Audit 415763

HUD insured mortgage program Section 223(f), ALN 14.155 Criteria: Under HUD regulations, recipients are required to maintain and make available all records necessary to demonstrate compliance with program requirements. HUD requires documentation of tenant eligibility, income verification, and rent determination. The Uniform Guidance requires recipients to maintain records that adequately identify the source and application of funds. Statement of Condition: We reviewed 10% of the total population of tenant files. During our review, we noted that documentation to support tenant eligibility determination was missing or incomplete. We consider this condition to be a significant deficiency. Cause: The deficiencies occurred due to inconsistent file management practices and ineffective internal review procedures to ensure that all required eligibility documentation is obtained and retained. Effect: Missing or incomplete files increase the risk of improper eligibility determinations, inaccurate rent calculations, questioned costs, and HUD noncompliance. Recommendation: We recommend that management strengthen internal controls over tenant file documentation by conducting periodic supervisory reviews of files to ensure that all required documentation is present and complete and by providing staff training on HUD eligibility and documentation requirements. Views of Responsible Officials: We agree with the auditor’s finding. The audited files exist in the same timeframe as other issues noted in the previous audit, and therefore findings will be similar. Those files and documents were not properly managed or maintained and some cannot be located. Prior management did not implement established and required processes and failed to oversee the work to ensure accuracy. In the second quarter of 2025, we began exploring the issues that existed at that time and correcting procedures, changing software systems, establishing supervisors, training staff, and establishing tracking and monitoring systems and processes. Staff have made substantial progress and continue to do so.

HUD insured mortgage program Section 223(f), ALN 14.155 Criteria: In accordance with HUD regulations and the Uniform Guidance, recipients are required to submit audited financial statements to HUD and to submit the Single Audit reporting package to the Federal Audit Clearinghouse (FAC) within nine months after fiscal year end. Statement of Condition: The Organization did not submit its audited financial statements to HUD or its Single Audit reporting package to the FAC by the required due date. Cause: The delays in completing the audit resulted from the Organization’s difficulty completing year-end closing of the books due to issues from a change to new software and staff turnover during the year. Additional delays resulted from the Organization’s difficulty locating occupancy records requested by the auditor. Effect: Failure to submit required reports by the established deadlines places the Organization in noncompliance with federal requirements and may result in sanctions or restrictions on program funding. Recommendation: We recommend that management implement procedures to ensure that financial reconciliations are completed timely and that software issues are promptly identified and resolved. We also recommend that management strengthen recordkeeping procedures to ensure that occupancy records are maintained, organized, and provided timely to auditors. Views of Responsible Officials: We agree with the auditor’s finding. The issues from the prior year have been extensive and we are still making necessary corrections and climbing out of the hole we found ourselves in. We are doing our best to get all the accounts corrected as we continue to run operations daily. Even though it’s been a slow process we are seeing great progress. It is our goal to have the audits completed timely as we always did in the past.

HUD insured mortgage program Section 223(f), ALN 14.155 Criteria: The Project’s occupancy rate should be adequate to maintain Project operations. Statement of Condition: The Project’s vacancy expense was 35% of rental revenue for the year ended September 30, 2025. Cause: Thirteen of the Project’s 48 units were vacant the entire year, and nine units were vacant for different periods during the year. Effect: Decreased revenue may result in excessive future usage of replacement reserve and debt service savings reserve funds. Decreased revenue may also negatively impact the Project’s ability to fund future Project operations. Recommendation: The Project should continue its efforts to obtain tenants and decrease vacancies. Views of Responsible Officials: We agree with the finding. The Project will continue its attempts to decrease vacancies.