Finding Text
Statement of Condition: On April 20, 2022, HUD's Real Estate Assessment Center ("REAC") inspected the Project, and the Project received a score of 29c. The inspection report identified serious deficiencies that demonstrate the Corporation is in violation of the Regulatory Agreement. On May 16, 2022, the Corporation received a Notice of Violation and Demand for Corrective Action ("NOV") from HUD's Department Enforcement Center as a result of the violation. Furthermore, the NOV required corrective actions within 60 days of receipt of the NOV or a written request for a reasonable extension. Management has not completed all of the corrective actions nor submitted a response to the NOV or request for an extension. Criteria: The Regulatory Agreement requires that the Corporation maintain the mortgaged premises, accommodations and the grounds and equipment appurtenant thereto, in good repair and condition. Furthermore, the Regulatory Agreement requires responses to all inquiries from HUD (including its agents, employees, or attorneys) upon which information is desired relative to income, assets, liabilities, contracts, operations, condition of the property, and the status of the insured mortgage. Effect: Noncompliance with the Regulatory Agreement and possible default on the Regulatory Agreement. Cause: Management override of controls. The Project does not have sufficient cash flow to make the required repairs and is in need of a rehab. Context: A test was performed to review inspection reports/notices from HUD and management's actions/responses to any inspection report/notices from HUD received during the year ended June 30, 2022. Questioned Costs: N/A Recommendation: We recommend that management and ownership continue to pursue a rehab of the Project with HUD and respond to all notices received from HUD. View of Responsible Officials and Corrective Action Plan: Management acknowledges all corrective actions described in the NOV have not been completed and no response was provided to HUD for the NOV. Management and the owners are working with HUD to proceed with a rehab of the Project to correct all physical deficiencies. Furthermore, management has submitted a request to HUD to release Section 8 Contract Savings Escrow funds to pay for the up-front costs due to the lender to process the loan application to HUD for a rehab.