JERUSALEM JUDSON MEADOWSNon-Profit

S3800-010 Finding Reference Number 2025-1 S3800-015 Type of Finding Federal Award Finding S3800-020 Criteria Compliance with the Regulatory Agreement stipulates that required deposits must be made into the replacement reserve. S3800-030 Statement of Condition The Organization did not meet the required monthly deposits needed into the reserve for replacements. S3800-035 Auditor Non-Compliance Code N - Reserve for Replacement Deposits S3800-037 FHA/Contract Number 046-EE020 S3800-038 Questioned Costs 816 S3800-050 Context The Organization did not have enough liquid funds to make the monthly reserve for replacement deposits. S3800-060 Effect Not making required deposits could result in insufficient funds to cover repairs and replacements. S3800-070 Cause The Organization does not have enough liquid funds to make the monthly reserve for replacement deposits. S3800-080 Recommendation The Organization should deposit $816 into the reserve for replacements.

S3800-010 Finding Reference Number 2024-1 S3800-015 Type of Finding Federal Award Finding S3800-020 Criteria Compliance with the Regulatory Agreement stipulates that a tax and insurance escrow account be maintained and fully funded S3800-030 Statement of Condition The Organization did not fully fund the tax and insurance escrow account S3800-035 Auditor Non-Compliance Code Z. Other S3800-037 FHA/Contract Number 046-EE020 S3800-038 Questioned Costs $ 9,208 S3800-050 Context The Organization did not have enough liquid funds to make the monthly tax and insurance escrow deposits. S3800-060 Effect Not making required deposits could result in insufficient funds to cover tax and insurance payments. S3800-070 Cause The Organization did not have enough liquid funds to make the monthly tax and insurance escrow deposits. S3800-080 Recommendation The Organization should deposit $9,208 into the tax and insurance escrow account.

S3800-010 Finding Reference Number 2023-1 S3800-015 Type of Finding Federal Award Finding S3800-020 Criteria Compliance with the Regulatory Agreement stipulates that required deposits have to be made into the reserve for replacements S3800-030 Statement of Condition The Organization did not meet the required monthly deposits needed into the reserve for replacements. S3800-035 Auditor Non-Compliance Code N - Reserve for Replacement Deposits S3800-037 FHA/Contract Number 046-EE020 S3800-038 Questioned Costs $4,007 S3800-050 Context The Organization did not have enough liquid funds to make the monthly reserve for replacement deposits. S3800-060 Effect Not making required deposits could result in insufficient funds to cover repairs and replacements S3800-070 Cause The Organization does not have enough liquid funds to make the monthly reserve for replacement deposits. S3800-080 Recommendation The Organization should deposit $4,007 into the reserve for replacements.

Condition: During the testing of eight out of forty-two tenant files, there were several documentation and calculation errors as documented below. Each situation was noted in one of the eight files: ? No evidence that EIV data was reviewed when performing the annual certification ? Six months of checking account statements were obtained and included in the file but the six month average of these statements did not match the asset information used in form HUD-50059 to determine the tenant?s rent ? Form HUD-50059 did not use the correct social security income amount to determine the tenant?s rent ? Form HUD-9887-A was not signed by management company personnel Criteria: Organizations receiving HUD-assisted rents must calculate the subsidy and tenant portions of rents using accurate and complete information provided by the tenant, the EIV system, and other third party documents, and by following the HUD rent calculation procedures and documentation requirements. Cause: The manager who completed the tenant files failed to run and retain required EIV documents and did not double check asset and income calculations before determining the tenant?s rent. There was no second party reviewing of the tenant files in total or on a sample basis. Effect: Because of the failure to correctly verify and calculate information during tenant certifications tenants could be incorrectly admitted to the property and/or tenant and HUD rent assistance could be incorrectly calculated. The direct result of the eight tenants tested resulted in a $36/month adjustment for one tenant that had been incorrectly charged since November 2021. Correcting this calculation will result in increased rent for the tenant going forward and the property repaying HUD for overclaimed amounts of rental assistance. Recommendation: The Organization should have more qualified personnel performing tenant file compliance. It should also have a second person reviewing files for compliance either on a test basis or for all files. Views of Responsible Officials and Planned Corrective Actions: Management acknowledges the issues and lack of control environment. Management has since put in place new individuals at the property at the regional supervisory level to be responsible for the compliance of tenant files. Management plans to review all files and correct all errors. The underpayment by the tenant will be written off and not collected as the error was due to incorrect procedures performed by management company personnel. The tenant was notified in December 2022 of the error and the increased amount of tenant rent due going forward. The amount overclaimed on the HUD vouchers will be refunded in the next HUD voucher, likely February 2023.

Condition: Sufficient funds were not available to make three months of required deposits in the replacement reserve. Criteria: Monthly deposits of $801.31 are required to be deposited in the replacement reserve account according to the HUD regulatory agreement. Cause: Cash flow is not properly managed in order to meeting the immediate and future needs of the organization such as properly escrowing funds in the replacement reserve. Effect: $2,403 in back due deposits are due to the replacement reserve in the coming fiscal year in additional to the required monthly payments. Recommendation: Management personnel should monitor cash flows on a monthly basis in line with budget and correct the large amount of vendor overpayments that continue to occur (see finding 2020-001) in order to appropriately meet the current and future needs of the property. Views of Responsible Officials and Planned Corrective Actions: Management acknowledges the lack of cash flow management. The onsite and regional manager plan to work together to perform better monthly review of expenses compared to budget and to work with vendors to obtain refunds for overpaid invoices. Personnel will also come up with a plan for funding the current and back due deposits.

Condition: The Organization did not identify the recording of duplicate invoices prior to vendor payments and did not identify the duplicate expenses during financial statement reviews. This is a repeat finding from the prior year, finding 2020-001. Criteria: The Organization has a responsibility to properly approve all invoices before vendor payments and to review the financial statements on a regular basis to ensure accuracy of the financial data. Cause: The duplicate payments were a result of several failures in the control process including (1) accounts payable entering the same invoice under two similar but different vendors (2) entering incorrect invoice numbers and (3) insufficient review of invoices and financial results at the end of each fiscal period. Effect: The effect was $8,286 of duplicate payments made to vendors. Recommendation: Management continues to redesign the control around this process to identify and correct such items on a timely basis and has hired new personnel to administer the control. We recommend the management company communicate written policies with clearly defined roles to its employees regarding approval of vendor payments and financial statement reviews. Views of Responsible Officials and Planned Corrective Actions: The management company agrees with the auditors' findings. The management company had significant employee turnover in both the accounts payable and regional manager positions during several fiscal years. Additional training and review procedures will be discussed an communicated to the responsible parties. The management company will contact vendors to obtain refunds for duplicate invoice payments. It will also review its current procedures and clearly define rules with its employees to prevent errors from detection in the future.

Condition: The Organization did not make the deposit within 60 days after year-end as required by HUD. This is a repeat of a prior year finding, 2020-002. Recommendation: The Organization should perform its own calculation of surplus cash and remit required deposits to the residual receipts account within 60 days after year-end as required by HUD.Current Status: The deposit identified in the previous year?s audit of $16,284 was made March 9, 2021. However, the deposit that was due for the year ended September 30, 2021, the year under audit, of $28,545 was not made until January 7, 2022.

Condition: Six of the eight tenants tested had noncompliant income verification during tenant certifications. This included missing EIV verifications, improper supporting documents for income, and the incorrect calculation of assets when calculating the tenant rent. Criteria: Organizations receiving HUD-assisted rents must calculate the subsidy and tenant portions of rents using accurate and complete information provided by the tenant, and by following the HUD rent calculation procedures and documentation requirements. Cause: The manager who completed the tenant files failed to run and retain required EIV documents, did not include proper income verification documentations in the tenant files and did not double check asset calculations before determining the tenant?s rent. There was no second party reviewing of the tenant files in total or on a sample basis. Effect: Two of the six tenant files with noncompliant income verification required rent adjustments to the tenant and to HUD vouchers. The other four tenants did not require rent adjustments once additional documentation was provided from the EIV system. One of the tenants with noncompliance income verification did not require rent adjustment but did deposit the incorrect amount in the security deposit account upon move in during the prior year. Recommendation: The Organization should have more qualified personnel performing tenant file compliance. It should also have a second person reviewing files for compliance either on a test basis or for all files. Views of Responsible Officials and Planned Corrective Actions: Management acknowledges the issues and lack of control environment. Management has since put in place a more qualified individual to be responsible for the compliance of tenant files. Management plans to review all files and correct all errors. The underpayment by the tenants will be written off and not collected as the error was due to incorrect procedures performed by management company personnel. Tenants will be notified in January of the error and the increased amount of tenant rent due going forward. The amount overclaimed on the HUD vouchers will be refunded in the next HUD voucher, likely February 2022. The over payment of the security deposit by the tenant will be refunded to the tenant.

Condition: Seven of the eight tenants tested did not have any unit inspections between October 1, 2020 and December 13, 2021. Property management believes that only move in and move out inspections were performed during that time period. Criteria: The Organization is required to perform regular inspections and repairs in order to ensure appropriate living conditions and safe guarding of the Organization?s assets. Cause: Neither the current or previous manager performed unit inspections. HUD has not performed an onsite inspection since September 2017. Effect: There is protentional for the property to go into disrepair or repairs to be more costly in the future because regular maintenance was not done on the property. The only repairs currently being completed are items reported by tenants and as identified by move in or move out inspections. Recommendation: The Organization should perform at least annual unit inspections and ensure repairs are performed in a timely fashion. Views of Responsible Officials and Planned Corrective Actions: Management acknowledges the issues and lack of control environment. The onsite manager plans to perform unit inspections on all units in January 2022.

Condition: The Organization did not identify the recording of duplicate invoices prior to vendor payments and did not identify the duplicate expenses during financial statement reviews. Recommendation: We recommended the management company communicate written policies with clearly defined roles to its employees regarding approval of vendor payments and financial statement reviews. Management concurred with the recommendation and concurred that the procedures would be implemented. Current Status: Of the $6,058 of duplicate payments identified in the prior audit, the Organization has received vendor refunds for $3,226. Additional overpayments of $3,048 were identified during the current year audit for a total of $5,880 in refunds still owed to the Organization. Management performed additional hiring and training of personnel but due to continued management company turnover and inadequately designed controls, duplicate payments to vendors continue to occur. Management plans to perform more detailed monthly financial reviews on the property in the coming fiscal year.

Condition: The Organization did not make the deposit within 60 days after year-end as required by HUD.Recommendation: The Organization should perform its own calculation of surplus cash and remit required deposits to the residual receipts account within 60 days after year-end as required by HUD. Current Status: The deposit identified in the previous year?s audit of $12,249 was made in February 14, 2020. However, the deposit that was due for the year ended September 30, 2020, the year under audit, of $16,284 was not made until March 9, 2021.

Condition: The Organization did not identify the recording of duplicate invoices prior to vendor payments and did not identify the duplicate expenses during financial statement reviews. Criteria: The Organization has a responsibility to properly approve all invoices before vendor payments and to review the financial statements on a regular basis to ensure accuracy of the financial data. Cause: The duplicate payments were a result of several failures in the control process including (1) accounts payable entering the same invoice under two similar but different vendors (2) entering incomplete invoice numbers (3) vendor resubmitting an invoice with a slightly different number 'July' instead of '07' at the beginning of the invoice number and (4) insufficient review of invoices and financial results at the end of each fiscal period. Effect: The effect was $6,058 of duplicate payments made to vendors. Recommendation: We recommend the management company communicate written policies with clearly defined roles to its employees regarding approval of vendor payments and financial statement reviews. Views of Responsible Officials and Planned Corrective Actions: The management company agrees with the auditors' findings. The management company had significant employee turnover in both the accounts payable and regional manager positions during the fiscal year. Additional training and review procedures will be discussed an communicated to the responsible parties. The management company will contact vendors to obtain refunds for duplicate invoice payments. It will also review its current procedures and clearly define rules with its employees to prevent errors from detection in the future.

Condition: The Organization did not make the deposit within 60 days after yearend as required by HUD. Criteria: Surplus cash should be remitted to the residual receipt deposits due within 60 days after yearend if surplus cash exists at the end of the fiscal year. Cause: The Organization did not calculate the surplus cash and make the deposit by November 29, 2019 (60 days after yearend). Effect: The deposit was made February 14, 2020, which was outside the required statutory requirements of HUD. Context: The management company relies on the audit to determine if amounts are due to the residual receipts and does not perform its own calculation. Recommendation: The Organization should perform its own calculation of surplus cash and remit required deposits to the residual receipts account within 60 days after yearend as required by HUD. Views of Responsible Officials and Planned Corrective Actions: A deposit to the residual receipts account was made after the prior year audit was issued in January 2020. The deposit was made in February 14, 2020. Questioned Costs $ 12,249

Condition: Seven of the eight tenants tested had noncompliant files. The issues included lack of move in or annual unit inspections, income verification through the EIV system, supporting documentation for income, tenant signatures on required forms, and incorrect calculation of tenant rent. Criteria: Organizations receiving HUD-assisted rents must calculate the subsidy and tenant portions of rents using accurate and complete information provided by the tenant, and by following the HUD rent calculation procedures and documentation requirements. Organization also must monitor and maintain the physical building asset. Cause: The manager who completed the tenant files lacked the skill to complete the files correctly and was dealing with a complex medical issue. There was no second party reviewing the files in total or on a sample basis. Effect: Management has since reviewed all files and believes that almost all files were impacted. Recommendation: The Organization should have more qualified personnel performing tenant file compliance. It should also have a second person reviewing files for compliance either on a test basis or for all files. Views of Responsible Officials and Planned Corrective Actions: Management acknowledges the issues and lack of control environment. Management has since put in place a qualified individual to be responsible for the compliance of tenant files. Management has reviewed all files and corrected all errors. Any overpayments by tenants were refunded to the tenants and any underpayments by the tenants were written off and refunds made to HUD on subsequent vouchers. All rents were fixed going forward.

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