its behalf.