EIN: 311208170
UEI: E8MGJDDKGGJ1
Audited by: Wharton CPA, LLC
Oversight agency: 14 [Department of Housing and Urban Development]
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Data as of August 31, 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 (530 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.
Management did not properly record the real estate tax liability 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: Management utilized recurring journal entries to post real estate tax expense instead of the actual invoice. Effect: The accrued liability account was overstated, as well as real estate tax expense, resulting in a prior period adjustment. Recommendation: I recommend management properly post all accruals and make necessary adjusting entries to properly reflect the financial position of the Project.
Show full finding ▾Hide full finding ▴2023-2 Real Estate Tax Liability Over Accrued Condition: Management did not properly record the real estate tax liability 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: Management utilized recurring journal entries to post real estate tax expense instead of the actual invoice. Effect: The accrued liability account was overstated, as well as real estate tax expense, resulting in a prior period adjustment. Recommendation: I recommend management properly post all accruals and make necessary adjusting entries to properly reflect the financial position of the Project.
Going forward we will adjust our accruals for real estate taxes based on the most recent property tax bill available.
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 ▴2023-3 Utility 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.
Going forward, we will adjust the utility accruals based on the most recent utility billings.
The Project did not make the required deposit into the bank account on a monthly basis. Deposits made from January 2023 through May 2023 were underfunded; however, were caught up in June 2023. Additionally, deposits for the month of September 2023 and November 2023 were not made; however, were caught up in December 2023. Criteria: According to the Regulatory Agreement, “mortgagor will establish and maintain a reserve fund for replacements in a separate account in a bank…Concurrently with the effective commencement of rental assistance payments under the HAP Contract, the Mortgagor will deposit an amount…per month unless a different date or amount is approved in writing by HUD”. Cause: The cause is undeterminable. Effect: The Project is not in compliance with the Regulatory Agreement. The cash balance was overstated by $1,073 related to deposits that were never made to this account. The balance was corrected during the audit. Recommendation: I recommend the Property make the required monthly deposits at the correct amount according to the Regulatory Agreement.
Show full finding ▾Hide full finding ▴2023-4 Reserve for Replacement Deposits Not Made Timely or Not at All Condition: The Project did not make the required deposit into the bank account on a monthly basis. Deposits made from January 2023 through May 2023 were underfunded; however, were caught up in June 2023. Additionally, deposits for the month of September 2023 and November 2023 were not made; however, were caught up in December 2023. Criteria: According to the Regulatory Agreement, “mortgagor will establish and maintain a reserve fund for replacements in a separate account in a bank…Concurrently with the effective commencement of rental assistance payments under the HAP Contract, the Mortgagor will deposit an amount…per month unless a different date or amount is approved in writing by HUD”. Cause: The cause is undeterminable. Effect: The Project is not in compliance with the Regulatory Agreement. The cash balance was overstated by $1,073 related to deposits that were never made to this account. The balance was corrected during the audit. Recommendation: I recommend the Property make the required monthly deposits at the correct amount according to the Regulatory Agreement.
In October 2023, management was notified by the banking institution of fraudulent activities that had taken place with some of the Reserve for Replacement accounts held at their institution. The banking institution closed all accounts and restricted all routine depository activity. When the new accounts were established, all required deposits for 2023, including the adjustment for the increase in the monthly deposit amount, were made.
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.
The Project did not make the required deposit amounts into the bank account on a monthly basis. Criteria: On August 1, 2021, HUD increased the monthly reserve for replacement amount from $1,095 to $1,120, and increased the deposit amount again on August 1, 2022 from $1,120 to $1,146. As of December 31, 2022, all deposits were still being made at $1,095 each month. Cause: The cause is undeterminable. Effect: The Project is not in compliance with the Regulatory Agreement and the account is underfunded. Recommendation: I recommend the Property make required monthly deposits at the correct amount.
Show full finding ▾Hide full finding ▴2022-1 Reserve for Replacement Account Underfunded Condition: The Project did not make the required deposit amounts into the bank account on a monthly basis. Criteria: On August 1, 2021, HUD increased the monthly reserve for replacement amount from $1,095 to $1,120, and increased the deposit amount again on August 1, 2022 from $1,120 to $1,146. As of December 31, 2022, all deposits were still being made at $1,095 each month. Cause: The cause is undeterminable. Effect: The Project is not in compliance with the Regulatory Agreement and the account is underfunded. Recommendation: I recommend the Property make required monthly deposits at the correct amount.
2022-1 ? Reserve for Replacement Account Underfunded Condition: The property did not make the required deposit amounts into the bank account on a monthly basis. Response: Management acknowledges that the monthly Reserve for Replacement deposits increased from $1,095 to $1,120 on 8/1/2021 through 7/31/2022 for an additional $25 for 12 months, totaling $300 and the monthly deposits increased again on 8/1/2022 from $1,120 to $1,146 for an additional $26 for 5 months, totaling $138 through 12/31/2022, for a grand total of $438 that was underfunded. This was an oversight, and we will correct this by depositing the $438 into the Reserve for Replacement account and will continue to make the $1,146 monthly deposits thereafter.
FAC accepted this audit on April 30, 2022 — management decision was due October 30, 2022.
Management failed to properly reconcile prepaid insurance expenses to the general ledger. Criteria: Management is required to prepare financial statements in accordance with generally accepted accounting principles. Cause: The cause is undeterminable. Effect: Misrepresentation of prepaid expenses could have an impact on both the balance sheet and the income statements. Recommendation: I recommend management properly record prepaid insurance expenses.
Show full finding ▾Hide full finding ▴2021-1 Prepaid Insurance Not Properly Recorded Condition: Management failed to properly reconcile prepaid insurance expenses to the general ledger. Criteria: Management is required to prepare financial statements in accordance with generally accepted accounting principles. Cause: The cause is undeterminable. Effect: Misrepresentation of prepaid expenses could have an impact on both the balance sheet and the income statements. Recommendation: I recommend management properly record prepaid insurance expenses.
In 2021 we were recording prepaid expenses monthly as required and reconciling based on the policy renewal date of 07/30/2021. Going forward, we will adjust the general ledger to match that of the prepaid expense schedule at fiscal year-end in reconciliation of the same
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 make the required deposit into the bank account on a monthly basis. Criteria: According to the Regulatory Agreement, ?mortgagor will establish and maintain a reserve fund for replacements in a separate account in a bank?Concurrently with the effective commencement of rental assistance payments under the Project Rental Assistance Contract, the Mortgagor will deposit an amount?per month unless a different date or amount is approved in writing by HUD?. Cause: The cause is undeterminable. Effect: The Project is not in compliance with the Regulatory Agreement. Recommendation: I recommend the Property make required monthly deposits according to the Regulatory Agreement.
Show full finding ▾Hide full finding ▴2021-3 Reserve for Replacement Deposits Not Made Timely Condition: The Project did not make the required deposit into the bank account on a monthly basis. Criteria: According to the Regulatory Agreement, ?mortgagor will establish and maintain a reserve fund for replacements in a separate account in a bank?Concurrently with the effective commencement of rental assistance payments under the Project Rental Assistance Contract, the Mortgagor will deposit an amount?per month unless a different date or amount is approved in writing by HUD?. Cause: The cause is undeterminable. Effect: The Project is not in compliance with the Regulatory Agreement. Recommendation: I recommend the Property make required monthly deposits according to the Regulatory Agreement.
The required remittances were made on a monthly basis, however delivery delays into the bank account were outside of our control. To correct this going forward, we will explore utilizing a financial institution that will allow for external wire transfers into the reserve for replacement bank account to avoid postal or other delivery methods delays.
Management failed to provide bids for procured services that exceeded $10,000 or more. Criteria: According to the HUD Management Agent Handbook 4381.5 Section 6.5 Contracting Guidelines when an owner/agent is contracting for goods or services involving project income, an agent is expected to solicit written cost estimates from at least three contractors for any contract, ongoing supply or service which is expected to exceed $10,000 per year. Cause: The cause is undeterminable. Effect: The Project procured services that did not comply with HUD regulations. Recommendation: I recommend management comply with all HUD rules and regulations regarding procurement.
Show full finding ▾Hide full finding ▴2021-4 No Bids Provided Condition: Management failed to provide bids for procured services that exceeded $10,000 or more. Criteria: According to the HUD Management Agent Handbook 4381.5 Section 6.5 Contracting Guidelines when an owner/agent is contracting for goods or services involving project income, an agent is expected to solicit written cost estimates from at least three contractors for any contract, ongoing supply or service which is expected to exceed $10,000 per year. Cause: The cause is undeterminable. Effect: The Project procured services that did not comply with HUD regulations. Recommendation: I recommend management comply with all HUD rules and regulations regarding procurement.
Pursuant to Contracting Guidelines in the Management Agent Handbook - 4381.5 REV-2 Chg-2, Section 6.50 ?When an owner/agent is contracting for goods or services involving project income, an agent is expected to solicit written cost estimates from at least three contractors or suppliers for any contract, ongoing supply or service which is expected to exceed $10,000 per year or the threshold established by the HUD Area Office with jurisdiction over the project.? To the condition, we respond as follows, 1) the property sustained structural damage in 2021 and emergency repairs were necessary. More than three bids were solicited however, only two bids were received and reviewed. The low bidder was selected, and the repairs were made to make the property safe and structurally whole and 2) there is an on-demand contract to meet the daily maintenance needs of the residents and property due to the absence of an employment agreement for qualified personnel. We did solicit for contractors and found one contractor who could meet the needs of the property. Our efforts to find either a qualified applicant or competitive contractor is ongoing in resolution of this matter.
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 agree that the previous accountant fail to post the prior year audit entries. Management?s new accountant has been made aware of this issue and has proceeded to post the prior year entries and will continue to post audit entries 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.
Will 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.
FAC accepted this audit on September 19, 2020 — management decision was due March 19, 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 9/1/2017 ? 8/31/2018. 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 9/1/2017 ? 8/31/2018. 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.
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 August 16, 2018 — management decision was due February 16, 2019.
GSA_MIGRATION
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Show full finding ▾Hide full finding ▴FAC accepted this audit on April 30, 2017 — management decision was due October 30, 2017.
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