Finding 1055781 (2023-002)

Condition: The Corporation has three properties secured by CDBG loans. The properties are known as Mid-City, AppleTree Housing, Inc. (“ATH”), and Center West. The Corporation was unable to support that at least fifty-one percent (51%) of the tenants at the ATH property were leased to and occupied by low or very low-income persons as determined by the Federal “Section 8” Income Standards with completed tenant certifications and recertifications. At ATH, 6 of 6 occupied unit’s certifications were not completed during the year ended June 30, 2023. This was an initial finding during the year ended June 30, 2020. Criteria: All CDBG loans included in the consolidated financial statements are subject to restrictive covenants listed in a declaration of restrictive covenants, conditions, and restrictions agreement with the Redevelopment Authority of the City of Philadelphia that requires that at least fifty-one percent (51%) of the dwelling units of the project to be leased to and occupied by low or very low-income persons as determined by the Federal “Section 8” Income Standards. The owner is required to certify tenant income annually to determine compliance with this restrictive covenant. Cause: Management was unable to complete the required tenant certifications and recertifications timely. Effect: Lack of oversight of regulatory requirements could increase the risk of loss of funding and default of loans. Recommendation: Management should ensure all tenant certifications are completed timely to ensure adherence to the requirement that at least fifty-one percent (51%) of the tenants of the dwelling units of the project to be leased to and occupied by low or very low-income persons as determined by the Federal “Section 8” Income Standards. Questioned costs: None identified. View of Responsible Officials and Planned Corrective Action: It is the goal of the Corporation to maintain compliance with regulatory requirements. Where hardships are encountered, the Organization remains in ongoing communication with respective regulatory agencies to promote transparency and mitigate risk of loss in fundings or default.