Audit 407198

Finding No. 2024-001 - Distributions to Owners - Material Weakness Name of Federal Agency: Department of Housing and Urban Development Federal Program Name: Supportive Housing for the Elderly (Section 202) Assistance Listing Number: 14.157 Federal Award Identification Number and Year: 2024-001 Criteria The terms of the regulatory agreement require payments/repayments of related party loans to be limited to available surplus cash computed on an annual basis unless approved by HUD. Condition In March 2024, the Sponsor provided a loan to the Organization in the amount of $15,000. On December 31, 2024, the Organization repaid the loan totaling $15,000 in excess of surplus cash available for distribution without HUD approval. Cause Procedures were not in place to ensure that distributions of cash were limited to available surplus cash computed in accordance with HUD regulations. Effect or Potential Effect The payment of $15,000 was an unauthorized distribution and therefore considered to be a questioned cost. Questioned Costs Unauthorized distributions of $15,000 Context Isolated instance which was not part of a statistical sample. Identification as a Repeat Finding This finding is not a repeat finding. Recommendation Management should implement procedures to limit distributions of project cash to the annual surplus cash calculation amount required by the regulatory agreement. In addition, management should immediately reimburse the project's cash account for the unauthorized distribution. Auditor Noncompliance Code: H. Unauthorized distribution of project assets Finding Resolution Status: In process Views of Responsible Officials Management will immediately reimburse the property’s operating account for the unauthorized distribution and procedures will be implemented to ensure that all future loan repayments and cash distributions comply with HUD surplus cash requirements and the regulatory agreement. Department of Housing and Urban Development

Finding No. 2024-002 - Eligibility - Material Weakness Name of Federal Agency: Department of Housing and Urban Development Federal Program Name: Supportive Housing for the Elderly (Section 202) Assistance Listing Number: 14.157 Federal Award Identification Number and Year: 2024-001 Criteria Tenant lease files are required to be maintained and tenant eligibility determined in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. Condition In connection with our lease file review, we noted the following deficiencies: For four out of six tenants tested the annual recertification was not performed in a timely manner. For one out of six tenants tested, the EIV system was not run in a timely manner. Cause Management's policies with respect to the determination of tenant eligibility and the maintenance of tenant lease files in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs were not consistently followed. Effect or Potential Effect The procedures for determining tenant eligibility and maintaining tenant lease files were not consistently applied in accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. This could result in units being rented to ineligible tenants or errors in the rent subsidies paid by HUD. Questioned Costs None Context A sample of 6 tenant files from a population of 59 were selected. We identified exceptions in 4 out of the 6 files tested. The sample is not a statistically valid sample. Identification as a Repeat Finding This finding is a repeat finding (see prior year finding number: 2023-002). Recommendation Management should establish procedures and monitor compliance with those procedures to ensure that tenant eligibility is correctly determined and that tenant lease files are properly maintained in accordance with the requirements of HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs. Auditor Noncompliance Code: R - Section 8 program administration Finding Resolution Status: In process Views of Responsible Officials Management has implemented corrective actions to address the deficiencies noted in tenant file maintenance and eligibility determinations.