Finding No. 2025-002 - Special Tests and Provisions U.S. Department of Housing and Urban Development Federal Program Name: Section 202 Supportive Housing for the Elderly Assistance Listing Number: 14.157 Criteria: The Section 202 Project Rental Assistance Contract (PRAC contract) requires that the project make monthly deposits to its replacement reserve. Condition: During the year ended September 30, 2025, the project did not make the required monthly deposits to the replacement reserve in the amount of $37,242. The project is required to make monthly deposits to the reserve in the amount of $6,198 per month, or $74,376 for the year. Cause: The project does not generate sufficient cash flow to make the required monthly deposits, due to significant delays in receipt of PRAC funds for over a year. This is related to the issues noted in finding 2025-001. Effect or Potential Effect: Failure to make monthly payments resulted in an underfunding of the replacement reserve and a violation of the PRAC subsidy contract. Questioned Costs: $37,242 Context: Due to significant delays in receipt of PRAC funds for over a year, management suspended making the monthly deposits to the reserve in 2024 until PRAC funding was replenished. Management also borrowed funds from the replacement reserve which funds were repaid during the year ended September 30, 2024 once a portion of past-due PRAC funds were received. Management continues to work on obtaining the remaining PRAC funds receivable, which has led to additional delays in deposits to the reserve for replacements until the cash flows are replenished. Identification as a Repeat Finding: Yes Recommendation: Management should review the project budget to determine if nonessential costs can be cut (or request a loan from the owner) to ensure that the replacement reserve is funded in accordance with the terms of the regulatory agreement. Management should obtain from HUD a waiver for the missing replacement reserve deposits if possible. If not granted, management should fund the missing deposits. Auditor Noncompliance Code: N - Replacement reserve deposits Finding Resolution Status: In process Views of Responsible Officials: Due to significant delays in receipt of PRAC funds for over a year, management suspended making the deposits to the reserve until PRAC funding was replenished. Management also borrowed funds from the replacement reserve in 2024 which funds were repaid during the year ended September 30, 2024 once past-due PRAC funds were received. Due to ongoing issues with PRAC funding, management continues to be behind on making the monthly deposits during the year ended September 30, 2025.
Finding No. 2025-003 - Special Tests and Provisions U.S. Department of Housing and Urban Development Federal Program Name: Section 202 Supportive Housing for the Elderly Assistance Listing Number: 14.157 Criteria: Any withdrawal from the replacement reserve account requires evidence of HUD approval, generally documented through a HUD-signed Form 9250 authorizing the release of funds. Condition: During the year ended September 30, 2025, management processed a withdrawal of $3,970 from the replacement reserve account to the operating account. Management did not provide a HUD-approved Form HUD-9250 supporting this withdrawal. A correcting transaction to return the $3,970 to the replacement reserve account was dated September 30, 2025, but the repayment did not clear the bank until October 2025, which is subsequent to the audit period. Additionally, management has still not repaid or obtained HUD approval of the prior year withdrawals missing HUD approval of $39,292. Cause: Management initiated the withdrawal without securing or retaining HUD-approved Form HUD-9250 documentation. The error in the original transfer was identified after the fact, resulting in a correcting entry dated at year-end. However, the repayment of the $3,970 occurred after the close of the fiscal year. The prior year withdrawal without HUD approval remains unaddressed. Effect or Potential Effect: Without evidence of HUD approval, the withdrawal is considered unauthorized under HUD requirements. Additionally, because the return of funds occurred after the fiscal year-end, the project remained out of compliance with HUD reserve withdrawal procedures during the audit period. Questioned Costs: $3,970 Context: Management reported that the $3,970 replacement reserve withdrawal was initiated at the direction of the EBGA Director. Upon further review, management determined the transfer amount was incorrect and processed a reversal dated September 30, 2025. However, the repayment cleared the bank in October 2025, outside the audit period. Documentation supporting HUD approval for the original withdrawal was not available for audit. The prior year withdrawal of $39,282 remains unaddressed. Identification as a Repeat Finding: Yes Recommendation: Management should implement procedures to ensure all replacement reserve withdrawals are supported with a HUD-signed Form HUD-9250 prior to releasing funds. Management should repay the $3,970 withdrawal. Management should obtain HUD approval for the 2024 unauthorized withdrawals of $39,282 or pay the amounts back to the reserve. Auditor Noncompliance Code: A - Unauthorized withdrawals from the replacement reserve account Finding Resolution Status: Unresolved Views of Responsible Officials: Management stated that a correction was processed to return the $3,970 to the replacement reserve account, with the repayment clearing in October 2025. The prior year unauthorized withdrawal remains unresolved, as management does not have the funds to repay the $39,282. Management will also strengthen internal controls to ensure all future withdrawals are fully supported with HUD-signed Form HUD-9250 approvals.
Finding No. 2025-004 - Eligibility U.S. Department of Housing and Urban Development Federal Program Name: Section 202 Supportive Housing for the Elderly Assistance Listing Number: 14.157 Criteria: In accordance with HUD Handbook 4350.3, REV-1, and the EIV Multifamily Program User Manual, Section 4.1.1, management is required to obtain and maintain active access to the EIV system and generate the applicable EIV reports for all tenants at required intervals. Condition: During the procedures applied to a sample of 6 tenant files, we noted that management was unable to provide information from the required EIV reports. Based on communication received from management, the current property manager's access to the HUD EIV system has not been activated by HUD despite the site manager completing the required training and requesting access and assurances from HUD to grant access to EIV. As a result, the property was unable to retrieve and furnish the EIV income reports and discrepancy reports requested during the audit. Cause: The site manager completed the required EIV training and followed HUD's procedures to request EIV access; however, HUD did not activate the property's site manager's EIV system access. This prevented management from retrieving the necessary EIV reports for inclusion in the tenant files. Effect or Potential Effect: Without active access to the EIV system, management is unable to obtain required income verification reports in accordance with HUD Handbook 4350.3, resulting in noncompliance with HUD reporting guidelines. This could increase the risk of undetected discrepancies in tenant-reported income and may impact the accuracy of rent subsidies paid by HUD. Questioned Costs: None Context: Management has reported ongoing issues with obtaining EIV system activation from HUD. Despite completing the required training and submitting access requests, HUD has not granted access to the EIV portal. As a result, management was unable to obtain required EIV documentation for certain tenant lease files during the audit period. Identification as a Repeat Finding: No Recommendation: Management should continue to follow up with HUD to complete activation of their EIV system access. Once access is established, management should implement procedures to ensure all required EIV reports are generated, retained, and reviewed in accordance with HUD guidelines. Auditor Noncompliance Code: Z - Other Finding Resolution Status: In process Views of Responsible Officials: Management acknowledged the challenges experienced in obtaining EIV access from HUD and stated that follow-up efforts are ongoing. Once access is granted by HUD as already approved, management will generate and maintain all required EIV reports and strengthen controls to ensure compliance with HUD requirements.
Finding No. 2025-005 - Reporting U.S. Department of Housing and Urban Development Federal Program Name: Section 202 Supportive Housing for the Elderly Assistance Listing Number: 14.157 Criteria: The FAC requires that the annual financial statements be submitted the earlier of 30 days after the report date or nine months after the fiscal year end. Condition: The Single Audit was not submitted to the Federal Audit Clearinghouse (FAC) within nine months after the fiscal year end of the Company for the year ended September 30, 2024. Cause: Management does not have controls in place to timely file its financial statements with the FAC. Effect or Potential Effect: Management is not in compliance with the requirement to timely submit the Single Audit to the FAC. Questioned Costs: None Context: Management does not have a process in place to ensure that all audits are submitted to the FAC timely. Identification as a Repeat Finding: No Recommendation: Management should implement procedures to ensure that the financial statements are submitted to the FAC in accordance with the FAC filing requirements. Auditor Noncompliance Code: Z - Other Finding Resolution Status: Resolved Views of Responsible Officials: Management agrees with the finding and is taking steps to address the issue that caused it.
Finding No. 2025-006 - Special Tests and Provisions U.S. Department of Housing and Urban Development Federal Program Name: Section 202 Supportive Housing for the Elderly Assistance Listing Number: 14.157 Criteria: In accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs, within 30 days after the move-out date (or shorter time if required by state and/or local laws), management must either: refund the full security deposit plus accrued interest to a tenant that does not owe any amounts under the lease; or provide the tenant with an itemized list of any unpaid rent, damages to the unit, and an estimated cost for repair, along with a statement of the tenant’s rights under state and local laws. Condition: In connection with the procedures applied to a sample of 2 tenants that moved out of the project during the year, we noted 1 instance where management failed to refund the tenant security deposit and/or provide the tenant with an itemized list of charges deducted from the deposit within thirty days after the move-out date. Cause: Management did not have procedures in place regarding timely refunding of tenant security deposits which require refunds or notice to occur within the 30-day requirement established by HUD. Effect or Potential Effect: Management failed to comply with the HUD occupancy requirement to timely refund the tenant security deposits or to provide the tenant with a list of charges. Questioned Costs: $322 Context: Management did not have monitoring procedures in place to ensure timely refunding of tenant security deposits to the tenant or to their estate. Due to errors with the software input an incorrect report was provided to accounting showing no amounts owed to the tenant at move out. Identification as a Repeat Finding: Yes Recommendation: Management should change its policies and procedures related to refunding of tenant security deposits to comply with the thirty-day timeline required by HUD regulations. Auditor Noncompliance Code: M - Security Deposits Finding Resolution Status: In Process Views of Responsible Officials: Management is still reviewing and updating the processes and procedures with site personnel to strengthen controls over the refunding of tenant security deposits.