Audit 411038

FINDING No. 2025-001: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: Replacement reserve account. Sample Size Information: Replacement reserve deposits. Identification of Repeat Finding and Finding Reference Number: Yes, 2024-001 Criteria: In accordance with HUD, monthly deposits must be made to the Project’s replacement reserve account for authorized amounts, and any increase requires an approved form HUD-9250. Statement of Condition: The Project overfunded the replacement reserve account by $1,750 for the current year and did not withdraw $800 to clear finding 2024-001. Cause: The Project made two additional deposits in excess of the HUD approved monthly funding requirement. Effect or Potential Effect: Overfunded reserve for replacement. Auditor Non-Compliance Code: N – Reserve for Replacements Deposits. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendation will be adopted. Recommendation: Management should submit a form HUD-9250 to withdraw the excess deposits and implement procedures to ensure the correct amounts are deposited into the replacement reserve account each month. Response Indicator: Agree Completion Date: 12/31/2026 Response: The Project will submit a form HUD-9250 to withdraw the excess replacement reserve deposits as recommended. In addition, management will strengthen its review procedures to ensure that replacement reserve deposits are made in the correct HUD-approved amounts and that all reserve account adjustments are addressed on a timely basis.

FINDING No. 2025-002: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Housing Projects, ALN 14.155 Finding Resolution Status: Resolved. Information on Universe Population Size: Escrow deposits account. Sample Size Information: Real estate tax disbursements. Identification of Repeat Finding and Finding Reference Number: No. Criteria: The OMB Compliance Supplement stipulates that costs charged to federal awards must be necessary and reasonable for the performance of the federal award. Statement of Condition: The mortgagor remitted a payment of $62,415 to the District of Columbia for real estate taxes for which the Project has complete exemption. The Project is owed refunds of prior year and current year payments totaling $137,657. Cause: Management did not take corrective measures to ensure the Project’s mortgage company ceased payment of real estate taxes spanning multiple audit periods. Effect or Potential Effect: Project funds were not used for allowable costs. Auditor Non-Compliance Code: S – Internal Control Deficiencies. Reporting Views of Responsible Officials: The Project disagrees with the finding. Recommendation: Management should take corrective measures to prevent further escrow disbursements for exempt taxes and should obtain timely refunds for amounts that were incorrectly disbursed. Response Indicator: Disagree. Completion Date: 2/27/2026 Response: Management has properly filed the real estate exemption forms with the District of Columbia in prior years. When real estate funds were improperly withdrawn by the mortgage company and/or its tax vendor, management promptly identified the issue and recorded a journal entry (debit accounts receivable, credit escrow deposit) to recognize the receivable. Beginning in 2024 and continuing through 2025, management made multiple attempts to follow up with the mortgage company representatives to request the refund. Management has taken proactive and persistent steps to pursue resolution. As of early 2026, the refund has been successfully received. Management also expects that the mortgage company will no longer withdraw real estate tax payments for the property going forward. Based on the above, management believes appropriate controls were in place and effectively operated, as evidenced by the timely identification of the issue and the actions taken to remediate it.