Audit 403859

FINDING 2025-001: Unauthorized fees paid by the Corporation Criteria – The Project must obtain approval from HUD to pay fees outside of the previously approved management fee. Condition – A project wholly-owned by the Corporation (the Project) paid the management company of the Project a bookkeeping fee that was not authorized by HUD. Questioned costs and how they were computed – $2,376. The questioned costs are bookkeeping fees that were paid by the Project prior to being approved by HUD. Context – The entire unauthorized bookkeeping fee of $2,376 that was charged to the Project in 2024 should not have been paid by the Project. Cause – In 2024, the management company charged a bookkeeping fee in the amount of $2,376 to the Project prior to the fee being approved by HUD. Effect – The Project paid the management company a bookkeeping fee that may constitute an unauthorized distribution. Identification of Repeat Finding – Yes, 2024-001. The finding remains open. Recommendation 2025-001 – We recommend that management continue to work with HUD to resolve the situation. Auditee’s comments and response – The Corporation has contacted HUD and is awaiting a response. Responsible party for corrective action: Lisa Fischer – Chief Operating Officer

FINDING 2025-002: Unauthorized receipt of COVID-19 Supplemental Payments (CSP) Criteria – Section 8 owners who took distributions of surplus cash following the announcement of CSPs on July 23, 2020, are not eligible to receive a CSP for expenses incurred in the first, second, or third operating periods (March 27, 2020 to March 31, 2021). The Corporation must be able to substantiate the costs submitted for reimbursement and the costs must fall under the eligible cost category for which they were submitted. Condition – The Corporation received CSPs for all five program operating periods. The Corporation received reimbursement for expenditures in eligible expense categories different from the expense categories applied for. Questioned costs and how they were computed – $89,393. The questioned costs are the CSP funds received that the projects were either not eligible for or that were received for expenditures that were different than those used in the CSP applications. Context – The Corporation is responsible for compliance with the Section 8 program requirements, including any special provisions or programs that may be included with the Section 8 cluster. Cause – The management company applied for reimbursement of expenses on behalf of the Corporation for all five program operating periods, when the Corporation was only eligible for program periods 4 and 5. The Corporation received reimbursement for eligible expense categories different from the expense categories applied for. Effect – The Corporation received federal finds it was not eligible to receive. Identification of Repeat Finding – No. Recommendation 2025-002 – We recommend that the Corporation continue to work with HUD or the Section 8 HAP contract administrators to resolve the situation. Auditee’s comments and response – The applications for reimbursement for program periods 1 through 3 were made in error. The Corporation has contacted HUD and is awaiting a response. Responsible party for corrective action: Lisa Fischer – Chief Operating Officer

FINDING 2025-003: Untimely Return of Security Deposits Criteria – HUD requires owners of HUD assisted multifamily projects to refund security deposits no later than 30 days after the tenant vacates the unit, unless a shorter period is required by state or local law (21 days in Minnesota). Owners must also provide an itemized statement of any deductions and retain detailed records for three years. Failure to comply with these requirements constitutes a violation of the regulatory agreement and HUD regulations. Condition – During our review of tenant files of a project wholly-owned by the Corporation (the Project), we noted that the Project did not refund security deposits to one former tenant within the required time-frame after move-out. The refund was issued beyond the 21-day period specified by HUD requirements. Questioned costs and how they were computed – No questioned costs identified. Context – One of four move-outs tested did not receive their security deposit back within the timeframe required by HUD. Cause – The delay in refunding the security deposits was due to inadequate monitoring of moveout dates and insufficient internal controls over the security deposit refund process. Effect – Failure to refund security deposits in a timely manner exposes the Project to noncompliance with HUD regulations, potential client complaints, and possible enforcement action by HUD. Identification of Repeat Finding – No. Recommendation 2025-003 – We recommend that management implement and document procedures to monitor the move-out dates and ensure that security deposits are reviewed, processed, and returned within 21 days. Auditee’s comments and response – Management agrees with the finding and is in the process of implementing procedures to monitor tenant move-outs, document amounts due to former tenants, and issue refund checks in a timely manner. Responsible party for corrective action: Lisa Fischer – Chief Operating Officer