Audit 411792

FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAMS AUDIT U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Project, Assistance Listing 14.155 Project-Based Rental Assistance, Assistance Listing 14.195 Significant Deficiency 2025-001 Compliance Requirement: Special Tests and Provisions – Surplus Cash Condition: The fiscal year December 31, 2024 residual receipts deposit of $163,902 was made into the residual receipts account in July 2026. Criteria: Pursuant to HUD regulations (24 CFR section 891.600(e)), a deposit shall be made into the residual receipts account equal to the annual computation of surplus cash. Such deposit should be made within 90 days following the end of the fiscal year. Therefore, the fiscal year end December 31, 2024 deposit should be made by March 31, 2025 unless a waiver is requested and approved prior to that date. Cause/Effect: The Organization awaited completion of its audited financial statements in order to accurately determine the surplus cash balance. Consequently, MDBM – Drake Senior Housing Corporation’s deposit of surplus cash into the residual receipts account was after the 90-day due date, resulting in non-compliance with HUD regulations. Questioned Cost: $163,902 Recommendation: It is recommended that efforts be made to ensure compliance with the surplus cash remittance requirements going forward. Views of Responsible Officials and Planned Corrective Actions: Every effort will be made to ensure that deposits are made within the 90-day allotted period.

FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAMS AUDIT (continued) U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Project, Assistance Listing 14.155 Project-Based Rental Assistance, Assistance Listing 14.195 Significant Deficiency 2025-002 Compliance Requirement: Special Tests and Provisions – Excess of Residual Receipts Condition: The Organization transferred surplus cash to the residual receipts account which is held in escrow by the mortgage servicing company. At December 31, 2025, the excess residual receipts amount in the account was $301,510. The Organization has not requested HUD approval to utilize the available residual receipts balance to support a Service Coordinator program. Criteria: Pursuant to its Regulatory Agreement and relevant HUD residual receipts guidance memoranda, MDBM – Drake Senior Housing Corporation may utilize residual receipts to support a Service Coordinator program, contingent upon HUD approval. Residual receipt funds in excess of the $25,000 retention allowance (calculated at $250 per unit for 100 units) may be used to fund a Service Coordinator program prior to offsetting Section 8 HAP payments. Cause/Effect: Per the 2012 HUD residual receipts guidance memorandum (Section IV authority, paragraph 2), upon termination of the contract, any excess funds must be remitted to HUD. The current contract expires February 1, 2027. As a result, the Organization should reduce its Section 8 HAP payment voucher request or request use of the residual receipts for a Service Coordinator program in order to be in compliance with the Regulatory Agreement and avoid other administrative actions. Questioned Cost: $301,510 Recommendation: It is recommended that efforts be made to ensure compliance with the residual receipts excess fund requirements going forward. Views of Responsible Officials and Planned Corrective Actions: Every effort will be made to ensure compliance with the residual receipts excess funds requirement.