Audit 401563

Statement of Condition: The auditors noted that the entity did not submit its financial statements to HUD within the required 90-day timeframe. For the fiscal year ended 12/31/2025, the entity’s financial statements and related reporting package were submitted after the required deadline. Criteria: HUD reporting requirements generally require auditees to submit their financial statements and related reports within 90 days after fiscal year-end (or within the applicable required submission timeframe) to ensure timely reporting and oversight. Context: During the audit of the fiscal year ended 12/31/2025, the auditors noted the entity’s financial statement submission occurred after the required 90-day deadline. Cause: According to management, the entity experienced a lack of sufficient accounting personnel to ensure the books and records were maintained timely in accordance with generally accepted accounting principles (GAAP) and to complete the year-end closing and reporting package within required timeframes. Effect: Failure to submit required financial statements timely results in noncompliance with HUD reporting requirements and reduces the timeliness of financial information available to HUD and other users for oversight and decision-making. This delay may also indicate a deficiency in internal control over financial reporting and financial close processes, which could rise to the level of a significant deficiency depending on the auditor’s evaluation. Recommendation: Management should evaluate staffing levels and competencies within the accounting function and implement a formal closing and reporting timeline to support timely preparation and submission of financial statements and related HUD reporting. Management should also establish monitoring controls (e.g., supervisory review, milestone tracking, and escalation procedures for delays) to ensure required submissions are completed within applicable deadlines. Management Response: Management noted the finding was caused partially by the change in management company and the delayed access to REAC caused by the change. Management now has the required access and will work to ensure the books are reconciled and closed timely to ensure compliance with HUD financial statement requirements in future periods

Statement of Condition: The auditors noted that the entity did not complete annual tenant recertifications by the required due date for certain tenants. Specifically, for 2 of the 11 eligibility samples selected for testing, the annual tenant recertification was completed 22 days after the recertification due date. Criteria: Applicable HUD program requirements and the entity’s policies and procedures generally require annual tenant recertifications to be completed by the tenant’s annual recertification anniversary date (or other required due date) to support timely and accurate eligibility determinations and assistance calculations. Context: This condition was identified during eligibility testing for the HUD program. The auditors tested 11 tenant eligibility/recertification items and noted exceptions in 2 items in which the annual recertification was completed 22 days after the due date. Cause: The condition appears to have resulted from delays in tracking or monitoring recertification due dates and ensuring recertification activities were scheduled, completed, and reviewed timely. Contributing factors may include staffing constraints and/or insufficient oversight of the recertification tracking process. Effect: Failure to complete annual tenant recertifications timely results in noncompliance with applicable program requirements and increases the risk that tenant eligibility determinations and rental assistance amounts are based on outdated information. Questioned costs may arise if benefits were calculated or paid based on incomplete or outdated tenant information. This condition represents a deficiency in controls over the eligibility and recertification compliance process. Recommendation: The entity should strengthen controls over annual recertifications by implementing and maintaining effective tracking and monitoring of recertification due dates, including timely scheduling, automated or manual reminders, documented supervisory review of recertification status, and periodic management monitoring to ensure recertifications are completed by required due dates. Management Response: Management will continue to monitor recertification activity to ensure ongoing compliance with HUD occupancy requirements and to prevent similar issues moving forward

Statement of Condition: The auditors noted that the entity did not complete a required annual housing inspection within the required timeframe for certain tenants/units. Specifically, for 1 of the 11 eligibility samples selected for testing, the annual housing inspection was not completed within the last 12 months. Criteria: Applicable HUD program requirements and the entity’s policies and procedures generally require housing inspections to be performed and documented at least annually (i.e., within each 12-month period) to support compliance with inspection requirements and housing quality standards. Context: This condition was identified during eligibility testing for the HUD program. The auditors tested 11 eligibility items and noted one exception in which the required annual housing inspection was not performed within the required 12-month period. Cause: The condition appears to have resulted from inadequate tracking or monitoring of inspection due dates and/or inspection scheduling challenges, resulting in inspections not being performed and documented timely. Effect: Failure to perform annual housing inspections within the required timeframe results in noncompliance with applicable program requirements and increases the risk that housing quality standards issues are not identified and addressed timely. This condition represents a deficiency in controls over monitoring and completion of required annual inspections. Recommendation: The entity should improve processes and controls over annual housing inspections by maintaining an inspection schedule and tracking log, implementing reminders for upcoming and overdue inspections, documenting completion dates, and performing supervisory review and periodic monitoring to ensure inspections are completed and documented at least every 12 months. Management Response: Management noted the finding was caused partially by the change in management company and the required documentation to validate the prior year housing inspections was not provided. Management will continue to monitor annual inspections to ensure ongoing compliance with HUD occupancy requirements and to prevent similar issues moving forward.