Audit 405980

Finding 2026-001: Significant deficiency Information on universe: It was noted during testing that the management agent could be withdrawing more funds from the reserve for replacement account to cover costs instead of using operating funds. Sample size: Monthly reserve activity is tested for compliance. Identification of repeat finding: 2025-007 Condition: The property is not utilizing the Replacement Reserve as intended and is instead paying for costs out of the operating account. Criteria: Significant replacement costs should be submitted for approval to be paid for with Replacement Reserve funds. Effect: Low operating cash balances and cash flow issues. Context: Auditor reviewed the Replacement Reserve activity and noted minimal withdrawals. Cause: Lack of monitoring at the management agent. Recommendation: The management agent should consider using the Replacement Reserve for all applicable and allowable expenditures.

Finding 2026-003: Compliance finding Information on universe/sample size: Management Occupancy Review (MOR) Identification of repeat finding: Yes, 2025-003 Condition: HUD performed an MOR in September of 2023 for which a response is required within 30 days. The response was not completed timely and the MOR is still open. Criteria: A response is due within 30 days of the MOR. Effect: Findings by HUD have not been resolved. Context: Auditor noted the MOR is still open. Cause: Significant turnover and lack of staff at the management agent. Recommendation: Once the management agent is fully staffed, they must make all efforts to reply to the MOR findings within the required 30 days.

Finding 2026-004: Significant deficiency and compliance Information on universe/sample size: It was noted during testing that the management agent was not able to perform all management duties in a timely manner. Identification of repeat finding: Yes, 2025-005 Condition: All management agent duties should be performed timely. Criteria: Tenant units should be filled in a timely manner; existing tenants must be recertified annually and the related subsidy requested for backdated recertifications and budgets must be filed timely. Effect: Significant vacancies existed at the beginning of the year and not all subsidy has been applied for. Additionally, the HUD budget is not completed or filed timely. Context: Auditor noted the vacancies and file issues during testing and also note that an accurate budget was not provided. Cause: Significant turnover at the management agent. Recommendation: The management agent should hire a consultant to assist with performing the necessary management agent duties until they are fully staffed.

Finding 2026-002: Significant deficiency and compliance finding Information on universe: Total population was 57 units. Sample size: 10 files were selected for testing. Identification of repeat finding: No Condition: Corrected HUD-50059-A’s were needed for several tenants in order to properly reflect the total tenant portion (TTP) and HUD portion of rent on the tenant’s annual recertification. Criteria: HUD requires annual recertification of tenant income and expenses to determine the TTP of rent. Effect: Income and expense calculations on the annual recertification were incorrectly calculated resulting in the TTP and HUD portions of rent being inaccurate. Context: Auditor reviewed tenant files noting calculations were incorrect. Cause: Error made by property manager. Recommendation: A procedure be implemented to review tenant files for accuracy.