Audit 412807

SECTION III - FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAMS AUDIT FINDING No. 2025-001: Section 202 Supportive Housing for the Elderly, ALN 14.157 Finding Resolution Status: Unresolved. Information on Universe Population Size: Replacement reserve account. Sample Size Information: All replacement reserve deposits for the year ended December 31, 2025. Identification of Repeat Finding and Finding Reference Number: Yes, 2024-001. Criteria: In accordance with HUD, required monthly deposits must be made to the Project’s replacement reserve account. Statement of Condition: The Project underfunded the replacement reserve account by $24,000 in the current year and did not correct the prior years’ net deficiency of $24,000 for a total underfunding of $48,000. Cause: The Project did not fund the reserve account as required by the funding requirements stipulated in form HUD-9250. Effect or Potential Effect: Deficiently funded reserve for replacements account. Auditor Non-Compliance Code: N – Reserve for Replacements deposits Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations will be adopted. Recommendation: Management should implement procedures to ensure the replacement reserve is properly funded on a monthly basis and fund the account for the total deficient amount or obtain a HUD approved retroactive suspension for the period. Response Indicator: Agree. Completion Date: 12/31/2026 Response: The verification of the correct funding amounts is now confirmed against approved 9250 on a monthly basis, and is a step that is being added on the month-end close checklist. RR will be funded correctly by 12.31.26. This property requested a suspension due to the overfunding of the RR account. Questioned Costs – Department of Housing and Urban Development: $24,000

FINDING No. 2025-002: Section 202 Supportive Housing for the Elderly, ALN 14.157 Finding Resolution Status: Unresolved. Information on Universe Population Size: Utility costs. Sample Size Information: Annual utility allowance analysis. Identification of Repeat Finding and Finding Reference Number: No. Criteria: HUD regulations require the owner to submit an analysis of utility allowances with supporting documentation, to perform an annual review of tenant utility allowances to determine their reasonableness, and to adjust utility allowances, when deemed appropriate. Statement of Condition: The reasonableness of tenant utility allowances was not assessed by management. Cause: Management did not perform an annual review of tenant utility allowances for the current year. Effect or Potential Effect: Depending on the results of the analysis, the tenants could be receiving the incorrect utility allowance. 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 comply with all applicable HUD regulations and ensure the annual utility allowance analysis is performed with supporting documentation retained. Response Indicator: Agree. Completion Date: 12/31/2026 Response: Staff training has been provided regarding UA support and annual analysis and included in monthly reporting procedures.