Advanced Living, Inc.'s Schwenckfeld ManorNon-Profit

Criteria: In accordance with regulatory agreements under the HUD Consolidated Audit Guide, residual receipts from the operation should be deposited to the residual receipts reserve account within 90 days from the year-end. Condition: The Project did not deposit the residual receipts from fiscal year 2023 into the reserve account. Effect: Advanced Living Inc.’s Schwenckfeld Manor may lose its federal assistance if does not comply with the deposit requirements under regulatory agreements. Cause: Management of Advanced Living Inc.’s Schwenckfeld Manor did not monitor the timely deposit of residual receipts. Questioned Costs: The Project had the residual receipts of $204,886 as calculated on the audited financial statements for the year ended June 30, 2023. Recommendation: The Project should more closely monitor its timely deposit of residual receipts as required by the regulatory agreement. Management's Response: Management had asked HUD for guidance in this matter during September of the fiscal year, but it was not officially addressed. Management made the same request this year and HUD is looking into the possibility of using the residual receipts to pay the owner advance off. As of today, management has not received definitive guidance. Management will follow the recommendation received from HUD and deposit the residual receipts with HUD.

Criteria: In accordance with regulatory agreements under the HUD Consolidated Audit Guide, residual receipts from the operation should be deposited to the residual receipts reserve account within 90 days from year-end. Condition: The Project did not deposit the residual receipts from fiscal year 2022 into the reserve account. Effect: Advanced Living Inc.'s Schwenckfeld Manor may lose its federal assistance if does not comply with the deposit requirements under regulatory agreements. Cause: Management of Advanced Living Inc.'s Schwenckfeld Manor did not monitor the timely deposit of residual receipts. Questioned Costs: The Project had the residual receipts of $153,831 as calculated on the audited financial statements for the year ended June 30, 2022. Recommendation: The Project should more closely monitor its timely deposit of residual receipts as required by the regulatory agreement. Management's Response: This issue was also raised last year. Management had asked HUD for guidance but it was not officially addressed. Management made the same request this year and HUD is looking into the possibility of using the residual receipts to pay the owner advance off. As of today, management has not received definitive guidance. Management will follow the recommendation received from HUD.

Criteria: In accordance with regulatory agreements under the HUD Consolidated Audit Guide, only expenditures related to the Project can be allocated to the Project. Condition: The payroll charged to the Project for certain employees for the fiscal year ended June 30, 2022 was not in accordance with the Project?s allocation policy. Effect: Advanced Living Inc.?s Schwenckfeld Manor may lose its federal assistance if expenditures are made that are not related to the Project. Cause: Advanced Living Inc.?s Schwenckfeld Manor's management monitoring did not work effectively to ensure proper recordkeeping. Questioned Costs: Misallocated payroll and related taxes and benefits in the amount of $4,099 needed to be reallocated to the Project for the fiscal year ended June 30, 2022. The amounts were determined by totaling the wages and related taxes and benefits that were charged to the management company in error. Recommendation: The Project should more closely monitor its payroll allocations during the year to ensure that the Project is charged in accordance with its allocation policy. Management's Response: Management agrees with the comment and has already corrected the issue prior to the audit report date via a proposed journal entry. Management has also committed to more thorough monitoring of its payroll allocations each payroll period during the year to ensure allocations are made in accordance with the Project?s policy.

Criteria: In accordance with its regulatory agreement under the HUD Consolidated Audit Guide, Advanced Living Inc.'s Schwenckfeld Manor cannot use the funds in the replacement reserve account without the HUD?s authorization. Schwenckfeld Manor received the authorization from HUD to loan $100,000 to a related party. Condition: Advanced Living Inc.'s Schwenckfeld Manor did not return the funds it loaned to a related party, Advanced Living Home Services (ALHS), pursuant to the terms of the note. Funds were originally withdrawn from the replacement reserve account with the HUD?s approval. The detail of the loan is disclosed under Note 5. The loan was not collected and the approval for extension was not obtained from HUD by the due date of the loan and currently remains in review by HUD as of the statement of financial position date. Effect: Advanced Living Inc.'s Schwenckfeld Manor may lose its federal funding without meeting the requirements regarding the replacement reserve account. Cause: Advanced Living Inc.'s Schwenckfeld Manor's management personnel and system of tracking its compliance with the regulatory agreement lack the monitoring needed to ensure timely reviews of compliance. This is a repeated finding (Finding 2020-001). Questioned Costs: $100,000 was loaned to a related party in 2012, which was agreed to be repaid by March 2019. The loan was not repaid by the due date. Recommendation: We recommend Advanced Living Inc.'s Schwenckfeld Manor obtain the approval of HUD to renew the loan to the related party. Management's Response: Management agrees with the comment and has been making efforts to obtain an extension. An extension of time will allow management to finalize terms with HUD to repay the loan in full. As of the audit report date, management obtained approval from HUD to renew the loan.

Criteria: In accordance with its regulatory agreement under the HUD Consolidated Audit Guide, Advanced Living Inc.'s Schwenckfeld Manor is required to maintain an appropriately funded replacement reserve account. Condition: Advanced Living Inc.'s Schwenckfeld Manor is required to maintain a specific balance in its replacement reserve account, as determined by HUD. However, Advanced Living Inc.'s Schwenckfeld Manor?s replacement reserve account was underfunded at June 30, 2021. Advanced Living Inc.'s Schwenckfeld Manor recognized the error and deposited the funds necessary to increase the replacement reserve account as of the audit report date. Effect: Advanced Living Inc.'s Schwenckfeld Manor?s replacement reserve balance was underfunded for the fiscal year noted above and the Project may lose its federal funding without properly funding its replacement reserve. Cause: Advanced Living Inc.'s Schwenckfeld Manor refinanced its mortgage in a prior year. During this process, Advanced Living Inc.'s Schwenckfeld Manor?s lender prior to the refinance withdrew bank fees in the amount of $2,622 from the replacement reserve account without obtaining management?s approval. Management was negotiating with the prior lender in subsequent years to recover the amount; however, this attempt was unsuccessful. Questioned Costs: Additional reserve funds in the amount of $2,622 were deposited to meet the reserve requirements as of the audit report date. Recommendation: We recommend Advanced Living Inc.'s Schwenckfeld Manor?s management be vigilant with respect to the replacement reserve compliance requirements. Management's Response: As management?s negotiations to recover the amount were unsuccessful, management funded the replacement reserve account to the required amount as of the audit report date.

Criteria: In accordance with its regulatory agreement under the HUD Consolidated Audit Guide, Advanced Living Inc.'s Schwenckfeld Manor cannot use the funds in the replacement reserve account without the HUD?s authorization. Schwenckfeld Manor received the authorization from HUD to loan $100,000 to a related party. Condition: Advanced Living Inc.'s Schwenckfeld Manor did not return the funds it loaned to a related party, Advanced Living Home Services (ALHS), pursuant to the terms of the note. Funds were originally withdrawn from the replacement reserve account with the HUD?s approval. The detail of the loan is disclosed under Note 5. The loan was not collected and the approval for extension was not obtained from HUD by the due date of the loan and currently remains in review by HUD. Effect: Advanced Living Inc.'s Schwenckfeld Manor may lose its federal funding without meeting the requirements regarding the replacement reserve account. Cause: Advanced Living Inc.'s Schwenckfeld Manor's management personnel and system of tracking its compliance with the regulatory agreement lack the monitoring needed to ensure timely reviews of compliance. This is a repeated finding (Finding 2019-002). Questioned Costs: $100,000 was loaned to a related party in 2012, which was agreed to be repaid by March 2019. The loan was not repaid by the due date. Recommendation: We recommend Advanced Living Inc.'s Schwenckfeld Manor obtain the approval of HUD to renew the loan to the related party. In addition, management should implement a monitoring system to oversee compliance with the replacement reserve requirement. Management's Response: Management agrees with the comment and has been making efforts to obtain an extension. An extension of time will allow management to finalize terms with HUD to repay the loan in full.

Criteria: In accordance with its regulatory agreement under the HUD Consolidated Audit Guide, Advanced Living Inc.'s Schwenckfeld Manor is required to deposit funds in its replacement reserve account monthly. Condition: Advanced Living Inc.'s Schwenckfeld Manor is required to increase its monthly replacement reserve deposit whenever it applies an Operating Cost Adjustment Factor (OCAF) rent increase, as determined by HUD. However, Advanced Living Inc.'s Schwenckfeld Manor failed to apply the monthly replacement reserve deposit increases for the years ended June 30, 2018, 2019, and 2020. Advanced Living Inc.'s Schwenckfeld Manor recognized its error during the fiscal year ended June 30, 2020, and deposited the funds necessary to increase the reserve to the proper balance. Effect: Advanced Living Inc.'s Schwenckfeld Manor?s replacement reserve balance was underfunded for the fiscal years noted above and the Project may lose its federal funding without properly funding its replacement reserve. Cause: Advanced Living Inc.'s Schwenckfeld Manor's management personnel and system of tracking its compliance with the regulatory agreement lack the monitoring needed to ensure timely reviews of compliance. Questioned Costs: Additional reserve funds in the amount of $7,907 was deposited to meet the reserve requirements as of June 30, 2020. Recommendation: We recommend Advanced Living Inc.'s Schwenckfeld Manor?s management implement a monitoring system to oversee compliance with the replacement reserve requirements. Management's Response: Management discovered the deficiency before the audit and made corrections. Internal control was implemented to monitor this change and comply with the requirements in a timely manner.

Criteria: In accordance with Uniform Guidance, Advanced Living Inc.'s Schwenckfeld Manor is required to file its Single Audit Package with the Federal Audit clearinghouse within nine months of its fiscal year end. Condition: Advanced Living Inc.'s Schwenckfeld Manor failed to file its Single Audit Package for the fiscal year ending June 30, 2017 within nine months of its fiscal year end. Effect: Advanced Living Inc.'s Schwenckfeld Manor may lose its federal funding. Cause: The personnel assigned and the system used for tracking Federal Awards and related expenditures were unaware of the submission requirements. Recommendation: We recommend that management develop and implement policies and monitoring procedures to ensure timely submission of the package. Management's response: Management agrees with the comment and has been working toward better accountability. The internal control procedures were implemented to monitor timely submissions of the Single Audit Package. The Single Audit Package for the fiscal year ending June 30, 2018 was submitted on time. The Single Audit Package for June 30, 2017 has been submitted as of the report date.

Criteria: In accordance with regulatory agreement under the HUD Consolidated Audit Guide, Advanced Living Inc.'s Schwenckfeld Manor is required to deposit its surplus cash into Residual Receipts account in a timely manner. Condition: Advanced Living Inc.'s Schwenckfeld Manor did not receive the funds they loaned to a related party, Advanced Living Home Services (ALHS), pursuant to the terms of the note. The detail of the loan is disclosed under the Note 5. The loan was not collected and the approval for extension was not obtained from the HUD by the due date of the loan and currently remains in review by HUD. Effect: Advanced Living Inc.'s Schwenckfeld Manor may lose its federal funding without proper segregation of residual receipts. Cause: The Manor's management personnel and system of tracking its compliance with the regulatory agreement lack the monitoring needed to ensure timely reviews of compliance. Recommendation: We recommend to obtain the approval by HUD to renew the loan to the related party. In addition, management should implement a monitoring system to oversee the compliance with the residual receipts requirement. Management's response: Management agrees with the comment and has been making efforts to obtain the extension approval from HUD. The internal control procedures were implemented to monitor compliance with the residual receipts requirements.

Criteria: In accordance with regulatory agreements under the HUD Consolidated Audit Guide, only expenditures related to the project can be allocated to the project. Condition: The management and maintenance payroll charged to Advanced Living Inc.'s Schwenckfeld Manor for the fiscal years ending June 30, 2018 and 2017, were not substantiated with written documents or records. Effect: Penalties and repayments of unsubstantiated payroll in the amount of $1,680,009 were imposed by HUD as a result of an audit. Cause: The Manor?s management personnel and system of tracking its compliance with the regulatory agreement lack the monitoring needed to ensure proper recordkeeping. Questioned costs: Unsubstantiated payroll and related taxes and benefits in the amount of $211,287 and $388,104 needed to be re-allocated to the management company for the fiscal years ended June 30, 2018 and 2017, respectively. The amounts were determined by totaling the wages and related taxes and benefits charged by the management company which are not documented with the written time logs or work orders. Recommendation: The Manor should implement a system to keep track of the recordkeeping of the time and work performed by personnel from the management company. A senior member of the management should be charged with monitoring this process and compliance. Management's response: Management agrees with the comment and has already implemented a system to keep track of time sheets by management and maintenance personnel, and this information has been reflected in the payroll documents. The internal control procedures were implemented to monitor compliance.

GSA_MIGRATION