Audit 6742

FINDING No. 2023-001: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Rental Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: All management fee expenses. Sample Size Information: All management fee expenses. Identification of Repeat Finding and Finding Reference Number: Yes, 2022-001. Criteria: As required by HUD, the Project shall only use funds as specified in the Regulatory Agreement and owes the management company fees at the rate specified in the Project Owner’s/Management Agent’s Certification (Form HUD-9839-B). Statement of Condition: As a result of an expired Form HUD-9839-B, the Project has been overcharged management fees, resulting in an unauthorized loan to the Management Company. Cause: The Project’s Form HUD-9839-B expired and a new one was not prepared nor approved by HUD. Effect or Potential Effect: The Project has made an unauthorized loan to the management company as a result of overpaying management fees of $4,014. Auditor Non-Compliance Code: J – Unauthorized Management Fees. 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 monitor the expiration of HUD required documents to ensure timely preparation and approval. Response Indicator: Agree Completion Date: 3/31/2024 Response: To ensure timely renewals, management created a separate department that will handle all management certification renewals.

FINDING No. 2023-002: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Rental Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: One hundred nineteen tenants. Sample Size Information: Twenty tenants. Identification of Repeat Finding and Finding Reference Number: No. Criteria: HUD regulation requires: • Form 50059 certifications, leases and addendums, and information release forms to be signed by tenants in a timely manner. • Retaining tenant file documentation. • Background checks to be performed. • Annual unit inspections to be performed. • Timely verification of tenant income through the use of Enterprise Income Verification (EIV) or other supporting documentation prior to moving in. Statement of Condition: Missing documentation in tenant files: • One Form 50059 was not signed by the tenant. • One lease was not signed by the tenant. • One information release form was not signed by the tenant. • One tenant file did not contain the tenant’s application. • One tenant file did not contain a background check. • Two tenant files did not contain annual unit inspection reports. • One tenant does not meet the age eligibility requirement resulting in $3,717 of ineligible tenant assistance payments. • One tenant file did not contain any income verification support resulting in $3,864 of ineligible tenant assistance payments. Cause: The Project did not maintain appropriate tenant eligibility documentation as required by HUD. Effect or Potential Effect: Unable to verify tenant eligibility and cost of assistance may be disallowed. 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 ensure that tenant eligibility is verified, tenant files are properly maintained, and tenant signatures are obtained in a timely manner. Response Indicator: Agree. Completion Date: 3/31/2024 Response: The Compliance Department is in the process of implementing a plan that both move in and recertification tenant files will be reviewed by Compliance for accuracy. This will ensure files will have the proper forms and income is verified. Additional training will be provided to the staff in reference to eligibility requirements to prevent these errors moving forward.

FINDING No. 2023-001: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Rental Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: All management fee expenses. Sample Size Information: All management fee expenses. Identification of Repeat Finding and Finding Reference Number: Yes, 2022-001. Criteria: As required by HUD, the Project shall only use funds as specified in the Regulatory Agreement and owes the management company fees at the rate specified in the Project Owner’s/Management Agent’s Certification (Form HUD-9839-B). Statement of Condition: As a result of an expired Form HUD-9839-B, the Project has been overcharged management fees, resulting in an unauthorized loan to the Management Company. Cause: The Project’s Form HUD-9839-B expired and a new one was not prepared nor approved by HUD. Effect or Potential Effect: The Project has made an unauthorized loan to the management company as a result of overpaying management fees of $4,014. Auditor Non-Compliance Code: J – Unauthorized Management Fees. 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 monitor the expiration of HUD required documents to ensure timely preparation and approval. Response Indicator: Agree Completion Date: 3/31/2024 Response: To ensure timely renewals, management created a separate department that will handle all management certification renewals.

FINDING No. 2023-002: Section 207/223(f) Mortgage Insurance for the Refinancing of Existing Multifamily Rental Housing Projects, ALN 14.155 Finding Resolution Status: Unresolved. Information on Universe Population Size: One hundred nineteen tenants. Sample Size Information: Twenty tenants. Identification of Repeat Finding and Finding Reference Number: No. Criteria: HUD regulation requires: • Form 50059 certifications, leases and addendums, and information release forms to be signed by tenants in a timely manner. • Retaining tenant file documentation. • Background checks to be performed. • Annual unit inspections to be performed. • Timely verification of tenant income through the use of Enterprise Income Verification (EIV) or other supporting documentation prior to moving in. Statement of Condition: Missing documentation in tenant files: • One Form 50059 was not signed by the tenant. • One lease was not signed by the tenant. • One information release form was not signed by the tenant. • One tenant file did not contain the tenant’s application. • One tenant file did not contain a background check. • Two tenant files did not contain annual unit inspection reports. • One tenant does not meet the age eligibility requirement resulting in $3,717 of ineligible tenant assistance payments. • One tenant file did not contain any income verification support resulting in $3,864 of ineligible tenant assistance payments. Cause: The Project did not maintain appropriate tenant eligibility documentation as required by HUD. Effect or Potential Effect: Unable to verify tenant eligibility and cost of assistance may be disallowed. 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 ensure that tenant eligibility is verified, tenant files are properly maintained, and tenant signatures are obtained in a timely manner. Response Indicator: Agree. Completion Date: 3/31/2024 Response: The Compliance Department is in the process of implementing a plan that both move in and recertification tenant files will be reviewed by Compliance for accuracy. This will ensure files will have the proper forms and income is verified. Additional training will be provided to the staff in reference to eligibility requirements to prevent these errors moving forward.