Aldersbridge Communities and SubsidiariesNon-Profit

Significant Deficiency: Finding 2024-001 Criteria: The U.S. Department of Housing and Urban Development (HUD) required that the Organization transfer surplus cash of $720,497 to a residual receipts account within 90 days after December 31, 2023. Condition: The Organization did not establish a residual receipts account and deposit the required funds within 90 days after December 31, 2023. Cause: The delay in completing the transfer was due to the Organization being in communications with HUD in consideration of refinancing their debt and, therefore, no longer having the residual receipt requirement. Effect: The failure to complete the transfer within the specified timeframe could result in noncompliance with regulatory requirements and potential financial penalties. Additionally, it may impact the Organization’s financial reporting accuracy and reliability. Recommendation: It is recommended that the Organization reviews and strengthens its internal controls and procedures to ensure timely transfers to the residual receipts account. This may include implementing additional oversight to ensure compliance with the established timelines. Management Response: Management is in agreement with this finding. Winslow Gardens is actively working with HUD to determine next steps for the residual receipts and a solution to the outstanding Flex Subsidy Loan.

Federal agency: U.S. Department of Housing and Urban Development Federal program title: Operating Assistance for Troubled Multifamily Housing Projects Assistance Listing Number: 14.164 Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: HUD requires that the Organization maintain a Fidelity Bond that is equal to or exceeds two months of gross potential receipts. Condition: Two months of gross potential receipts was in excess of the Fidelity Bond maintained by the Organization. Questioned costs: None Context: The Organization did not maintain a fidelity bond in excess of two months of gross potential collections. The required coverage was $616,781 or more, but the actual coverage was $500,000. Cause: The Organization did not increase their insurance coverage for increases in revenue and other receipts. Effect: The Organization does not have the required coverage determined by HUD and exposes themselves to potential liability. Repeat Finding: No Recommendation: We recommend that the Organization increase their Fidelity Bond insurance coverage. Views of responsible officials: There is no disagreement with the audit finding. Effective February 5, 2024, the Organization had increased their Fidelity Bond coverage for the 2024 fiscal year.

Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: HUD requires that security deposits be returned to the tenant within 30 days of the move-out date. Condition: Two of the eight security deposits tested were not returned to the tenant within the 30-day HUD requirement. Questioned costs: None Context: There were thirty-one tenants who had security deposits returned during 2022. For two out of eight tenants tested for security deposit move-outs, the Organization did not refund their security deposits on a timely basis. Cause: The Organization did not follow proper check disbursement procedures and the payment of the security deposit refund checks was delayed. Effect: The Organization did not properly implement check disbursement and moveout procedures, which resulted in a violation of the HUD 30-day security deposit refund requirement. Repeat Finding: No Recommendation: We recommend that the Organization follow proper procedures regarding security deposits for move-outs to ensure timely refunds. Views of responsible officials: There is no disagreement with the audit finding.

Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: HUD requires that payments of distributions and other nonproject related cash disbursements can only be made with available surplus cash. Condition: During 2022, the Organization made operating advances of $9,208 for expenses belonging to organizations related by common control. These advances were in excess of amounts available from surplus cash as determined by HUD regulations and represent a control deficiency as the matter was not identified timely. Questioned costs: $9,208 Context: Four quarters were tested for the transactions for three entities with common control for a total of twelve quarters. During two of the twelve quarters tested, we noted a receivable balance when there was no surplus cash available to loan. In addition, during testing of contributions to and from the Organization, we noted a contribution from the Organization to an entity related by common control when there was no surplus cash available. Cause: The Organization paid expenses pertaining to affiliated organizations when there was no available surplus cash by error. Effect: The Organization made an unauthorized distribution of project funds, which is a violation of the Organization?s agreement with HUD. Repeat Finding: No Recommendation: We recommend that no expenses be paid on behalf of related organizations when surplus cash is not available and that the Organization complete timely reviews of related organization financial activity to ensure no unauthorized advances occur. Views of responsible officials: There is no disagreement with the audit finding.

Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: The HUD regulatory agreement states that all bank accounts that are either not insured or that exceed federally insured limits must be monitored quarterly. Condition: Of the twelve instances where the Organization's replacement reserve and operating account bank monitoring was required during 2021, no instances were completed for the operating account leaving four out of twelve incomplete. Questioned costs: None Context: The Organization has one operating bank account for which bank ratings should be monitored on a quarterly basis. Ratings were not monitored for four out of the four instances that monitoring was required; therefore, the Organization did not follow proper procedures required by HUD. Cause: The Organization had employee turnover in the finance department and this procedure was overlooked for the operating account. Effect: The Organization did not properly monitor bank ratings on a quarterly basis as required by HUD. Repeat Finding: Yes Recommendation: We recommend that the Organization follow proper procedures for monitoring bank ratings to meet the requirements stated in the HUD regulatory agreement. Views of responsible officials: There is no disagreement with the audit finding.

2020-001 During 2020, the Organization made operating advances of $12,586 for expenses belonging to organizations related by common control. These advances were in excess of amounts available from surplus cash as determined by HUD regulations. Program Operating Assistance for Troubled Multifamily Housing Projects - 14.164 Criteria The HUD regulatory agreement states that payments of distributions and other non-project related cash disbursements can only be made with available surplus cash. Condition During 2020, the Organization made operating advances of $12,586 for expenses belonging to organizations related by common control. These advances were in excess of amounts available from surplus cash as determined by HUD regulations and represent a control deficiency as the matter was not identified timely. Cause The Organization paid expenses pertaining to affiliated organizations when there was no available surplus cash by error. Effect The Organization made an unauthorized distribution of project funds, which is a violation of the Organization?s regulatory agreement. Questioned Costs $12,586 Perspective The universe consists of amounts paid for non-project related expenses. This finding discloses the only identified unauthorized distributions of project funds. Recommendation We recommend that no expenses be paid on behalf of related organizations when no surplus cash is available and that the Organization complete timely reviews of related organization financial activity to ensure no unauthorized advances occur. Views of Responsible Officials Management concurs with the finding.

2020-002 During 2020, the Organization did not adequately monitor quarterly bank ratings for their two replacement reserve accounts as required by HUD. Program Operating Assistance for Troubled Multifamily Housing Projects - 14.164 Criteria The Organization is required by HUD to monitor bank ratings on a quarterly basis for the replacement reserve accounts that are either not insured or that exceed federally insured limits. Condition Of the eight instances where replacement reserve bank monitoring was required during 2020, only three instances were completed leaving five quarters unmonitored during 2020. Cause The Organization had employee turnover in the finance department and this procedure was overlooked. Effect The Organization did not properly monitor bank ratings on a quarterly basis as required by HUD. Questioned Costs None Perspective The Organization has two bank accounts that hold replacement reserve funds for which bank ratings should be monitored on a quarterly basis. Ratings were not monitored for five out of the eight instances that monitoring was required; therefore, the Organization did not follow proper procedures required by HUD. Recommendation We recommend that the Organization follow proper procedures for monitoring bank ratings to meet the requirements stated in the HUD regulatory agreement. Views of Responsible Officials Management concurs with the finding.

2019-001 During 2019, one of five tenants tested for eligibility was not of eligible age at the time of move-in. This violates the HUD regulatory agreement. Program Operating Assistance for Troubled Multifamily Housing Projects - 14.164 Criteria The HUD regulatory agreement states that tenants must be of eligible age upon move-in. Condition During 2019, one of five tenants tested for eligibility was not of eligible age at the time of move-in. Cause The Organization waived the eligibility criteria for this tenant as the tenant became of eligible age three months after move-in. Effect The Organization did not properly implement eligibility procedures, which is a violation of the HUD regulatory agreement. Questioned Costs None Perspective There were thirty-two new tenants who moved in during 2019. For one out of the five tenants tested for eligibility, the Organization did not follow proper procedures regarding meeting the eligibility criteria. Recommendation We recommend that the Organization follow proper procedures for tenant eligibility regarding tenant move-ins to meet the requirements stated in the HUD regulatory agreement. Views of Responsible Officials Management concurs with the finding.

2019-002 During security deposit testing, we noted that two out of five security deposits tested for move-outs were not refunded within thirty days of the tenant?s move-out date. This violates the HUD regulatory agreement. Program Operating Assistance for Troubled Multifamily Housing Projects - 14.164 Criteria HUD requires that security deposits be returned to the tenant within 30 days of the move-out date. Condition Two of the five security deposits tested were not returned to the tenant within the thirty-day HUD requirement. Cause The Organization did not follow proper check disbursement procedures and the payment of the security deposit refund checks was delayed. Effect The Organization did not properly implement check disbursement and move-out procedures, which resulted in a violation of the HUD thirty-day security deposit refund requirement. Questioned Costs None Perspective There were twenty-eight tenants who moved out during 2019. For two out of the five tenants tested for security deposit move-outs, the Organization did not refund their security deposits on a timely basis. Recommendation We recommend that the Organization follow proper procedures regarding security deposits for move-outs to ensure timely refunds. Views of Responsible Officials Management concurs with the finding.

2019-003 During 2019, the Organization did not monitor quarterly bank ratings for their two replacement reserve accounts as required by HUD. Program Operating Assistance for Troubled Multifamily Housing Projects - 14.164 Criteria The Organization is required by HUD to monitor bank ratings on a quarterly basis for the replacement reserve accounts that are either not insured or that exceed federally insured limits. Condition Neither of the two replacement reserve accounts? bank ratings were monitored during 2019. Cause The Organization had employee turnover in the finance department and this procedure was overlooked. Effect The Organization did not properly monitor bank ratings on a quarterly basis as required by HUD. Questioned Costs None Perspective The Organization has two bank accounts that hold replacement reserve funds for which bank ratings should be monitored on a quarterly basis. Ratings were not monitored for either bank account, therefore the Organization did not follow proper procedures required by HUD. Recommendation We recommend that the Organization follow proper procedures for monitoring bank ratings to meet the requirements stated in the HUD regulatory agreement. Views of Responsible Officials Management concurs with the finding.

2019-004 During 2019, the Organization made operating advances of $21,971 for payroll expenses belonging to organizations related by common control. These advances were in excess of amounts available from surplus cash as determined by HUD regulations. Program Operating Assistance for Troubled Multifamily Housing Projects - 14.164 Criteria The HUD regulatory agreement states that payments of distributions and other non-project related cash disbursements can only be made with available surplus cash. Condition During 2019, the Organization made operating advances of $21,971 for payroll expenses belonging to organizations related by common control. These advances were in excess of amounts available from surplus cash as determined by HUD regulations and represent a control deficiency as the matter was not identified timely. Cause The Organization paid expenses pertaining to affiliated organizations when there was no available surplus cash by error. Effect The Organization made an unauthorized distribution of project funds, which is a violation of the Organization?s regulatory agreement. Questioned Costs $21,971 Perspective The universe consists of amounts paid for non-project related payroll expenses. This finding discloses the only identified unauthorized distributions of project funds. Recommendation We recommend that the payroll expense paid on behalf of the related organizations be paid to the project prior to disbursement by the project, and that the Organization complete timely reviews of related organization financial activity to ensure no unauthorized advances occur. Views of Responsible Officials Management concurs with the finding.

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