Audit 415764

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: Per HUD regulatory agreements and HUD Handbook 4370.2, owners/agents must compute surplus cash within 90 days after fiscal year-end and remit the full required deposit into the residual receipts account by the due date. Statement of Condition: The Project remitted $26,882 of the prior year required $51,323 surplus cash deposit by the December 29, 2024 HUD deadline. However, the remaining $24,441 of surplus cash was not deposited until October 14, 2025. Cause: Management indicated that the partial late deposit occurred because the annual audit had not been completed in time to finalize the surplus cash calculation. The audit was not able to be completed by the HUD filing deadline due to the Organization’s difficulty completing year-end closing of the books and locating occupancy records requested by the auditor. Effect: Failure to deposit the full amount of surplus cash by the required deadline constitutes noncompliance with HUD regulations. Untimely deposits reduce HUD’s ability to ensure that residual receipts are available for authorized project purposes in accordance with program requirements. Recommendation: We recommend that management establish controls to ensure full and timely surplus cash deposits, including procedures for making provisional calculations or estimated deposits if the audit is delayed, and ensuring that audits are completed in time to support timely compliance. Views of Responsible Officials: We agree with the auditor’s finding. We understand the audits need to be completed timely to know the correct surplus cash amount to be deposited in a timely manner. Until we can get to that point, we will make provisional calculations to estimate this amount, if any, so it can be deposited in a timely manner.