High Street Homes, Inc.Non-Profit

Statement of Condition: As a result of our audit procedures, we noted that High Street Homes, Inc. used Project funds to pay for unallowable costs. (Repeat Finding #2024-003) Criteria: All Project costs must be used only for expenses that are reasonable and necessary for the operation of the Project as provided for in the HUD agreement. Cause: There was significant turnover of key personnel in the Finance department during the year, causing new personnel who were inexperienced with the HUD agreement to have to assume recording of Project expenses. Effect: The Project used HUD funding to pay for unallowable costs. Questioned Costs: $2,261. Recommendation: The Project should review the HUD agreement and approved budget to obtain a better understanding of the type of costs that are allowable, and ensure they are only using HUD funds for allowable costs. Views of Responsible Officials and Planned Corrective Actions: High Street Homes, Inc. concurs with this finding. The questioned costs resulted from staff unfamiliarity with the HUD agreement due to turnover in the Finance Department. Corrective measures taken include:  Reimbursement of the unallowable costs identified ($2,261) with non-federal funds.  Ongoing training for Finance staff regarding HUD cost principles, allowable costs, and budget compliance.  Regular review of expenditures by the Director of Finance to ensure costs are reasonable, necessary, and allowable under the HUD agreement. These corrective actions will strengthen compliance with HUD cost requirements and prevent future occurrences.

Statement of Condition: As a result of our audit procedures, we noted one instance whereby High Street Homes, Inc. did not obtain a signed lease agreement for the tenant. Criteria: All required HUD forms must be properly signed by the Project and the tenant, as applicable. Cause: Management did not obtain a lease signed by the tenant and Project management prior to tenant moving in. Effect: The Project had incomplete documentation on file for the tenant. Recommendation: The Project should perform a review of all tenant files to ensure all tenant files are complete with required documentation. Views of Responsible Officials and Planned Corrective Actions: High Street Homes, Inc. acknowledges the deficiency related to tenant eligibility documentation . Management recognizes the importance of maintaining complete tenant files to ensure compliance with HUD requirements. Corrective actions taken include: mmediate review of all current tenant files to confirm lease agreements and all required HUD forms are properly executed and on file.  Establishment of a tenant file checklist to ensure all required documentation is obtained and reviewed prior to tenant move-in.  Implementation of supervisory review of tenant files to verify completeness before occupancy is finalized.  Staff training on HUD eligibility and documentation requirements to reinforce compliance. High Street Homes, Inc. is committed to ensuring full compliance with HUD tenant eligibility documentation requirements.

Statement of Condition: As a result of our audit procedures, we noted that High Street Homes, Inc. did not make the monthly required deposits for eight months. (Repeat Finding #2023-002) Criteria: Management is responsible for reconciling the replacement reserve account on a monthly basis to ensure the activity is accurately recorded on a monthly basis. Cause: There was significant turnover of key personnel in the Finance department during the year, causing new personnel who were inexperienced with the HUD replacement reserve process to have to assume these duties. Effect: The HUD required monthly deposits were not made. Recommendation: Replacement reserve account should be reconciled monthly and reviewed to ensure all required deposit activity is made. Views of Responsible Officials and Planned Corrective Actions: The projects Replacement Reserve monthly deposit Is now made every month starting in March 2024 and continuing into the present. Staff are now compliant on this topic. (All HUD bank reconciliations are fairly current at this time as an additional PRN employee has been hired to help with project work. This PRN employee works on Saturdays. Again, a formal internal monthly meeting with a checklist will help with the HUD review process. Access to a CPA firm for or other provider of training would also help.)

Statement of Condition: As a result of our audit procedures, we noted that High Street Homes, Inc. used Project funds to pay for unallowable costs. Criteria: All Project costs must be used only for expenses that are reasonable and necessary for the operation of the Project as provided for in the HUD agreement. Cause: There was significant turnover of key personnel in the Finance department during the year, causing new personnel who were inexperienced with the HUD agreement to have to assume recording of Project expenses. Effect: The Project used HUD funding to pay for unallowable costs. Questioned Costs: $7,010. Recommendation: The Project should review the HUD agreement and approved budget to obtain a better understanding of the type of costs that are allowable, and ensure they are only using HUD funds for allowable costs. Views of Responsible Officials and Planned Corrective Actions: A formal scheduled training and study session would benefit staff as there is a need to understand allowable costs. As Senior Management reviews the disbursements, the final review before check signing, a top level review can also be done. At this point, the best approach seems there should be formal purchase orders written for the HUD homes - differentiating High Street Homes from Five Rivers Homes - expenses that should be attached to the invoices before approval. This additional layer of review will benefit the situation as staff can easily see if an item is approved.

Statement of Condition: As a result of our audit procedures, we noted that High Street Homes, Inc. did not make the monthly required deposits for eleven months and an unapproved withdrawal was made out of the account. Criteria: Management is responsible for reconciling the replacement reserve account on a monthly basis to ensure the activity is accurately recorded on a monthly basis. In addition, request for withdrawals must be submitted to HUD and approved by HUD prior to any withdrawals. Cause: There was significant turnover of key personnel in the Finance department during the year, causing new personnel who were inexperienced with the HUD replacement reserve process to have to assume these duties. Effect: The HUD required monthly deposits were not made and an unapproved withdrawal was made. Recommendation: Replacement reserve account should be reconciled monthly and reviewed to ensure all required deposit activity is made and there are no unapproved withdrawals from the account. Views of Responsible Officials and Planned Corrective Actions: Upper Bay Counseling and Support Services, Inc. will implement monthly reporting of Replacement Reserve Account and other HUD information as part of an effort to improve internal financial reporting overall.

Statement of Condition: As a result of our audit procedures, we noted that the monthly rental income from the tenants was not paid to the Project from Upper Bay, who acts as the tenants’ representative payee. Criteria: The Project has entered into a project rental assistance contract under Section 811 of the National Housing Act. Under the contract, the Project will receive monthly rent supplements directly from HUD for qualified tenants. The amount of rent payable by a qualified resident of the apartment building is based on the tenant’s income level. Housing assistance payments are received from HUD for the amount of the difference between an apartment’s contract rent and the amount received from the tenant. Cause: There was significant turnover of key personnel in the Finance department during the year, causing new personnel who were inexperienced with the HUD rental revenue process to have to assume these duties. Effect: The Project did not receive the tenant monthly rental income during the fiscal year. Recommendation: The Project should accurately maintain the monthly rental schedule and reconcile the HUD voucher activity and tenant payments to the general ledger and bank statements. The rental activity should be reconciled monthly and the Director of Finance should review the rental schedule monthly to ensure the reconciliation is accurate and all activity is properly accounted for during the year. Views of Responsible Officials and Planned Corrective Actions: Upper Bay Counseling and Support Services, Inc. will implement monthly HUD financial meetings providing the oversight and review needed. Financial staff will submit a report to Senior Management of HUD financial matters on a regular basis.

Statement of Condition: The annual financial statements for the year ended June 30, 2023 were not filed by the required due date of September 30, 2023 to REAC. Criteria: In accordance with HUD requirements, the audited financial statements must be completed and submitted to REAC by September 30, 2023. Cause: Management did not have an approved contract renewal with HUD for the year ended June 30, 2023 until September 27, 2023. The contract renewal application had errors when originally submitted and there was a lack of follow up with HUD due to significant turnover at the Project causing a delay in obtaining HUD approval. As a result, the financial statements could not be properly prepared in time for the submission deadline to be met. Effect: The annual financial statements for the year ended June 30, 2023 were not submitted to REAC in a timely manner. Recommendation: We recommend that management ensure the HUD contract renewal application is completed accurately and submitted timely in order to receive HUD approval at the start of the fiscal year. This is extremely important to ensure the timely submission of the audited financial statements to REAC. Views of Responsible Officials and Planned Corrective Actions: Upper Bay Counseling and Support Services, Inc. will have Senior Management and Financial staff working together via scheduled internal meetings to ensure the HUD approval at the start of the fiscal year is obtained. The contract renewal application and required follow up will be on the agendas of the internal HUD meetings.

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