CASA MARIA DEL RIO

2021-001 Noncompliance CFDA 14.181: Section 811 Capital Advance CFDA 14.195: Section 8 Housing Assistance Payments Program Compliance Requirement: Special Tests and Provisions Known Questioned Costs: $1,507 Condition: Contributions to the replacement reserve account from the operations account were delinquent. Criteria: Per Title 24 Subpart ?880.602: (a) A replacement reserve must be established and maintained in an interest-bearing account to aid in funding extraordinary maintenance and repair and replacement of capital items. (ii) The reserve must be built up to and maintained at a level determined by HUD to be sufficient to meet projected requirements. Should the reserve achieve that level, the rate of deposit to the reserve may be reduced with the approval of HUD. Cause: Internal controls were not properly designed or implemented to ensure compliance with the compliance requirements of the federal programs. Internal controls were not designed and implemented because the employees were not properly trained on the compliance requirements of the federal programs and Uniform Guidance (see finding 2021-002). Effect: The replacement reserve account was underfunded by $1,507 as of August 31, 2021. Recommendation: We recommend that funds of $1,507 be transferred from the operations bank account to the replacement reserve account to address the underfunding. View of Responsible Officials and Corrective Actions: The funds were not spent on operations. The team did not know that the funds were supposed to be transferred from the operations account rather than the replacement reserve account. The funds will be transferred in December 2021.

2021-002 Significant Deficiency in Internal Control over Compliance CFDA 14.181: Section 811 Capital Advance CFDA 14.195: Section 8 Housing Assistance Payments Program Condition: Instances of noncompliance were found during the audit affecting the major program, as well as the non-major program. The noncompliance is reported at finding 2021-001. Criteria: Per Title 2 Subpart ?200.303, ?The non-Federal entity must: (a) Establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in ?Standard for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Cause: Internal controls were not properly designed or implemented to ensure compliance with the compliance requirements of the federal programs. Internal controls were not designed and implemented because the employees were not properly trained on the compliance requirements of the federal programs and Uniform Guidance. Effect: Compliance testing discovered a significant instance of immaterial noncompliance within compliance requirements of the major and non-major programs. Recommendation: We recommend that management implement a training program for all employees that perform duties for the project. Once trained, internal controls should be designed and implemented at each level of the company to ensure the project complies with the requirements of the federal programs and Uniform Guidance. View of Responsible Officials and Corrective Actions: On site staff and Supervisory team will be enrolled in training and compliance programs to better understand the program and the property. The Supervisory staff will ensure upon recurring visits of the property that the training has been implemented and will supply the on-site staff with the ongoing training and supplies needed.

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT 2020-001 Noncompliance CFDA 14.157: Section 202 Supportive Housing for Persons with Disabilities CFDA 14.195: Section 8 Housing Assistance Payments Program Compliance Requirement: Special Tests and Provisions Known Questioned Costs: $357 Condition: Delinquent contributions to the residual receipts account were transferred from the replacement reserve account in error. The funds were supposed to be transferred from the operations account. Criteria: Per Title 24 Subpart ?880.601: (a) Any remaining project funds must be deposited with the Agency, other mortgagee or other Agency-approved depository in an interest-bearing account. Withdrawals from this account may be made only for project purposes and with the approval of the Agency. Cause: Internal controls were not properly designed or implemented to ensure compliance with the compliance requirements of the federal programs. Internal controls were not designed and implemented because the employees were not properly trained on the compliance requirements of the federal programs and Uniform Guidance (see finding 2020-002). Effect: The replacement reserve account was underfunded by $357 as of August 31, 2020. Recommendation: We recommend that funds of $357 be transferred from the operations bank account to the replacement reserve account to address the underfunding. View of Responsible Officials and Corrective Actions: The funds were not spent on operations. The team did not know that the funds were supposed to be transferred from the operations account rather than the replacement reserve account. The funds will be transferred in December 2020.

2020-002 Significant Deficiency in Internal Control over Compliance CFDA 14.157: Section 202 Supportive Housing for Persons with Disabilities CFDA 14.195: Section 8 Housing Assistance Payments Program Condition: Instances of noncompliance were found during the audit affecting the major program, as well as the non-major program. The noncompliance is reported at finding 2020-001. Criteria: Per Title 2 Subpart ?200.303, ?The non-Federal entity must: (a) Establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in ?Standard for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Cause: Internal controls were not properly designed or implemented to ensure compliance with the compliance requirements of the federal programs. Internal controls were not designed and implemented because the employees were not properly trained on the compliance requirements of the federal programs and Uniform Guidance.Effect: Compliance testing discovered a significant instance of immaterial noncompliance within compliance requirements of the major and non-major programs. Recommendation: We recommend that management implement a training program for all employees that perform duties for the project. Once trained, internal controls should be designed and implemented at each level of the company to ensure the project complies with the requirements of the federal programs and Uniform Guidance. View of Responsible Officials and Corrective Actions: On site staff and Supervisory team will be enrolled in training and compliance programs to better understand the program and the property. The Supervisory staff will ensure upon recurring visits of the property that the training has been implemented and will supply the on-site staff with the ongoing training and supplies needed.

2019-002 Material Weakness in Internal Control over Compliance CFDA 14.181: Section 811 Supportive Housing for Persons with Disabilities CFDA 14.195: Section 8 Housing Assistance Payments Program Condition: Instances of both material and immaterial noncompliance were found during the audit affecting the major program, as well as the non-major program. The material noncompliance is reported at finding 2019-003. Criteria: Per Title 2 Subpart ?200.303, ?The non-Federal entity must: (a) Establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in ?Standard for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Cause: Internal controls were not properly designed or implemented to ensure compliance with the compliance requirements of the federal programs. Internal controls were not designed and implemented because the employees were not properly trained on the compliance requirements of the federal programs and Uniform Guidance. Effect: Compliance testing discovered five instances of immaterial noncompliance within various compliance requirements of the major and non-major programs. The federal program assistance may be disallowed. Recommendation: We recommend that management implement a training program for all employees that perform duties for the project. Once trained, internal controls should be designed and implemented at each level of the company to ensure the project complies with the requirements of the federal programs and Uniform Guidance. View of Responsible Officials and Corrective Actions: On site staff and Supervisory team will be enrolled in training and compliance programs to better understand the program and the property. The Supervisory staff will ensure upon recurring visits of the property that the training has been implemented and will supply the on-site staff with the ongoing training and supplies needed.

2019-003 Material Noncompliance CFDA 14.181: Section 811 Supportive Housing for Persons with Disabilities CFDA 14.195: Section 8 Housing Assistance Payments Program Compliance Requirement: Special Tests and Provisions Known Questioned Costs: $34,284 Condition: No separate bank account was opened to hold the excess project funds that have accumulated throughout the years. The funds were held in the operations bank account. Criteria: Per Title 24 Subpart ?880.601: (a) Any remaining project funds must be deposited with the Agency, other mortgagee or other Agency-approved depository in an interest-bearing account. Withdrawals from this account may be made only for project purposes and with the approval of the Agency. Cause: Internal controls were not properly designed or implemented to ensure compliance with the compliance requirements of the federal programs. Internal controls were not designed and implemented because the employees were not properly trained on the compliance requirements of the federal programs and Uniform Guidance (see finding 2019-002). Effect: The residual receipts and excess amenities account balances of $357 and $6,547 as of August 31, 2018, respectively, and the residual receipts resulting from the computation of surplus cash reported on the audited financial statements of the year then ended of $27,380 were held within the operations bank account. The funds could have potentially been spent without HUD approval. Recommendation: We recommend that interest-bearing accounts should be opened at an approved depository and the accumulated residual receipts and excess amenities funds be transferred into the account immediately. View of Responsible Officials and Corrective Actions: The funds were not spent on operations. The team did not know to open another account for these funds after the transition of property management companies. An interest-bearing account was opened for the residual receipts, and the funds were transferred on November 15, 2019. An interest-bearing account was opened for the excess amenities funds on November 25, 2019, and funds will be transferred as soon as possible.