Pleasant Street Housing, Inc.

Information on the Federal Program: Federal Agency: HUD Program Name: Mortgage Insurance for the Purchase or Refinance of Existing Multifamily Housing Projects CFDA: 14.155 Federal Award Identification Number: 024-11030 Federal Award Year: 2021 Specific Requirement: In accordance with the HUD Regulatory Agreement, the Organization is required to deposit in its residual receipts reserve account any surplus cash, as calculated per HUD regulations, with 90 days after the end of the fiscal period within such receipts are realized. Condition Found: Refer to Section II finding 2021-001. During 2020, the Organization had surplus cash of $43,837 required to be deposited into its residual receipt account. As of June 30, 2021, the Organization had not yet made this required deposit. Context: We obtained detail of all residual receipts reserve activity occuring during 2021 noting no such deposit and confirmed the failure to deposit surplus cash in its residual receipts reserve account with management. Questioned Costs: $43,837 Cause and Effect: Applicable personnel have not been trained on Notice H-2012-14. Further, internal controls have not been established to monitor and ensure compliance with this provision of the HUD Regulatory Agreement. This resulted in noncompliance with Notice H-2012-14 and the HUD Regulatory Agreement. Failure to comply with the terms of the HUD Regulatory Agreement could result in HUD declaring the whole indebtedness immediately due and payable. Recommendation: At June 30, 2021 the Organization continued to maintain surplus cash in excess of the prior year surplus cash to be deposited. We recommend the Organization make the required deposit into its residual receipts reserve account. We also recommend establishing a system of internal controls that would identify surplus cash and the need for a deposit within the 90 day timeframe as required by HUD. Views of Responsible Official and Corrective Action Plan: Management agreements with the finding and recommendation. See Corrective Action Plan attached.

Program Affected Mortgage Insurance for the Purchase or Refinance of Existing Multifamily Housing Projects - CFDA No. 14.155 Criteria Management is responsible for the design, implementation, and monitoring of internal control to reduce to a relatively low level the risk that material misstatements, caused by fraud or error, may occur and not be detected in a timely manner by employees in the normal course of performing their assigned functions. Management is also responsible for compliance with Notice H-2012-14, "Use of 'New Regulation' Section 8 HAP Contracts Residual Receipts to Offset Project-Based Section 8 Housing Assistance Payments". Condition and Context The regulatory agreement for the HUD program requires excess amounts in the residual receipts account be remitted back to HUD and offset against future Housing Assistance Payments (HAP). Excess amounts have not been offset against the HAP. Accordingly, a material journal entry was necessary, resulting in the restatement of the 2018 financial statements, for the financial statements to be in accordance with U.S. generally accepted accounting principles (U.S. GAAP). Cause and Effect Internal controls have not been established to ensure compliance with this provision of the HUD regulatory agreement. This resulted in a material misstatement of the financial statements, as well as noncompliance with Notice H-20112-14. Questioned Costs $19,791 Recommendation We recommend management attend regular trainings on HUD rules and regulations to help ensure compliance. In addition, the internal financial statements should be regularly reviewed to help ensure transactions with HUD are properly recorded and in accordance with U.S. GAAP. Management's Response and Responsibly Party PENDING