Holy Family Housing Corporation

Significant Deficiency #2024-003 Mortgage insurance for the purchase or refinance of existing multifamily housing projects AL #14.155 - Special Tests and Provisions (Replacement Reserve and Residual Receipts Accounts) Criteria Under the Uniform Guidance Special Test requirements, the Project is required to maintain sufficient internal controls to ensure compliance with special tests. Condition During our audit procedures we noted that there are weaknesses in internal controls over replacement reserve and residual receipts accounts. There is no documentation of these accounts being reviewed by management. Cause of Condition The Project didn’t have adequate controls in place to ensure that replacement reserve and residual receipts required deposits are made in accordance with the Uniform Guidance requirements. Effect If the control process is not documented, it is not possible to determine if the controls are designed and applied consistently. The inadequate documentation of the components of internal controls could result in an inability to appropriately monitor the effectiveness of the internal controls. Questioned Costs: None Identification as a Repeat Finding, if applicable – No Recommendation We recommend that management implement a process to document formal review and approvals of replacement reserve and residual receipts accounts. Management’s Response Please see Project’s Corrective Action Plan included in this reporting package.

Criteria Replacement reserve disbursements should be made for only HUD approved purposes according to HUD guidelines. Condition During our audit procedures we noted that a disbursement was made for the same expense twice. Cause of Condition The control in place over replacement reserve disbursements did not detect the error due to two separate employees requesting disbursement on same invoice independently. Effect Due to the weakness in internal controls and compliance finding noted above, there is a risk of federal funds being expended on activities that are not allowed. Questioned Costs: $4,230 Identification as a Repeat Finding, if applicable – No Recommendation We recommend that management review their current policies and procedures and establish adequate internal controls related to replacement reserve disbursements. In addition, we recommend the Project return the funds to the replacement reserve account. Management’s Response Please see Project’s Corrective Action Plan included in this reporting package.