Audit 8203

2023-001 14.181 Supportive Housing for Persons with Disabilities (Section 811) Information on Universe and Population Size: Noncompliance was not discovered as a result of a sampling procedure. Sample Size Information: Noncompliance was not discovered as a result of a sampling procedure. Repeat finding: This is a repeat finding of 2022-001. Criteria: Under Special Tests and Provisions, monthly deposits are to be made to the Replacement Reserve account. In the prior year, HUD authorized a draw from the replacement reserve to be repaid when HUD paid outstanding subsidy that was due to the Project. Statement of condition: For the year ended June 30, 2022, deposits totaling $8,522 were required but not made into the replacement reserve. Those deposits have not yet been made into the replacement reserve. Cause: The Project is owed subsidy from HUD of $14,993. Accordingly, Salmon Creek Housing, Inc. did not have sufficient funds to make required monthly deposits and, repay the replacement reserve, while continuing to pay costs such as utilities, emergency repairs, and the audit fee. Effect of potential effect: Salmon Creek Housing, Inc. was out of compliance with the Replacement Reserve deposit requirement. Auditor Non-Compliance Code: N – Reserve for Replacements Deposits Amount of Questioned Costs: $0 Perspective/Context: Subsidy due from HUD is from December 2022, January 2023, and April 2023 putting a severe strain on cash flow. Management chose to pay necessary operating costs with the intention of repaying the replacement reserve as soon as cash flow allows. Recommendation: Management should continue to request rent increases from HUD. Views of Responsible Officials: We agree with the finding. Please see our corrective action plan. Auditor’s evaluation of the views of responsible officials: I believe the Organization’s response is appropriate. The project can use the funds released from the replacement reserve to fund delinquent deposits.

2023-001 14.181 Supportive Housing for Persons with Disabilities (Section 811) Information on Universe and Population Size: Noncompliance was not discovered as a result of a sampling procedure. Sample Size Information: Noncompliance was not discovered as a result of a sampling procedure. Repeat finding: This is a repeat finding of 2022-001. Criteria: Under Special Tests and Provisions, monthly deposits are to be made to the Replacement Reserve account. In the prior year, HUD authorized a draw from the replacement reserve to be repaid when HUD paid outstanding subsidy that was due to the Project. Statement of condition: For the year ended June 30, 2022, deposits totaling $8,522 were required but not made into the replacement reserve. Those deposits have not yet been made into the replacement reserve. Cause: The Project is owed subsidy from HUD of $14,993. Accordingly, Salmon Creek Housing, Inc. did not have sufficient funds to make required monthly deposits and, repay the replacement reserve, while continuing to pay costs such as utilities, emergency repairs, and the audit fee. Effect of potential effect: Salmon Creek Housing, Inc. was out of compliance with the Replacement Reserve deposit requirement. Auditor Non-Compliance Code: N – Reserve for Replacements Deposits Amount of Questioned Costs: $0 Perspective/Context: Subsidy due from HUD is from December 2022, January 2023, and April 2023 putting a severe strain on cash flow. Management chose to pay necessary operating costs with the intention of repaying the replacement reserve as soon as cash flow allows. Recommendation: Management should continue to request rent increases from HUD. Views of Responsible Officials: We agree with the finding. Please see our corrective action plan. Auditor’s evaluation of the views of responsible officials: I believe the Organization’s response is appropriate. The project can use the funds released from the replacement reserve to fund delinquent deposits.