Audit 402074

S3800-010 Finding Reference Number: 2025-001 S3800-011 Title and CFDA Number of Federal Program: Project-Based Rental Assistance (PBRA) 14.195 S3800-015 Type of Finding: Financial Statement and Federal Award Finding S3800-016 Finding Resolution Status Unresolved S3800-017 Information on Universe Population Size: Utility expenses (electricity) for the period January 1, 2025 through December 31,2025. S3800-018 Sample Size Information: Utility expenses (electricity) for the period January 1, 2025 through December 31, 2025. S3800-019 Identification of Repeat Finding and Finding Reference Number: N/A S3800-020 Criteria: The Project should have an adequate system of internal controls to ensure that all vendor and utility provider transactions are properly processed, paid timely, and properly recorded in the Project's accounting records. S3800-030 Statement of Condition: The Project had not processed nor paid the utility invoices of its electricity provider from March 2025 through March 2026. Unpaid utility and late fee charges totaled $170,391. Electricity continued to be provided to the Project during this time. The Project required an audit adjustment of $121,717 for unrecorded utility expenses (electricity) in order to properly reflect the Project's financial position and results of operations for the year ended December 31, 2025, in accordance with GAAP. S3800-032 Cause: The electric utility provider changed the Project's billing address. Utility invoices did not arrive at the property. The utility provider did not contact Project management to inform of delinquent payments. Internal controls did not detect that utility expenses were understated. S3800-033 Effect or Potential Effect: Delinquent payments to the utility provider could hinder the Project's ability to maintain a safe and operational building for residents. Additionally, incomplete financial information may hinder the overall administration of the Project. S3800-035 Auditor Non-Compliance Code: S – Internal control deficiencies S3800-037 FHA/Contract Number: 085-11073 S3800-040 Questioned Costs: $-- S3800-045 Reporting Views of Responsible Officials: Management acknowledges the finding and is taking corrective actions to address the issue. We do have a process where the manager is to ensure all public utility invoices are received and entered. The manager has a spreadsheet with the public utility accounts, which should ensure the manager receive the invoices. In this instance, the manager did not use the spreadsheet. If the manager doesn’t follow the spreadsheet, it should be caught upon receiving a past due notice or a disconnect notice. Sine Ameren changed the Project's address, we did not receive correspondence. The manager has been informed of the process that should be followed. Ameren called to make payment arrangements and will be waiving the late fees. This will be taken care of upon receiving and reviewing all monthly invoices and making appropriate arrangements. S3800-050 Context: For the year ended December 31, 2025, the Project required a significant audit adjustment in order to properly reflect the Project's financial position and results of operations in accordance with GAAP. S3800-080 Recommendation: The auditor recommends that the Project implement enhanced controls and procedures of its period-end closing process to ensure all proper expense accruals are recorded for invoices not timely received. The auditor also recommends that the Project implement enhanced controls and procedures to identify unreceived and unpaid vendor invoices to prevent potential disruption of services.

S3800-010 Finding Reference Number: 2025-003 S3800-011 Title and CFDA Number of Federal Program: Project-Based Rental Assistance (PBRA) 14.195, Mortgage Insurance Rental Housing 14.134 S3800-015 Type of Finding: Federal Award Finding S3800-016 Finding Resolution Status Unresolved S3800-017 Information on Universe Population Size: N/A S3800-018 Sample Size Information: N/A S3800-019 Identification of Repeat Finding and Finding Reference Number: N/A S3800-020 Criteria: Per HUD guidance, management must implement approved increases of the required monthly deposits of replacement reserves on the effective date approved by HUD or the Contract Administrator. S3800-030 Statement of Condition: The Project received correspondence approving an increase in the required monthly deposit for replacement reserves effective September 1, 2024 and then September 1, 2025. The Project failed to implement the deposit increase approved by the Contract Administrator on the effective approval dates. As of December 31, 2025, the Project was in arrears by $12,452. S3800-032 Cause: Oversite was due to staff changes. S3800-033 Effect or Potential Effect: The failure to implement the increase may result in an understatement of the reserve for replacement deposits and restricted funds. This non-compliance may result in administrative actions by HUD, including potential sanctions, future funding or renewal of contracts. S3800-035 Auditor Non-Compliance Code: N – Reserve for replacement deposits S3800-037 FHA/Contract Number: 085-11073 S3800-040 Questioned Costs: $-- S3800-045 Reporting Views of Responsible Officials: The Project's Accounts Payable has been paying what was stated on the mortgage statement, which includes the required replacement reserve deposits. The lender was not notified of the increase, so the deposit amount was not increased. Management will need to make sure to look out for the notifications from HUD and notify the lender if the deposits change, in case the lender doesn’t get the HUD notification. S3800-050 Context: For the years ended December 31, 2025 and December 31, 2024, the Project did not implement the approved increase to the required monthly replacement reserve deposits as of the designated effective date. S3800-080 Recommendation: The auditor recommend that the Project implement enhanced internal controls and procedures to ensure HUD approved rate changes of the required monthly deposits of replacement reserves are timely identified and implemented.

S3800-010 Finding Reference Number: 2025-004 S3800-011 Title and CFDA Number of Federal Program: Project-Based Rental Assistance (PBRA) 14.195, Mortgage Insurance Rental Housing 14.134 S3800-015 Type of Finding: Federal Award Finding S3800-016 Finding Resolution Status Resolved S3800-017 Information on Universe Population Size: N/A S3800-018 Sample Size Information: N/A S3800-019 Identification of Repeat Finding and Finding Reference Number: N/A S3800-020 Criteria: Per HUD guidance, the Project must maintain the security deposit account at a balance equal to or more than the security deposit liability at all times, consistent with the HUD approved lease for the tenant of the Project operating leases to low-and moderate-income individuals, including any bank maintenance fees. S3800-030 Statement of Condition: The Project did not maintain the security deposit account at a balance equal to or more than the security deposit liability at all times. As of December 31, 2025, the deficiency was $1,295. S3800-032 Cause: The Project did not follow the terms of the HUD approved lease. S3800-033 Effect or Potential Effect: Tenant deposit is being used to pay for Project expenses. S3800-035 Auditor Non-Compliance Code: Z – Other S3800-037 FHA/Contract Number: 085-11073 S3800-040 Questioned Costs: $-- S3800-045 Reporting Views of Responsible Officials: Funding of the security deposit account should occur monthly but it was not overlooked. S3800-050 Context: For the year ended December 31, 2025, the Project did not maintain the security deposit account at a balance equal to or more than the security deposit liability. S3800-080 Recommendation: The auditor recommends that the Project deposit additional funds to the security deposit account to ensure the balance equals or exceeds the tenant security deposit liability at all times.