Audit 409323

Information on the Federal Program: U.S. Department of Housing and Urban Development (“HUD”) – 14.157 Supportive Housing for the Elderly (Section 202); FAIN #012-EH692; July 1, 2024 – June 30, 2025 Finding Type: Significant deficiency Criteria: In accordance with 24 CFR 891.400(e) and 891.600(e), a separate interest-bearing project fund account shall be maintained in a depository or depositories which are members of the Federal Deposit Insurance Corporation and all tenant payments, charges, income and revenues arising from project operation or ownership shall be deposited to this account. Condition and Context: During our testing, we noted that the project fund account used by the Organization was not an interest-bearing account. Cause: Subsequent to the initial rent assistance contract, changes to HUD regulations resulted in the requirement that the project fund account be an interest-bearing account. Due to oversight by the Organization’s management, the new requirement was not adopted. Effect or Potential Effect: Project funds would not earn interest in accordance with HUD requirements. Repeat Finding: 2024-001 Questioned Costs: None Recommendation: We recommend that the Organization utilize an interest-bearing account for project funds in accordance with HUD requirements. Management’s Response: Although the Organization does not currently use an interest-bearing account for project funds, due to the ongoing operation of the program and continuous activity within the project funds account, any interest earned in such an account would be negligible. Management is in the process of evaluating this recommendation to determine the appropriate course of action.

Information on the Federal Program: U.S. Department of Housing and Urban Development (“HUD”) – 14.157 Supportive Housing for the Elderly (Section 202); FAIN #012-EH692; July 1, 2024 – June 30, 2025 Finding Type: Significant deficiency Criteria: In accordance with 24 CFR 891.400(e) and 891.600(e), and the Organization’s HUD Regulatory Agreement and Project Rental Assistance Contract (PRAC), surplus cash generated from project operations is required to be deposited into the Residual Receipts Reserve account in a timely manner and maintained in accordance with HUD requirements. Condition and Context: During our compliance testing of Special Tests and Provisions for the Organization’s HUD Section 202 program for the year ended June 30, 2025, we noted that the Organization did not deposit surplus cash into the Residual Receipts Reserve account in a timely manner, as required based on the annual surplus cash computation for the audit year. This condition related to the project’s Residual Receipts Reserve account maintained for the project during the period under audit. Cause: During the period of transition in finance/management personnel, responsibility for preparing/reviewing the annual surplus cash computation and initiating the required Residual Receipts deposit was not clearly reassigned or sufficiently reviewed, resulting in an oversight of the deposit requirement in a timely manner. Effect or Potential Effect: Project funds that should have been restricted in the Residual Receipts Reserve account remained in operating accounts, increasing the risk that restricted amounts could be used for unapproved purposes and resulting in potential HUD compliance consequences. Questioned Costs: None Recommendation: We recommend that management establish written procedures and assign responsibility for monitoring surplus cash calculations and ensuring timely deposits to the Residual Receipts Reserve, including documented management review, particularly during periods of personnel transition. Management’s Response: Management is in the process of implementing formal procedures to strengthen oversight of HUD regulatory requirements, including the preparation, review, and timely execution of surplus cash calculations and related residual receipts deposits. These procedures will include clearly assigning responsibility, incorporating the requirement into a year-end compliance checklist, and documenting management review. Management expects these procedures to be implemented promptly and believes they will ensure compliance with HUD requirements going forward.

Information on the Federal Program: U.S. Department of Housing and Urban Development (“HUD”) – 14.157 Supportive Housing for the Elderly (Section 202); FAIN #012-EH692; July 1, 2024 – June 30, 2025 Finding Type: Significant deficiency Criteria: The Organization as mortgagor, in accordance with the regulatory agreement, is required to maintain a reserve for replacements. The required minimum monthly deposit into this account is $13,053. For the year ended June 30, 2025, a total of $156,638 was to be deposited into the replacement reserve account, however, only deposits of $104,426 were made into the replacement reserve account. Condition and Context: During our compliance testing of replacement reserve for the Organization’s HUD Section 202 program for the year ended June 30, 2025, we noted that the Organization did not deposit cash into the replacement reserve for 4 months. This condition related to the project’s replacement reserve account maintained for the project during the period under audit.Cause: During the period of transition in finance/management personnel, responsibility for initiating the required replacement reserve deposit was not clearly reassigned or sufficiently reviewed, resulting in an oversight of the deposit requirement in a timely manner. Effect or Potential Effect: Project funds that should have been restricted in the replacement reserve account remained in operating accounts, increasing the risk that restricted amounts could be used for unapproved purposes and resulting in potential HUD compliance consequences. Questioned Costs: None Recommendation: We recommend that management establish written procedures and assign responsibility for ensuring timely deposits to the replacement reserve, including documented management review, particularly during periods of personnel transition. Management’s Response: Management is in the process of implementing formal procedures to strengthen oversight of HUD regulatory requirements, including the timely execution of replacement reserve deposits. These procedures will include clearly assigning responsibility, incorporating the requirement into a month-end compliance checklist, and documenting management review. Management expects these procedures to be implemented promptly and believes they will ensure compliance with HUD requirements going forward.