Audit 410630

FINDING No. 2025-002: Section 202 Supportive Housing for the Elderly – Capital Advance, ALN 14.157 Finding Resolution Status: Unresolved. Information on Universe Population Size: Rental income. Sample Size Information: Contract rent increase. Identification of Repeat Finding and Finding Reference Number: No. Criteria: As required by HUD regulations, rent changes shall be executed upon obtaining HUD approval and recorded in accordance with GAAP. Statement of Condition: The Project did not implement a rent increase that HUD approved before year end, resulting in material errors on the financial statements before proposed audit adjustments were made. The result of these errors caused an understatement of the accounts receivable, HAP revenue, vacancy loss, and administrative rent-free unit accounts for the year. In addition, once the retroactive HAP adjustments were made, the Project neglected to request HAP on six move-out tenants for the months those units were occupied. These matters resulted in a total understated HAP revenue of $192,643. Cause: The Project did not follow HUD regulations for timely applying the gross rent change and did not request HAP for six tenants that moved out during current year. Effect or Potential Effect: Without accepting the proposed audit adjustments, the financial statements would have been materially understated by $192,643. Additionally, the Project did not notice the HAP requests missing for six move-out tenants during the year. Auditor Non-Compliance Code: R – Section 8 Program Administration. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations will be adopted. Recommendation: The Project should comply with HUD regulations for implementing rent increases upon receiving HUD approval, and ensure financial statements are recorded in accordance with GAAP. Response Indicator: Agree. Completion Date: 12/31/2026 Response: Staff training has been provided to ensure timely applying of gross rent changes and requesting timely move out of tenants on the voucher. This is included in monthly reporting procedures. Questioned Costs – Department of Housing and Urban Development $ 192,643; Total Questioned Costs – Department of Housing and Urban Development $ 192,643

FINDING No. 2025-001: Section 202 Supportive Housing for the Elderly – Capital Advance, ALN 14.157 Finding Resolution Status: Unresolved. Information on Universe Population Size: Fifty-four tenants. Sample Size Information: Ten tenants. Identification of Repeat Finding and Finding Reference Number: No. Criteria: HUD regulations require timely collection and retention of all initial and ongoing tenant eligibility documentation. Statement of Condition: Missing documentation in tenant files: • Four tenant files were missing their initial EIV report. • One tenant file did not contain a background check. • Two form HUD-50059’s were signed by owner/agent after the effective date. Cause: The Project did not accurately perform the tenant eligibility and screening process in accordance with HUD requirements. Effect or Potential Effect: Unable to verify tenant eligibility and cost of assistance may be disallowed. Auditor Non-Compliance Code: R – Section 8 Program Administration. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations will be adopted. Recommendation: The Project should implement procedures to ensure that initial and ongoing tenant eligibility documentation is obtained timely and maintained in tenants’ files. Response Indicator: Agree. Completion Date: 12/31/2026 Response: Staff training has been provided with additional HUD training inclusive of EIV reporting and tenant file maintenance and included in monthly reporting procedures.