EIN: 311208168
UEI: EVRESDVDLK89
Audited by: Wharton CPA, LLC
Oversight agency: 14 [Department of Housing and Urban Development]
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Data as of September 2, 2026
Management decision deadline — for entities that funded this organization
The FAC accepted this audit on September 20, 2024. Under 2 CFR 200.521(d), a pass-through entity that provided federal funds to this organization for this audit period must issue a management decision on these findings by March 20, 2025 (533 days ago).
What is a management decision? →Management failed to post prior year audit entries. Criteria: Agreed upon audit adjustments must be posted to the financial statements each year. Cause: The cause is undeterminable. Effect: The financial statement records did not contain all financial transactions of the property. Recommendation: I recommend management post audit entries to agree financial records to audit report.
Show full finding ▾Hide full finding ▴2023–1 Prior Year Audit Entries Not Posted Condition: Management failed to post prior year audit entries. Criteria: Agreed upon audit adjustments must be posted to the financial statements each year. Cause: The cause is undeterminable. Effect: The financial statement records did not contain all financial transactions of the property. Recommendation: I recommend management post audit entries to agree financial records to audit report.
The beginning balances of 2023 were not adjusted to the requested 2022 Audit Adjustment Entries received from the Auditor. We will record the adjusted journal entries of 2022 and 2023 in their respective periods
The owner did not meet the HUD financial reporting requirement. Criteria: According to HUD’s Uniform Financial Reporting Standards rule, annually, an owner is required to submit a financial statement, prepared in accordance with generally accepted accounting principles (GAAP), in the electronic format specified by HUD. The unaudited financial statement is due three months after the owner’s fiscal year end and the audited financial statement is due nine months after its fiscal year-end (24 CFR section 5.801). The financial statement must include the financial activities of this program. Cause: The cause is undeterminable. Effect: The Project is not compliant with HUD program requirements. Recommendation: I recommend the owner meet HUD program requirements.
Show full finding ▾Hide full finding ▴2023-3 Late HUD Financial Reporting Condition: The owner did not meet the HUD financial reporting requirement. Criteria: According to HUD’s Uniform Financial Reporting Standards rule, annually, an owner is required to submit a financial statement, prepared in accordance with generally accepted accounting principles (GAAP), in the electronic format specified by HUD. The unaudited financial statement is due three months after the owner’s fiscal year end and the audited financial statement is due nine months after its fiscal year-end (24 CFR section 5.801). The financial statement must include the financial activities of this program. Cause: The cause is undeterminable. Effect: The Project is not compliant with HUD program requirements. Recommendation: I recommend the owner meet HUD program requirements.
We will ensure that going forward, processes are in place to allow for the timely submission of the financial reporting requirements. Further, we request that this finding be removed as the late filing occurred in 2024 and should be given in 2024 pursuant to AU-C 935.
FAC accepted this audit on September 24, 2023 — management decision was due March 24, 2024.
FAC accepted this audit on April 30, 2022 — management decision was due October 30, 2022.
Management failed to post prior year audit entries. Criteria: Agreed upon audit adjustments must be posted to the financial statements each year. Cause: The cause is undeterminable. Effect: The financial statement records did not contain all financial transactions of the property. Recommendation: I recommend management post audit entries to agree financial records to audit report.
Show full finding ▾Hide full finding ▴2021-1 Prior Year Audit Entries Not Posted Condition: Management failed to post prior year audit entries. Criteria: Agreed upon audit adjustments must be posted to the financial statements each year. Cause: The cause is undeterminable. Effect: The financial statement records did not contain all financial transactions of the property. Recommendation: I recommend management post audit entries to agree financial records to audit report.
We disagree with this finding in its entirety. In 2021, the property posted all 2020 audit entries except for an entry pertaining to the return of Residual Receipts. This was due to our understanding of HUD regulations for Section 202/8 properties, and prior year circumstances, whereby HUD would instruct the property on the return of Residual Receipts and would do so via written notification to withhold subsidy payments and authorize the use of Residual Receipts. This understanding also applied to the 2019 audit adjusting entry for Residual Receipts (finding 2020-1). Nevertheless, updated information and knowledge dictates that the accounting books must still reflect the tentative recapture to HUD until HUD approval and instructions are received. Therefore, based upon this new understanding of the regulation, the property will book the required audit adjusting entries concerning excess Residual Receipts when we book all 2021 audit adjusting entries. The adjusting entry would be to debit new account 7190.00, Other Entity Expense and credit account 2112.00 Other Accounts Payable for the expected amount of recapture. We will leave that entry on the property books until the recapture process begins.
2020-001
Management did not record utility accruals in the accounting records. Criteria: The accrual accounting method ensures transactions are recognized in the accounting period incurred, rather than paid; which follows the matching principle. Cause: The cause is undeterminable. Effect: Not recording accruals could have a material impact on both the balance sheet and the income statements. Recommendation: I recommend management post all accruals to properly reflect the financial position of the Project.
Show full finding ▾Hide full finding ▴2021-2 Accruals Not Properly Posted Condition: Management did not record utility accruals in the accounting records. Criteria: The accrual accounting method ensures transactions are recognized in the accounting period incurred, rather than paid; which follows the matching principle. Cause: The cause is undeterminable. Effect: Not recording accruals could have a material impact on both the balance sheet and the income statements. Recommendation: I recommend management post all accruals to properly reflect the financial position of the Project.
We will ensure that going forward, all required utility accrual entries will be done timely.
The Project did not prepare a HUD 9250 to remit excess residual receipts nor did it mail a check or transmit a wire of those funds. Criteria: According to the Consolidated Appropriations Act, 2017, owners subject to a Section 202 or 811 are required to remit any excess balance in a Residual Receipts account, greater than $250 per unit, to HUD?s Accounting Center upon termination or renewal of the contract. Effect: Residual receipts balance is $13,938 as of December 31, 2021. The allowable balance is $10,000 ($250 X 40 units), resulting in excess residual receipts of $3,938. Recommendation: I recommend the Property prepare the HUD 9250 requesting to remit excess funds to HUD.
Show full finding ▾Hide full finding ▴2021-3 Excess Residual Receipts Condition: The Project did not prepare a HUD 9250 to remit excess residual receipts nor did it mail a check or transmit a wire of those funds. Criteria: According to the Consolidated Appropriations Act, 2017, owners subject to a Section 202 or 811 are required to remit any excess balance in a Residual Receipts account, greater than $250 per unit, to HUD?s Accounting Center upon termination or renewal of the contract. Effect: Residual receipts balance is $13,938 as of December 31, 2021. The allowable balance is $10,000 ($250 X 40 units), resulting in excess residual receipts of $3,938. Recommendation: I recommend the Property prepare the HUD 9250 requesting to remit excess funds to HUD.
We disagree with this audit finding and request its removal. The basis for this is that pursuant to HUD Notice H-2012-14, the Owner/Agent is responsible for depositing Residual Receipts into the designated Residual Receipt account. Withdrawals from this account will be made only with the approval of HUD and for project purposes, including the reduction of housing assistance payments. Further guidance reflects that Project Based Section 8 Contracts will remit residual receipts through the offset process at HUD?s written direction. We have complied with the requirement to deposit Residual Receipts into the designate account, and we did not receive notice from HUD to submit to the offset of assistance payments to recover the Residual Receipts. Upon receipt of HUD?s notice, we will comply with offset process.
FAC accepted this audit on April 29, 2021 — management decision was due October 29, 2021.
Management failed to post prior year audit entries. Criteria: Agreed upon audit adjustments must be posted to the financial statements each year. Cause: The cause is undeterminable. Effect: The financial statement records did not contain all financial transactions of the property. Recommendation: I recommend management post audit entries to agree financial records to audit report.
Show full finding ▾Hide full finding ▴2020?1 Prior Year Audit Entries Not Posted Condition: Management failed to post prior year audit entries. Criteria: Agreed upon audit adjustments must be posted to the financial statements each year. Cause: The cause is undeterminable. Effect: The financial statement records did not contain all financial transactions of the property. Recommendation: I recommend management post audit entries to agree financial records to audit report.
Management agrees that our previous accountant failed to post the prior year audit entries. Management?s recently hired accountant has been made aware of this issue and has proceeded to post the prior year entries and will post audit entries timely going forward.
Management failed to capitalize expenditures that yield benefits over an extended period of time. Criteria: Management is required to prepare financial statements in accordance with generally accepted accounting principles. Cause: Transactions were expensed in the accounting records. Effect: Misrepresentation of financial position of the Project. Recommendation: I recommend management properly capitalize property and equipment according to their capitalization policy.
Show full finding ▾Hide full finding ▴2020-2 Property and Equipment not Capitalized Condition: Management failed to capitalize expenditures that yield benefits over an extended period of time. Criteria: Management is required to prepare financial statements in accordance with generally accepted accounting principles. Cause: Transactions were expensed in the accounting records. Effect: Misrepresentation of financial position of the Project. Recommendation: I recommend management properly capitalize property and equipment according to their capitalization policy.
We have reviewed this issue with our recently hired accountant who will ensure that going forward eligible expenses are capitalized. This matter was an oversite and not an intentional measure of misrepresentation of the financial position of the property.
The Project failed to deposit surplus cash into the residual receipts account in a timely manner. Criteria: According to the Consolidated Audit Guide for Audits of HUD Program Handbook 2000.04 REV-2 Change 1, Chapter 3, surplus cash must be deposited into the residual receipts account within 90 days after the close of the fiscal year. Cause: The cause is undeterminable. Effect: The Project is not in compliance with the Consolidated Audit Guide for Audits of HUD Program Handbook as it relates to residual receipts. Recommendation: I recommend management implement stronger internal controls to ensure compliance with the Consolidated Audit Guide for Audits of HUD Programs.
Show full finding ▾Hide full finding ▴2020-3 Residual Receipts Not Deposited Timely Condition: The Project failed to deposit surplus cash into the residual receipts account in a timely manner. Criteria: According to the Consolidated Audit Guide for Audits of HUD Program Handbook 2000.04 REV-2 Change 1, Chapter 3, surplus cash must be deposited into the residual receipts account within 90 days after the close of the fiscal year. Cause: The cause is undeterminable. Effect: The Project is not in compliance with the Consolidated Audit Guide for Audits of HUD Program Handbook as it relates to residual receipts. Recommendation: I recommend management implement stronger internal controls to ensure compliance with the Consolidated Audit Guide for Audits of HUD Programs.
The deposit delay was as a result of HUD reviewing and questioning the residual receipt calculations as submitted in the 2019 Annual Financial Statement. Upon the completion of HUDs review and agreement to the same, the deposits were made. We understand that we must deposit residual receipts within the required time frame.
FAC accepted this audit on September 17, 2020 — management decision was due March 17, 2021.
Vacancies are not reconciled throughout the calendar year. Criteria: Vacancies should be reconciled at the end of each month. Cause: The cause is undeterminable. Effect: Vacancies had to be reconciled during the audit process. Recommendation: I recommend management reconcile vacancies on a monthly basis.
Show full finding ▾Hide full finding ▴2019 ?1 Vacancies Not Reconciled Timely Condition: Vacancies are not reconciled throughout the calendar year. Criteria: Vacancies should be reconciled at the end of each month. Cause: The cause is undeterminable. Effect: Vacancies had to be reconciled during the audit process. Recommendation: I recommend management reconcile vacancies on a monthly basis.
Response: All vacancies in the General Ledger of ARMS agree to the reports of the tenant ledgers in our Leasing and Rents software. This reconciliation of vacancies is performed on a regular basis.
Gross potential rent is not reconciled throughout the calendar year. Criteria: Gross potential rent should be reconciled at the end of each month. Cause: The cause is undeterminable. Effect: Gross potential rent had to be calculated and reconciled during the audit process. Recommendation: I recommend management calculate and reconcile on gross potential rent on a monthly basis.
Show full finding ▾Hide full finding ▴2019?2 Gross Potential Rent Not Reconciled Timely Condition: Gross potential rent is not reconciled throughout the calendar year. Criteria: Gross potential rent should be reconciled at the end of each month. Cause: The cause is undeterminable. Effect: Gross potential rent had to be calculated and reconciled during the audit process. Recommendation: I recommend management calculate and reconcile on gross potential rent on a monthly basis.
Response: The gross rent potential is reconciled throughout the year. However, interim and annual certifications of resident income, assets, and household composition may create adjustments to prior periods of rent and subsidy payments. We will continue to ensure reconciliation of Gross Rent Potential on a monthly basis.
Management failed to collect monthly lease payments resulting in tenants accruing large amounts of past due rent. Criteria: Monthly tenant lease payments should be collected and payable according to the terms of the HUD model lease. Cause: Site managers did not carry out the terms of the HUD-model lease and collect rent due. Effect: Tenant accounts receivables included significant amounts of unpaid rent for former residents. Recommendation: I recommend management develop and implement a collection policy.
Show full finding ▾Hide full finding ▴2019?3 Collection of Tenant Accounts Receivable Condition: Management failed to collect monthly lease payments resulting in tenants accruing large amounts of past due rent. Criteria: Monthly tenant lease payments should be collected and payable according to the terms of the HUD model lease. Cause: Site managers did not carry out the terms of the HUD-model lease and collect rent due. Effect: Tenant accounts receivables included significant amounts of unpaid rent for former residents. Recommendation: I recommend management develop and implement a collection policy.
Response: Management has a collection policy and will ensure that it is adhered to.
Management Agent Certifications provided during the audit and approved by the Department of Housing and Urban Development (HUD) had a term of 2/1/2018 ? 1/31/2019, nothing was provided prior by the management company. Criteria: According to HUD Handbook 4381.5, The Management Handbook, Paragraph 2.6, the owner and agent must complete HUD Form 9839-B Management Agent Certification. Cause: Management failed to obtain a current management agent certification approved by HUD. Effect: The accuracy of the management fee expense is undeterminable. Recommendation: I recommend the management company obtain current management agent certifications approved by HUD, upon expiration.
Show full finding ▾Hide full finding ▴2019?4 Management Agent Certifications Not Current Condition: Management Agent Certifications provided during the audit and approved by the Department of Housing and Urban Development (HUD) had a term of 2/1/2018 ? 1/31/2019, nothing was provided prior by the management company. Criteria: According to HUD Handbook 4381.5, The Management Handbook, Paragraph 2.6, the owner and agent must complete HUD Form 9839-B Management Agent Certification. Cause: Management failed to obtain a current management agent certification approved by HUD. Effect: The accuracy of the management fee expense is undeterminable. Recommendation: I recommend the management company obtain current management agent certifications approved by HUD, upon expiration.
Response: The Management Agent Certification (HUD Form 9839-b) does not have an expiration date. An updated Management Agent Certification (HUD Form 9839-b) is required under the following conditions: a) Authorizing the agent to collect a fee different from the percentages fees and any special fees specified in Paragraph 1 of the existing Certification: b) Changing the expiration date of the Management Agreement. c) Renewing the Management Agreement. d) Permitting a new Agent to operate the project e) Permitting a new Agent to collect a fee. f) Undertaking self-management of the project. Therefore, we disagree with this finding as the Management Agent Certification provided that is signed and approved by the Owner, HUD, and the Agent, is valid.
The reserve for replacement account balance did not agree to the ending statement balance. Criteria: The reserve for replacement account balance should be reconciled to the statement balance at year-end. The supporting documentation for all reconciling items should be provided to the auditor with bank reconciliations. Cause: There was a deposit in transit of $24,305 not reflected in reconciling to the statement balance at year-end. Effect: The reserve for replacement account had to be reconciled by the auditor during the audit process. Recommendation: I recommend management reconcile the reserve for replacement balance to the bank statement ending balance, and provide all supporting documentation when requested in a timely manner.
Show full finding ▾Hide full finding ▴2019?5 Reserve for Replacement Balance Not Reconciled to Bank Statement Condition: The reserve for replacement account balance did not agree to the ending statement balance. Criteria: The reserve for replacement account balance should be reconciled to the statement balance at year-end. The supporting documentation for all reconciling items should be provided to the auditor with bank reconciliations. Cause: There was a deposit in transit of $24,305 not reflected in reconciling to the statement balance at year-end. Effect: The reserve for replacement account had to be reconciled by the auditor during the audit process. Recommendation: I recommend management reconcile the reserve for replacement balance to the bank statement ending balance, and provide all supporting documentation when requested in a timely manner.
Response: We disagree with this finding as the replacement reserve reconciles exactly into the replacement reserves balances per the mortgage statement at 12/31/2019.
FAC accepted this audit on March 25, 2019 — management decision was due September 25, 2019.
GSA_MIGRATION
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Show full finding ▾Hide full finding ▴FAC accepted this audit on September 6, 2018 — management decision was due March 6, 2019.
GSA_MIGRATION
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GSA_MIGRATION
FAC accepted this audit on April 30, 2017 — management decision was due October 30, 2017.
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