Trinity Acres Housing CorporationNon-Profit

The Enterprise Income Verification (EIV) was not obtained after 90 days from the date of move-in from the following tenants:

In the prior years, the Corporation owed the project $18,561 for overpayment of the management. Per audit compliance procedures, the Due to Owner was not approved by HUD and is considered a finding. The balance due as of December 31, 2024, is $12,526.95.

The Corporation entered into Paycheck Protection Program Loans (PPP) for $49,775 via QuickBooks Capital through Cross River Bank (the Lender). The Lender has charged off the PPP loan, and the SBA purchased it. The Corporation is still liable for the PPP Loan. Due to the PPP loan not being approved by HUD, the payment of principal and interest cannot be made with current Project funds. The PPP Forgiveness Application was submitted to QuickBooks Capital. On April 25, 2025, the Corporation’s PPP loan was not forgiven. Per QuickBooks Capital, “However, after a review of your business’ operations, it has been determined that your business operates in a manner that would indicate it to be an ineligible business as outlined in 13 CFR 120.110 as revised by SBA regulations and guidance.” According to 13 CFR 121.110, Nonprofit businesses are ineligible for PPP Loan forgiveness.

As a result of our audit, we proposed eight (8) audit adjusting entries to correct the books as originally provided to us for audit. Most of these adjustments proposed were material to the financial statements. Adjustments were necessary for basis areas of accumulated depreciation, PPP loan, and expenses.

The Enterprise Income Verification (EIV) was not obtained after 90 days from the date of move-in from the following tenants:

During our testing of Tenant Move-out, the move-out inspection was not performed for the following tenants:

During our testing of Tenant Move-out, the following tenants were not provided an itemized list :

During our testing of Housing Quality Standards, we were told that an annual inspection was not performed in 2023.

During our testing of Tenant Eligibility, we noted the following:

The Corporation entered into Paycheck Protection Program Loans (PPP) for $49,775 through Cross River Bank (the Lender). The Lender has charged off the PPP loan, and the SBA purchased it. The Corporation is still liable for the PPP Loan. Due to the PPP loan not being approved by HUD, the payment of principal and interest cannot be made with current Project funds. Therefore, a PPP loan is an Unauthorized Acquisition of Liabilities.

In the prior years, the Corporation owed the project $18,561 for overpayment of the management fee—$9,626 and other advances—$8,935. Per audit compliance procedures, the Due to Owner was not approved by HUD and is considered a finding.. The balance due as of 12/31/2023 is $12,526.95.

The Management Agent’s Certification approved by HUD on 2/22/2022 per page 1 of 4 1(2) Fees: stated the following: a) 6.09 % of residential income collected;b) 0% of commercial income collected;c) 0% of miscellaneous income collected.However, the Management Agent charged the Project 6.09% of miscellaneous income collected fees for December 2023, totaling $16.32.

As a result of our audit, we proposed twelve (12) audit adjusting entries to correct the books as originally provided to us for audit. Most of these adjustments proposed were material to the financial statements. Adjustments were necessary for basis areas cash, accumulated depreciation, accounts payable, accrued wages payable, accrued payroll taxes, PPP loans, net assets, revenue, and expenses.

The Project did not make the required monthly deposit to the replacement reserve account. Only 10 deposits were made during 2022. The replacement reserve account is unfunded by $22,456.

For the procurement of small purchases over $10,000, the Management Agent did not obtain price or rate quotations from an adequate number of qualified sources for the following procurements per the Uniform Guidance:

During our testing of cash disbursements, we noted the following: 1. Timesheet provided does not show hours worked. 2 (two) exceptions were noted 2. No approval on vendor’s invoice. 1 (one) exceptions were noted.

The Enterprise Income Verification (EIV) was not obtained after 90 days from the date of move-in from the following tenants:

During our testing of Tenant Move-in, we noted that prorate of tenant rent was not performed for the following:

During our Testing of Move-Outs, the following tenant’s security deposit was not refunded within 30 days after the move-out date:

During our testing of Tenant Eligibility for Thomas, Sondra, Unit# 408, and Move-In Date 7/01/2022, the following noted:1. The citizenship declaration was not obtained. 2. Per Form 50059 Owner’s Certification of Compliance with HUD’s Tenant Eligibility & Rent Procedures, no income verification was performed per Section D Income Information.

Per examination of insurance coverage, we noted that the Project does not have Workers Compensation and Employer Liability Insurance coverage for its employees for the period 1/01/2022 through 12/31/2022.

The Corporation entered into Paycheck Protection Program Loans (‘PPP”) for $49,775 through Cross River Bank. The PPP Loan has been charged off by the Lender and purchased by the SBA, The Corporation is still liable for the PPP Loan. Due to the PPP loan not being approved by HUD, payment of principal and interest of the PPP cannot be paid with current Project funds. Therefore, a PPP loan is an Unauthorized Acquisition of Liabilities.

In the prior years, the Corporation owes the project $18,561 for overpayment of management fee-$9,626 and other advances-$8,935. Per audit compliance procedures, the Due to Owner was not approved by HUD and is considered a finding.

Criteria: Per Financial Operations and Accounting Procedures For Insured Handbook 4370.2, Chapter 2: Financial Operations and Accounting: 2-3 Maintenance of Books and Accounts B states that “Books and accounts must be complete and accurate. The books of original entry must be kept current at all times, and postings must be made a least monthly to ledger accounts. Standard journal entries may be established for recurring items and posted monthly.” Condition: As a result of our audit, we proposed thirty (30) audit adjusting entries to correct the books as originally provided to us for audit. Most of these adjustments proposed were material to the financial statements. Adjustments were necessary for basis areas such as accounts receivable, fixed assets, accumulated depreciation, accounts payable, accrued wages payable, accrued payroll taxes, net assets, revenue, and expenses. Cause: Management Agent did not properly reconcile the statement of financial positions accounts (balance sheet) on a monthly basis. It appears that there is no systematic method of ensuring that timely and complete monthly reconciliation and closing procedures take place. This situation leads to a continuing and growing backlog of transactions and journal entries that are not posted into the accounting system, which renders the accounting information virtually useless in making well-informed business decisions. This accounting function disorganization will ultimately cause significant errors in the financial records and financial statements as well as allow for possible irregularities, including fraud, to exist and continue without notice. Effect: The Project audited financial statements were not performed on a timely basis. The audit financial statements are due nine months and/or September 30, 2022. Also, many of the statements of financial position accounts (“balance sheet accounts”) were materially misstated. Recommendation: It is important to reconcile subsidiary ledgers or supporting schedules to the general ledger to ensure the accuracy of financial information and minimize the risk of misstatement or misappropriation. We strongly recommend that a policy be implemented whereby all subsidiary ledgers and/or supporting schedules are reconciled to the general ledger on a monthly basis. We also recommend that appropriate management-level personnel review the reconciliations for accuracy and document evidence of their review for audit purposes. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Per Financial Operations and Accounting Procedures for Insured Handbook 4370.20, Chapter 2. Financial Operations and Accounting 2-2 Objective of the HUD- Prescribed Accounting System General Objectives of the HUD accounting system include “Reporting on all financial transactions using HUD guidelines and Generally Accepted Accounting Principles (GAAP).” Per Financial Operations and Accounting Procedures for Insured Handbook 4370.20, Chapter 2. Maintenance of Books and Account 2-3, “Book and accounts must be complete and accurate. The books of the original entry must be kept current at all times, posting must be made at least monthly to ledger accounts. Standard journal entries may be established for recurring items and posted monthly. Condition: The Project’s general ledger is currently maintained on the cash basis of accounting and accrual adjustments are performed at year-end to convert the cash basis of accounting to the accrual basis of accounting. The accrual basis is the method of accounting where revenues are recognized when earned and expenses are recognized when incurred. We understand that maintaining the general ledger on the accrual basis of accounting is more difficult than using the cash basis. However, the accrual basis provides more meaningful financial information to management and complies with generally accepted accounting principles. Failure to maintain the Project’s general ledger on the accrual basis of accounting distorts the interim financial statements and may lead to critical financial decisions being made on erroneous data. Cause: The Project books and records are kept on the cash basis of accounting which is not generally accepted accounting principles. Effect: During our testing of cash disbursements, we noted that the majority of the expenditures are recorded when paid as opposed to when the transactions are incurred. The majority of expenditures are recorded one month to three months after the transactions are incurred. During our testing of Accounts Receivable for Tennant and HUD and Revenue, we noted the Rent Potential on an accrued basis.is unrecorded on a monthly basis. The monthly rental income is recorded when rent income is deposited. At year-end, there is no Detail Schedule for 1130 Tenant Accounts Receivable and 1135 Accounts Receivable-HUD. In summary, the majority of the audit adjustment entries were to convert the books and records to the accrual basis of accounting. Recommendation: We recommend that the Project implement the use of accrual basis accounting and utilize QuickBooks Accounts Payable Module to record vendor’s invoices as Accounts Payable and make payments Recommendation (Continued): We also recommend that the Owner hire a Management Agent Company that has the dual capacity to perform the HUD property management and HUD accounting functions. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Per Financial Operations and Accounting Procedures for Insured Handbook 4370.20, Chapter 2. Maintenance of Books and Account 2-3, “Book and accounts must be complete and accurate.” Condition: The Project is not reconciling Resident Balance by Fiscal Period -December 31, 2021 to QuickBooks to determine certain account balances. The Resident Balance by Fiscal Period is the subsidiary ledger for the accounts noted. Cause: The Project did not utilize the rent roll system to reconcile tenants' activity to the QuickBooks accounting system. Effect: The Project accounts noted were not reconciled to Resident Balance By Fiscal Period as of December 31, 2021 to determine the proper account balance. Recommendation: We recommend that the Management Agent establish policy and procedures to reconcile the Resident Balance by Fiscal Period on a monthly basis to the following accounts to determine a complete and accurate account balance: 5. 1130 Tenant Accounts Receivable. 6. 1135 Accounts Receivable-HUD. 7. 2210 Prepaid Revenue. 8. 2191 Tenant Deposit Held in Trust (Contra) Views of Responsible Officials and Corrective Action Plan: Do disagreements with the audit finding.

Criteria: Per Financial Operations and Accounting Procedures for Insured Handbook 4370.20, Chapter 2. Maintenance of Books and Account 2-3, “Book and accounts must be complete and accurate.” Condition: During the testing of the Cash Operating bank reconciliation as of December 31, 2021, we noted that the 1121 Operating Cash per book-($1,217.51) does not agree with the reconciliation balance-($10,662.87). A difference of ($9,445.36). Cause: This is caused by not agreeing the Cash Operating per book to bank reconciliation, An investigation must be performed correct the cash balance. Recommendation: We recommend that the Project investigate why the Cash Operating balance per book does not agree with the bank reconciliation. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Per The Management Agent Handbook 4381.5, REV-2, CHG-2, Section 1: Management Fees and Review Requirements,” Fee derived from project income (residentials commercial, and miscellaneous) must be quoted and calculated as a percentage of the amount of income collected by the agent. Multiplying the fee percentage by the Income collected gives the actual amount of fee paid to the agent. This requirement serves two purposes: 1) It gives the agent an incentive to maximize collections. 2) It automatically increases the agent’s potential fee yield as project rents increase. These increases help offset increases in the agent’s cost due to inflation. Condition: Management Agent fees are paid basis on the CAP Yield-$42,048.00 as opposed to 4% of residential income collected of ($810,525.34 total yearly collection X 4%) $32,421.01. The 4% of resident income collected fee is noted in the Project Owner’s Certification of Owner-Managed Multifamily Housing Projects dated May 25, 2016. The Yield CAP is established so the Management Fee basis on collections does not exceed the Yield CAP. The Management Agents do not attach to a monthly payment of the Management Fee a Schedule of Resident Income Collected to compute to the Management Fee to support the payment of the Management Fee. There is a question cost of $9,626.09. Cause: The Project did not follow the HUD directive regarding the calculated Management Fee as a percentage of the amount of income collected by the agent. Effect: Management Agent is overpaid by $9,626.99. Recommendation: We recommend that the Management Agent reimburse the Project the Management Fee Overpayment of $9,626.09. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Per HUD Handbook 4370.2 TEV-1, Financial Operations and Accounting Procedures for Insured Multifamily Projects 2-8 Surplus Cash and Residual Receipts E, “Funds may be released from the residual receipts funds only with prior written approval from HUD. HUD has the authority to approve, modify, or reject the owner’s proposed usage for residual receipts.” Condition: During our testing of Residual Receipts, the Project cannot provide Form HUD-9250 Fund Authorization noting HUD’s approval of the withdrawal for the Residual Receipts account. The following are the unsupported withdrawals from the Residual Receipts account, totaling $55,412.95 Cause: The Project did not follow the HUD directive regarding proper procedures for withdrawing funds from the Residual Receipts account. Effect: The Project ‘s Residual Receipts are not in compliance with HUD’s directive. Recommendation: For the Residual Receipts withdrawals, we recommend that Project provide the supporting request in writing with support invoices attached to Form HUD-9250 Fund Authorization to obtain approval from HUD. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Per HUD Handbook 4370.2 TEV-1, Financial Operations and Accounting Procedures for Insured Multifamily Projects: 2-7 Replacement Reserve D. “All requests, by the owner, for withdrawals from the Replacement Reserve account must be in writing and supported by invoices showing what was purchased and cost of the purchase. The request must list the items for which the withdrawal is requested, the number of each item and the dollar amount requested for each item. Condition: During our testing of the Replacement Reserve, we noted that the Project did not provide support of the request in writing with support invoices and Form HUD-9250 Fund Authorization noting HUD’s approval of the withdrawal for the Replacement Reserve. The following are the unsupported Replacement Reserve withdrawals totaling $144,346.60 Cause: The Project did not follow the HUD directive regarding proper procedures for withdrawing funds from the Replacement Reserve account. Effect: The Project ‘s Replacement Reserve is not in compliance with HUD’s directive. Recommendation: For the Replacement Reserve withdrawals, we recommend that Project provide the supporting request in writing with support invoices attached to Form HUD-9250 Fund Authorization to obtain approval from HUD. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Per HUD Handbook Multifamily Asset Management and Project Servicing (4350.01), Chapter 21-4 Section 2. Required Insurance For All HUD-Assisted and HUD-Held Multifamily Projects, “HUD Insured and HUD-Held Projects. Throughout the life of the mortgage insurance contract, the mortgagee of a HUD-insured project (or the Field Office Loan Management Branch Chief for a HUD-held project) must assure that the mortgagor maintains fire and other hazard (as determined by HUD) insurance on the property pledged as security for the loan. Condition: During our testing of the Management Function, the Project could not provide general and liability insurance policies to assure that the Project maintains fire and hazard insurance on the property pledged as security for the loan. Cause: Due to staff turnover, general & liability policies could not be located for testing of insurance coverage of the property. Effect: The test of insurance could not be performed to determine whether liability coverage is sufficient with Chapter 21 of HUD Handbook 4350.1. Recommendation: We recommend that the Project provide general & liability policies to determine liability coverage of the property during the audit period. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: The owner or management agent must obtain a fidelity bond in accordance with HUD Handbook 4381.5 The Management Agent Handbook Section 2. Procedures For HUD Approval of Management Agent 2.14 Bonding Requirement for Agents. The owner or the management agent must be insured for at least the value of two months’ gross potential income for the project. Condition: During the testing of fidelity bond insurance coverage, we noted that the Project could not provide support for fidelity bond coverage for at least the value of two months’ gross potential income for the Project. Cause: Due to staff turnover, the fidelity bond coverage for the proper coverage of two months’ gross potential income could not be located. Effect: The test to determine whether the owner has obtained a fidelity bond in accordance with Chapter 2.14 of HUD Handbook 4381.5 could not be performed. Recommendation: We recommend that the Project contact its fidelity bond company to determine if the Project has coverage for two months’ gross potential income during the audit period. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Per the Compliance Requirement, “Owner shall not, without the prior written consent of HUD, convey, assign, transfer, dispose of, or encumber any of the mortgaged property or permit the conveyance, transfer, or encumbrance of such property. Condition: The Corporation entered into two Paycheck Protection Program Loans (‘PPP”) for $49,775 and $44,235, respectively. Both PPP loans were not forgiven due to not applying for forgiveness and/or not providing the banks' documentation needed to complete the forgiveness applications. Due to the PPP loans not being approved by HUD, payment of principal and interest of the PPPs cannot be paid with current Project funds. Therefore, PPP loans are Unauthorized Acquisitions of Liabilities Cause: Due to the turnover of the Management Agent-Owner, there were no procedures in place to monitor and/or apply for the PPP Loan Forgiveness Applicant. Effect: As of December 31, 2021, the PPP Loans totaling $94,010 are not unforgiven and must be repaid by the Corporation and not out of the Project’s contract rents. Recommendation: We recommend that the Corporation contact banks, which are PNC-$44,235 and Cross River Bank-$49,775 requesting PPP loan forgiveness due to financial hardship and/or submit the PPP Loan Forgiveness Application for both loans. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Per the Compliance Requirement, “Owner shall not, without the prior written consent of HUD, convey, assign, transfer, dispose of, or encumber any of the mortgaged property or permit the conveyance, transfer, or encumbrance of such property. Condition: During our testing of Note Payable, the Corporation cannot provide a copy of the Payroll Protection Program Loan of $44,235 with PNC Bank. Cause: Due to the turnover of the Management Agent-Owner, there were no procedures to monitor the filing and/or storage of promissory notes. Effect: The testing to review additional; encumbrances that may have been made without HUD approval could not be performed. Recommendation: We recommend the Corporation contact PNC Bank to obtain a copy of the PPP loan promissory note for $44,235. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Per the Compliance Requirements-Procurement and Suspension and Debarment-Compliance Requirement-Procurement, “Use the micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR section 200.329(a) and (b). Under the micro-purchase method, the aggregate dollar amount does not exceed $10,000 ($2,000 in case of acquisitions for construction subject to Wage Rate Requirement (Davis-Bacon Act)). Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable (2 CFR section 200.32 (a). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources (CFR section 200.320 (b)). “ Condition: For the procurement of small purchases over $10,000, the Management Agent did not obtain price or rate quotations from an adequate number of qualified sources for the following procurements per the Uniform Guidance Effect: The Project did not follow small purchase procedures set forth in Compliance Requirements-Procurement. Cause: Due to the turnover of Management Agent personnel, the documentation to support small purchases was unavailable and/or not performed. Recommendation: We recommend that the Project follows a small purchase method for procurement that exceeds $10,000.

Criteria: Per Financial Operations and Accounting Procedures for Insured Handbook 4370.20, Chapter 2. Financial Operations and Accounting 2-12 Cash Management Controls-B Disbursement Controls are the following disbursement controls: 1. A request for a check must have supporting documentation (i.e., invoice itemizing amount requested with an authorized signature) in order for approval to be obtained top to make the disbursements. 2. Checks must be approved by an individual; authorized to approve checks. 3. The authorized check signer should review supporting documentation before signing checks. 4. Supporting vouchers shall be marked canceled to prevent resubmission. 5. A monthly reconciliation shall be performed to ensure that all outstanding checks disbursed are accounted for (i.e., cashed, outstanding, or void). 6. Invoices should be marked “paid,” and the check number and date should be posted to the invoice. Supporting vouchers shall also be marked “paid” to prevent resubmission. Condition: During our testing of cash disbursements, we noted the following: 1. Vendor’s invoice is unavailable for examination purposes. 24 (twenty-four) exceptions were noted 2. No approval note or accounts number & account description noted on vendor’s invoices per all vendors’ invoices. 8 (eight) exceptions were noted. 3. Cancelled check was unavailable for examination purposes. 40 (forty) exceptions were noted. Effect: The Management Agent did not follow HUD Disbursement Control procedures.

Criteria: Payroll transactions are in conformance with 2 CFR part 200. The Payroll charge is supported by personnel activity reports e.g., payroll journals, payroll cash requirements, time and attendance records, and salary distribution reports for nonprofit organizations. Condition: During our testing of Payroll, we noted Project terminated payroll service with QuickBooks as of the last payroll period ending 6/25/2021 and utilized the payroll services from ADP for the remainder of the 2021 calendar year. The payroll cost for the period 7/1/2021 through 12/22/2021 was recorded basis on the bank debits. Therefore, the payroll cost was not allocated in the Project’s books and records by account number & description per HUD’s Chart of Accounts but was recorded as Payroll Expenses-$11,366.18, Taxes-$19,929.63, & Wages -$58,297.15 totaling $89,574.96 of unallocated payroll. Condition (continued:) Also, the Project could not provide ADP payroll reports for the payroll period in question. To correct this, we utilized the payroll period ending 6/25/2021 to estimate the allocation of the payroll cost from 7/2021 through 12/22/2021 and 12/31/2021 accrued payroll and taxes. Effect: The Project could not provide personnel activity reports for the period 7/2021 through 12/22/2021 and 12/31/2021 accrual payroll and taxes and payroll cost per the books and records cannot be reconciled to the quarterly Form 941 Federal Employment Tax Returns. Cause Due to the turnover of Management Agent personnel, the Project’s personnel activity reports were unavailable for examination purposes. Recommendation: We recommend that Project contact ADP to obtain the missing personnel report for the period 7/1/2021 through 3/31/2022. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Per the HUD Handbook 4350.3: Occupancy Requirement of Subsidized Per Chapter 9. Enterprise Income Verification (EIV), the EIV is used for verifying the employment and income of tenants and for reducing administrative and subsidy errors. Per the EIV system instructions, the EIV is to be run within 90 days of move-in and any needed actions within 30 days of the report. Condition: The Enterprise Income Verification (EIV) was not obtained after 90 days from the date of move-in from the following tenants: Effect: The Project did not follow the EIV system directive to obtain EIV within 90 days of move-in. Cause: Due to the turnover of the Management Agent and Property Management Staff, obtaining EIV was performed within the 90 days of move-in. Context: A sample of four tenant files was selected for Eligibility Testing in which four of four tenants selected had instances of not obtaining EIV report within 90 days of move-in. Recommendation: We recommend that the Project follow the HUD directive in obtaining the EIV within 90 days of move-in. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: HUD Consolidated Audit Guide 2004.04 REV CHG-7-Tenant Application, Eligibility, and Recerfifixcation-2 Suggested Audit Procedures-e Select a sample of tenant files-procedure 8, “Determine whether the appropriate security deposit and prorated rent were correctly calculated and collected”. Condition: During our testing of Tenant Move-in, we noted that prorate of tenant rent was not performed for the following: Effect: The Project is not following HUD directives regarding the calculation of prorated rent. Cause: Due to the turnover of the Management Agent and Property Management Staff, proper procedures for prorating of 1st month's rent were not being performed. Context: A sample of three tenant files was for Testing of Move-in in which all three tenants had instances in which 1st month's rent was not being prorated. Recommendation: We recommend that Project properly prorate the move-in tenant's 1st-month rent. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Owners who participate in HUD’s rent subsidy program are responsible for accepting applications, determining eligibility, calculating the tenant's contribution toward rent and utilities, and calculating subsidy in accordance with HUD. Conditions: During our testing of Tenant Eligibility for Southward Rosa, Unit#503, and Move-In Date 6/01/2021, the following documentation was missing from the tenant file for examination purposes: 1. Signed tenant application. 2. Acknowledgment of the resident's rights and responsibilities. 3. Citizenship Declaration. 4. Criminal and drug background checks as well as sex offender registration. 5. HUD model lease and addendums signed by tenant and management 6. Form HUD-50059 Owner’s Certificate of Compliance with HUD’s Tenant Eligibility and Rent Procedures to determine if the initial certification was completely correct and accurate. 7. Supporting documentation for the computation of the tenant’s contribution toward rent and utilities and the subsidized portion of the tenant’s monthly rent was properly calculated. 8. Six months of bank statements. 9. Supporting documentation for payment of security and 1st-month rent. Effect: The Project was not in compliance with HUD’s rent subsidy program in the determination of tenant eligibility. Cause: Due to the turnover of the Management Agent and Property Management Staff, there was a lack of internal control in tenant eligibility documentation. Context: A sample of four tenant files was for Testing of Eligibility, in which one instance in which the majority of eligibility documentation was missing from the tenant file. Recommendation: We recommend that the Project obtain all eligibility documentation missing from the tenant files. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Only U.S. citizens or eligible noncitizens may receive assistance under Section 8. All applicants for assistance must be given notice of the requirement to submit evidence of citizenship status at the time of application. All family members, regardless of age, must declare their citizenship by completing Citizen Declaration Form. Condition: During our testing of Tennant Eligibility, the following tenants did not complete Citizen Declaration Form: Effect: The Project did not follow the HUD directive regarding tenants completing the Citizen Declaration Form. Cause: Due to the turnover of the Management Agent and Property Management Staff, there was a lack of internal control in tenant eligibility documentation. Context: A sample of four tenant files was for Testing of Eligibility, in which three instances in which the Citizen Declaration Form is unavailable for examination purposes. Recommendation: We recommend that the Project provide the Citizen Declaration Form to be complete. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Owners who participate in HUD’s rent subsidy program are responsible for the tenant and owner completing the move-in inspection form. Condition: During our testing of Tenant Move-In, the following Move-In inspection forms were unavailable for examination purposes: Effect: The Project did not follow the HUD directive regarding the completion of the move-in inspection forms. Cause: Due to the turnover of the Management Agent and Property Management Staff, there was a lack of internal control in performing move-in inspection forms. Context: A sample of four tenant files was for Testing of Eligibility, in which two instances in which the move-in inspection forms were unavailable for examination purposes. Recommendation: We recommend that the Project and tenants complete the move-in inspection forms. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Owners who participate in HUD’s rent subsidy program are responsible for the tenant and owner completing the move-out inspection form. Condition: During our testing of Tenant Move-Out, the following move-out inspection forms were unavailable for examination purposes: Effect: The Project did not follow the HUD directive regarding the completion of the move-out inspection forms. Cause: Due to the turnover of the Management Agent and Property Management Staff, there was a lack of internal control in performing move-out inspection forms. Context: A sample of four tenant files was for Testing of Eligibility, in which three instances in which the move-out inspection forms were unavailable for examination purposes. Recommendation: We recommend that the Project complete the move-out inspection forms. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: Within 30 days after the move-out date, the owner must refund the full security deposit plus accrued interest to a tenant that does not owe any amounts under the lease. Condition: During our Testing of Move-Outs, the following tenant’s security deposit was not refunded within 30 days after the move-out date: Effect: The Project did not follow the HUD directive regarding refunding the security deposit within 30 days after the move-out date. Cause: Due to the turnover of the Management Agent and Property Management Staff, there was a lack of internal control in performing security deposit refunds within 30 days after move-out. Recommendation: We recommend that the Project follow the HUD directive regarding refunding tenant security deposit within 30 days after move-out. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

Criteria: The owner’s certification of compliance with HUD’s tenant eligibility and rent procedures per Form HUD-50059 is completed correctly. Per HUD Operating Budget FY201-2022 for the New Rents letter dated June 2, 2021, the effective date of new rents will be May 25, 2021 from 1Br Current Rent-$1,381 to New Rents-$1,495. Condition: During our testing of Eligibility, we noted that Jordan, Levi who move-in date 8/15/2021, was charged $1,381 per Form HUD-50059 Owner’s Certification of Compliance with HUD’s Tenant Eligibility and Rent Procedures, but on the HUD lease contract rent was $1,495. Cause: Due to the turnover of the Management Agent and Property Management Staff, there was a lack of internal control over new contract rents on the HUD Lease and Form HUD- 50059. Effect: The initial certification Form HUD-50059 was not completed correctly. Context: A sample of four tenant files was for Testing of Eligibility, in which one instance in which, the Form HUD -5059 was not completed correctly. Recommendation: We recommend that the Project correct Form HUD 50059 for Jordan, Levi. Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.

2020-001: Section 202 Capital Advance CFDA 14.157 and Section 8 Housing Assistance Payment-CFDA 14.195 Reporting-Contract Period Ended December 31, 2020 ? Lack of Accrual Basis Accounting Condition: The Project ?s general ledger is currently maintained on the cash basis of accounting and accrual adjustments are performed at year-end to convert cash basis of accounting to the accrual basis of accounting. The accrual basis is the method of accounting where revenues are recognized when earned and expenses are recognized when incurred. We understand that maintaining the general ledger on the accrual basis of accounting is more difficult than using the cash basis. However, the accrual basis provides more meaningful financial information to management and complies with generally accepted accounting principles. Failure to maintain the Project?s general ledger on the accrual basis of accounting distorts the interim financial statements and may lead to critical financial decisions being made on erroneous data. Criteria: Per Financial Operations and Accounting Procedures for Insured Handbook 4370.20, Chapter 2. Financial Operations and Accounting 2-2 Objective of the HUD- Prescribed Accounting System General Objectives of the HUD accounting system include ?Reporting on all financial transactions using HUD guidelines and Generally Accepted Accounting Principles (GAAP).? Per Financial Operations and Accounting Procedures for Insured Handbook 4370.20, Chapter 2. Maintenance of Books and Account 2-3, ?Book and accounts must be complete and accurate. The books of the original entry must be kept current at all times, posting must be made at least monthly to ledger accounts. Standard journal entries may be established for recurring items and posted monthly. Cause: The Project books and records are kept on cash basis of accounting which is not generally accepted accounting principles. Effect: During our testing of cash disbursements, we noted that the major of the expenditures are recorded when paid as opposed when the transactions incurred. Major of expenditures are recorded one month to three months after the transactions are incurred. During our testing of Accounts Receivable for Tennant and HUD and Revenue, we noted that the Rent Potential on accrued basis.is unrecorded on monthly basis. The monthly rental income is recorded when rent income is deposited. At year end, there is no Detail Schedule for 1130 Tenant Accounts Receivable and 1135 Accounts Receivable-HUD. Recommendation: We recommend that the Project implement the use of accrual basis accounting and utilized QuickBooks Accounts Payable Module to record vendor?s invoices as an Accounts Payable and make payment. We also recommend that Owner to hire a Management Agent Company that has dual capacity to perform the HUD property management and HUD accounting functions.

2020-002 Section 202 Capital Advance CFDA 14.157 and Section 8 Housing Assistance Payment-CFDA 14.195 Reporting-Contract Period Ended December 31, 2020 ? Lack of Reconciling Resident Balance Condition: The Project is not reconciling Resident Balance by Fiscal Period -December 31, 2020 to QuickBooks to determine the following account balance: Accounts Description Balance Per Resident Balance Balances per QuickBooks Unreconciled Difference 1130 Tenant Accounts Receivable $1,484.00 $0.00 $1,484.00 1135 Accounts Receivable-HUD $47,996.00 $0.00 $47,996.00 2210 Prepaid Revenue $611.00 $0.00 $611.00 2191 Tenant Deposit Held in Trust (Contra) $11.556.00 $12,434.00 ($878.00) The Resident Balance by Fiscal Period is the subsidiary ledger for the accounts noted. Criteria: Per Financial Operations and Accounting Procedures for Insured Handbook 4370.20, Chapter 2. Maintenance of Books and Account 2-3, ?Book and accounts must be complete and accurate.? Cause: The Management Agent did not perform monthly reconciliation of Resident Balance by Fiscal Period to QuickBooks accounting system. Effect: The Project accounts noted were not reconciled to Resident Balance By Fiscal Period as of December 31, 2020 to determine the proper account balance. Recommendation: We recommend that the Management Agent established policy and procedures to reconcile the Resident Balance by Fiscal Period on a monthly basis to the following accounts to determine a complete and accurate account balance: 1. 1130 Tenant Accounts Receivable. 2. 1135 Accounts Receivable-HUD. 3. 2210 Prepaid Revenue. 4. 2191 Tenant Deposit Held in Trust (Contra).

2020-003 Section 202 Capital Advance CFDA 14.157 Allowable Cost/Cost Principles -Contract Period Ended December 31, 2020 ? Computation of Management Fees Condition: Management Agent fee are paid basis upon the CAP Yield-$42,048.00 as opposed to 4% of residential income collected of ($900,348.83 total yearly collection X 4%) $36,013.95. The 4% of resident income collected fee is noted in the Project Owner?s Certification of Owner-Managed Multifamily Housing Projects dated May 25, 2016. The Yield CAP is established so the Management Fee basis on collections does not exceed the Yield CAP. The Management Agents does not attach to monthly payment of the Management Fee a Schedule of Resident Income Collected to compute to the Management Fee to support the payment of the Management Fee. There is a question cost of $6,034.05. Criteria: Per The Management Agent Handbook 4381.5, REV-2, CHG-2, Section 1: Management Fees and Review Requirements,? Fee derived from project income (residentials commercial, and miscellaneous) must be quoted and calculated as a percentage of the amount of income collected by the agent. Multiplying the fee percentage by the Income collected gives the actual amount of fee paid to the agent. This requirement serves two purposes: 1) It gives the agent an incentive to maximize collections. 2) It automatically increases the agent?s potential fee yield as project rents increase. These increases help offset increases in the agent?s cost due to inflation. Cause: Management Agent did not process fees based upon the 4% of residential income collected. Effect: Management Agent is overpaid by $6,034.05. Recommendation: We recommend that the Management Agent reimburse the Project the Management Fee Overpayment of $6,034.05.

2020-004 Section 202 Capital Advance CFDA 14.157 Allowable Cost/Cost Principles-Contract Period Ended December 31, 2020 - Internal Controls Over Cash Disbursements Condition: During our testing of cash disbursements, we noted the following: 1. No approval note, or accounts number & account description noted on vendor's invoices per all vendors? invoices. 2. Vendor?s invoice was not recorded in the correct accounting period. 38 (thirty-eight) items. 3. Vendor's invoice represents prior year accounts payable recorded in current year. No prior year reversal entry to eliminate transaction. 4. Vendor's Invoice has no itemized detail of hours worked. 4 (four) items noted-Security Invoices. 5. Vendor's invoice was not attached to remittance copy of payment. 1 (one) exception noted 6. A vendor's proposal use as the invoice is not dated. 2 (two) exceptions noted. 7. A Vendor?s invoice is paid twice. 1 (one) exception noted. 8. Vendor?s invoice is unavailable for testing of income collected to support management fee payments. 2 (two) exceptions noted. 9. Bank statements do not include the scanned copies of canceled checks. Also, online banking only allows three months of retrieving canceled checks. Management Agent had to request PNC to provide canceled checks for cash disbursements testing. Criteria: Per Financial Operations and Accounting Procedures for Insured Handbook 4370.20, Chapter 2. Financial Operations and Accounting 2-12 Cash Management Controls-B Disbursement Controls, are the following disbursement controls: 1. A request for a check must have supporting documentation (i.e., invoice itemizing amount requested with an authorized signature) in order for approval to be obtained top to make the disbursements. 2. Checks must be approved by individual; authorized to approve checks. 3. The authorized check signer should review supporting documentation before signing checks. 4. Supporting vouchers shall be marked cancelled to prevent resubmission. 5. A monthly reconciliation shall be performed to ensure that all outstanding checks disbursed are accounted for (i.e., cashed, outstanding, or void). 6. Invoices should be marked ?paid? and the check number and date should be posted to the invoice. Supporting voucher shall also be marked ?paid? to prevent resubmission. Cause: The Management did not utilize Financial Operations and Accounting Procedures for Insured Handbook 4370.20, Chapter 2. Financial Operations and Accounting 2-12 Cash Management Controls-B Disbursement Controls. Effect: The Management Agent did not follow HUD Disbursement Control procedures. Recommendation: We recommend the following: 1. Management Agent follow HUD Disbursements Control procedures. 2. The review of canceled checks is impossible under this account, which greatly weakens internal controls over cash. The Management Agent make arrangements with their bank to have scanned cancelled checks as an attachment to the online bank statements. The ability to review all canceled checks is critically important to maintaining a strong system of cash controls. 3. Utilized the Accounts Payable system in QuickBooks to record vendor?s invoices and make payments.

2020-005 Section 202 Capital Advance CFDA 14.157 Allowable Cost/Cost Principles-Contract Period Ended December 31, 2020 - Lack of Policies Regarding Cash Disbursements Condition: There are no policy and procedures for payment of vendor?s invoice via check and/or online payment. Some vendors payments are online, and some vendors? payments are made by check. Criteria: Per Financial Operations and Accounting Procedures for Insured Handbook 4370.20, Chapter 2. Financial Operations and Accounting 2-2 Objective of the HUD-Prescribed Accounting System-General objectives of HUD accounting system includes ?Execution all transactions in accordance with project management and where required, HUD?s general or specific authorization. Cause: Management Agent is not following HUD directive per execution of all transactions. Effect: No written directive for Disbursement Controls. Recommendation: For audit trail, best business practice, HUD `s Disbursement Controls, we recommend the that only utilities (electricity, gas, water), telephone, and insurance (general liability & worker? compensation be paid online. The remaining vendors must be paid by check.

2020-006 Section 202 Capital Advance CFDA 14.157 Allowable Cost/Cost Principles-Contract Period Ended December 31, 2020 - Capitalization Threshold Condition: During our audit, we noted that Project?s policy for the capitalization of property and equipment purchases begins with any asset purchase over $500. We believe that the level of capitalization is much too low for an organization of this size. The depreciation computation is time consuming with a low capitalization of $500. Criteria: The IRS for 2020 suggest the Project chose one of the two capitalization thresholds for fixed assets expenditures, either $2,500 or $5,000. According to the Uniform Guidance, 2 CFR, the highest amount a threshold can be is $5,000. Cause: The Project has not updated it policy for capitalization of property and equipment purchases. Effect: The Project capitalized 24 (twenty-four) additions to fixed assets under the suggest capitalization threshold of $2,500. Recommendation: We recommend that Project significantly increase its capitalization policy, perhaps requiring that all future asset purchases costing more than $2,500 be capitalized and depreciated over the assets? useful lives.

2020-007 Section 202 Capital Advance CFDA 14.157 Procurement Suspension & Disbarment-Contract Period Ended December 31, 2020 - Controls Over Procurement Process Condition: For the procurement of small purchase over $3,500, the Management Agent did not obtain price or rate quotations from an adequate number of qualified sources for the following procurements per the Uniform Guidance: Vendor?s Name Scope of Work Amount Creative Electronic Install cameras floors $6,200.00 Gordon Remodeling and repair Unit Rehab 209 $7,830.00 Lester Nowak Unit Rehab 403 $8,340.00 Lester Nowak Unit Rehab 401 $4,660.00 Tolbert?s Roofing & Construction Major Roof Repair $10,535.00 Johnson Reliable Service Air conditioner units $8,425.00 Criteria: Per the Compliance Requirements-Procurement and Suspension and Debarment-Compliance Requirement-Procurement ?Use the micro-purchase and small purchase methods only for procurements that meet the applicable criteria under 2 CFR section 200.329(a) and (b). Under the micro-purchase method, the aggregate dollar amount does not exceed $3,500 ($2,000 in case of acquisitions for construction subject to Wage Rate Requirement (Davis-Bacon Act)). Small purchase procedures are used for purchases that exceed the micro-purchase amount but do not exceed the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable (2 CFR section 200.32 (a). If small purchase procedures are used, price or rate quotation must be obtained from an adequate number of qualified sources (CFR section 200.320 (b)). ? Cause: The Project was not aware to follow the Uniform Guidance requirement per the Compliance Requirements-Procurement and Suspension and Debarment-Compliance Requirement-Procurement. Effect: The Project did not follow small purchase procedures set forth in Compliance Requirements-Procurement. Recommendation: We recommend that the Project follows small purchase method for procurement that exceed over $3,500.

2020-008 Section 202 Capital Advance CFDA 14.157 Procurement Suspension & Disbarment-Contract Period Ended December 31, 2020 - Controls Over Procurement Process Condition: For the procurement of acquisition of TriStone Security for $226,061.76, the Management Agent did not follow the proper procurement methods per the Uniform Guidance. Criteria: Per the Compliance Requirements-Procurement and Suspension and Debarment-Compliance Requirement-Procurement, ?For acquisitions exceeding the simplified acquisition threshold of $150,000, the non-federal entity must use one of the following procurement methods: the seal bid method if the acquisition meets the criteria in 2 CFR section 200.320(c); the competitive proposals method under the conditions specified in 2 CFR section 200.320 (d ); or the noncompetitive proposals method (i.e., solicit a proposal from only a source) but only when one or more of the four circumstance are met, in accordance with 2 CFR section 200.320(f). Perform a cost or price analysis in connection with every procurement action in excess of the simplified acquisition threshold, including contract modifications (2 CFR section 300.32(a)). Cause: The Project was unaware to follow the Uniform Guidance requirement per the Compliance Requirements-Procurement and Suspension and Debarment-Compliance Requirement-Procurement. Effect: The Project did not follow procurement set forth in Compliance Requirements-Procurement. Recommendation: We recommend that the Project to follow the procurement procedures for above the simplified threshold of $150,000.

2020-009 Section 202 Capital Advance CFDA 14.157 and Section 8 Housing Assistance Payment-CFDA 14.195 Cash Management-Contract Period Ended December 31, 2020 Condition: During our analytical review of revenue, we noted that Potential Rent decreased by $202,780.17 from last year. Per HUD Letter dated April 30, 2020 regarding Oaks Operating Budget-FY2020-2021, ?the submitted budget does not support your requested rent increase or the current rents. As a result, HUD is decreasing the rents as listed below: the new rents effective date will be May 25, 2020.? The HUD Letter stated that the Project could have questions regarding this matter directed to the Resolution Specialist. Due to the lack of response to HUD decreasing the rents, the Project Rent decreased by $202,780.17. Criteria: The Management Agent must follow Multifamily Assets Management and Project Servicing M2M Program Operating Procedures Guide per Chapter 7 Processing Budgeted Rent Increase and Fees for Commercial Space and Services In Insured, Direct Loan and Non-Regulated HUD Projects and HUD Budget Rent Increase-Budget Based Rent Increase. Cause: The Management Agent did not address the rent decrease of $202,780.17 with the Resolution Specialist. Effect: The reduction of $202,780.17 from prior year has cause the Project to have cashflow issues with meeting it current obligations on a timely basis. Recommendation: We recommend that Management Agent to Appeal HUD decision of the rent adjustment as follows: ?Owners may appeal the HUD or CA?s decision of their rent adjustment request through two levels of appeals. (Note: Appeal procedures do not apply to owners of Section 236 non-insured projects). In the first level, the appeal is reviewed by Department staff at least one administrative level above the reviewer who made the contested rent adjustment decision (for example, if the contested rent decision is approved by the Account Executive Branch Chief, then the first level of appeal is reviewed by the Director, Asset Management Division). The final level of appeal is to the Director, Multifamily Regional Center. Owners are permitted to delay implementation of rent adjustments while the appeal is being processed. Any decision rendered by the Regional Director of Housing in the final level of appeal, will not be subject to further appeal.?

2020-010 Section 202 Capital Advance CFDA 14.157 and Section 8 Housing Assistance Payment-CFDA 14.195 Eligibility - Contract Period Ended December 31, 2020 - Tenant Eligibility Compliance Condition: Smith, Arlene, Unit 104 Move in Date 2/12/2020 was not selected from the waiting list. Criteria: HUD Handbook 4350.3: Occupancy Requirements of Subsidized Multifamily Housing Program Chapter. Waiting List and Selection, tenant selected for move-in must be selected from the tenant waiting list. Also, Project?s Tenant Selection Plan-Procedures for Selecting Applicant?s From the Waiting List per page 5, ?When an appropriate unit is available, the Project Manger shall review the waiting list to identify the next applicant?s name is in chronological order at the top of the list?. Cause: The Project did not utilize the waiting list for tenant selection. Effect: Project is not following its Tenant Selection Plan and HUD directive. Context: A sample of four tenants were selected Move-In Testing in which one of four tenants selected was not on the waiting list. Recommendation: We recommend that the Project follow its Tenant Selection Plan by selecting tenants from the waiting list.

2020-011 Section 202 Capital Advance CFDA 14.157 and Section 8 Housing Assistance Payment-CFDA 14.195 Eligibility - Contract Period Ended December 31, 2020 - Tenant Eligibility Compliance Condition: The Enterprise Income Verification (EIV) was not obtained after 90 days from the date of move in from the following tenants: Tenant?s Name Unit# Move-in Date EIV Report Date Tenant 1 102 3/3/2020 11/19/2020 Tenant 2 104 2/12/2020 9/02/2020 Tenant 3 209 8/3/2020 12/11/2020 Tenant 4 301 3/3/2020 Unavailable Criteria: Per the HUD Handbook 4350.3: Occupancy Requirement of Subsidized Per Chapter 9. Enterprise Income Verification (EIV), the EIV is used for verifying employment and income of tenants and for reducing administrative and subsidy errors. Per the EIV system instructions, the EIV is to be run within 90 days of move-in and any needed actions within 30 days of the report. Cause: The Project allowed the EIV to be run after the 90 days of move-in. Effect: Project did not follow the EIV system directive to obtain EIV within 90 days of move-in. Context: A sample of five tenant files were selected for Eligibility Testing in which four of five tenants selected had instances with not obtaining EIV report within 90 days of move-in. Recommendation: We recommend that the Project following HUD directive in obtaining the EIV within 90 days of move-in.

2020-012 Section 202 Capital Advance CFDA 14.157 and Section 8 Housing Assistance Payment-CFDA 14.195 Eligibility - Contract Period Ended December 31, 2020 - Tenant Eligibility Compliance Condition: During our testing of Tenant Move-in, we noted that prorate of tenant rent were not perform for the following: Tenant?s Name Unit# Move-In Date 1st Month Rent Deposited 1st Month Rent if prorate Tenant 1 102 3/3/2020 $125.00 $120.00 Tenant 2 104 2/12/2020 $229.00 $142.14 Tenant 3 209 8/3/2020 $296.00 $276.90 Tenant 4 301 3/3/2020 $198.00 $185.23 Criteria: HUD Consolidated Audit Guide 2004.04 REV CHG-7-Tenant Application, Eligibility, and Recerfifixcation-2 Suggested Audit Procedures-e Select a sample of tenant files-procedure 8, ?Determine whether the appropriate security deposit and prorated rent were correctly calculated and collected?. Cause: The Project did not consider prorating 1st month rent of tenants that move-in. Effect: Tenants that move-in was overcharged 1st month rent due to rent was not prorated. Context: A sample of four tenant files was for Testing of Move-in in which all four tenants had instance in which 1st month rent was not being prorated. Recommendation: We recommend that Project properly prorate move-in tenant 1st month rent.

2020-013 Section 202 Capital Advance CFDA 14.157 and Section 8 Housing Assistance Payment-CFDA 14.195 Eligibility - Contract Period Ended December 31, 2020 - Reject Applicant Compliance Condition: During Tenant Testing, we request a detail listing of Rejected Applicants for the audit period. Project could not provide the Rejected Application Listing per the rent roll system to perform the testing of Rejected Applicants. Criteria: For Rejected Applicants, the Project is required to maintain the following: i. The reason the applicant was denied admittance in accordance with the Tenant Selection Plan per page 10 and that the reason was properly supported. ii. Any indication of discriminatory rental practices or if the applicant threatened or entered litigation because of discriminatory practices. iii. The rejection letter provided to the applicant advising the applicant of his/her rights to appeal. Cause: The Project was unaware to follow HUD directive for Rejected Applicants. Effect: Project was not in compliance with Reject Applicants. Recommendation: We recommend that the Project follows its Tenant Selection Plan regarding Rejected Applicants.

2020-014 Section 202 Capital Advance CFDA 14.157 and Section 8 Housing Assistance Payment-CFDA 14.195 Special Test and Provision-Contract Period Ended December 31, 2020 ? Escrow and Reserve Accounts Condition: During our testing of restricted cash accounts, we noted the following: 1. Insurance Escrow: a. Funds totaling $50,201.49 were withdraw and only $46,213.49 were redeposited as payments for the withdraws. The withdraws were nonpayment of general liability insurance. However, the Project did not repay $3,988 on the nonpayment of general liability insurance fund that was withdraw. 2. Residual Receipts: a. Funds totaling $44,000 were withdraw and redeposited; however, the withdraw of funds were not approved by HUD Form 9250 Fund Authorization. Criteria: The following are HUD Compliance Requirements: 1. Insurance Escrow: Administration of Insured Home Mortgages Handbook 4330.REV-1 Chapter 2 HUD Escrow and Mortgage Premium (MIP) 2-1. Escrow Account-General (24 CFR 203.550) Mortgages must establish escrow deposits and require that mortgagors make monthly payments to ensure that funds will be available to pay taxes and insurance premium when they come due. 2. Residual Receipts: Non-profit owners and owners of limited distribution project, Section 202 projects, and Section 8211 projects shall establish a residual receipts account and make deposits into the account in accordance with HUD requirements within 90 days after the close of the fiscal year. Disbursements from such fund may be made only after written consent is received from HUD. Cause: The Project was having cashflow issues and utilized the Insurance Escrow and Residual Receipts accounts to cover it cash shortfall. Effect: Project is not in compliance with Insurance Escrow and Residual Receipts requirements. Recommendation: We recommend that the Project deposit $3,988 in the Insurance Escrow to reimburse the fund for the nonpayment of general liability insurance. We also recommend that the Project follows HUD directive for Insurance Escrow and Residual Receipts.

2020-015 Section 202 Capital Advance CFDA 14.157 and Section 8 Housing Assistance Payment-CFDA 14.195 Special Test and Provision-Contract Period Ended December 31, 2020 ? Approval over Owner Advances Condition: The Corporation (the Owner) advanced $7,000 to the Project without HUD approval. Criteria: Financial Operations and Accounting Procedures for Insured Handbook 4370.2 REV-1 Chapter 2-11 Repayment of Owner Advances: B. To encourage owners to make advances to projects in critical situations, the Department may approve on a case-by-case basis request to make advances and for the repayment of such advances on a monthly basis. Repayments under this paragraph are not considered owner distributions. Cause: The Management Agent was unaware of HUD directive regarding Owner Advances. Effect.: The Management Agent did not follow HUD directive regarding advances by owner. Recommendation: We recommend that the Management Agent follow HUD directive regarding advances from owner.

2020-016 Section 202 Capital Advance CFDA 14.157 and Section 8 Housing Assistance Payment-CFDA 14.195 Special Test and Provision - Contract Period Ended December 31, 2020 - Funding for Bookkeeping Fees Condition: We noted the during the process of submitting the Form 9839-A Project Owner?s Certification for Owner-Managed Multifamily Housing Projects that the Management Agent is not requesting funding for Bookkeeping Fees/Computer Services Fees -6351. The Bookkeeping fee and Computer Fee are both computed as a dollar amount per unit per month. Criteria: The Management Agent utilized Form 9839-A Project Owner?s Certification for Owner-Managed Multifamily Housing Projects to request Bookkeeping Fees and Computer Services Fees. Cause: Due to Management Agent not utilizing Form 98939-A Project Owner?s Certification for Owner-Managed Multifamily Housing Project to requesting Bookkeeping and Computer Services Fees, accounting services were not properly performed by an accountant on a monthly basis. Effect: The Management Agent is not requesting Bookkeeping Fees and Computer Services Fee per Form 9839-A Project Owner?s Certification for Owner-Managed Multifamily Housing Projects. This will provide the needed funding to obtain Accounting Services for proper and timely financial reporting. Recommendation: We recommend that the Management Agent request Bookkeeping Fees and Computer Service Fees by utilizing Form 9839-A Project Owner?s Certification for Owner-Managed Multifamily Housing Projects.

2020-017 Section 202 Capital Advance CFDA 14.157 and Section 8 Housing Assistance Payment-CFDA 14.195 Cash Management -Contract Period Ended December 31, 2020 - Compliance Over Vacancy Loss Revenue Condition: During our testing of Rental Income, we noted that the following units were vacancy over 60 days and Project is not following the rule on vacancy payments per HUD Federal Register Proposed Regulation and Notice dated March 16, 2015: Unit Period Vacancy Days Vacancy Vacancy Loss Rents 102 January 2020 to March 2020 90 days $3,799.00 104 January 2020 to February 2020 40 says $2,538.00 209 May 2020 to August 2020 120 days $4,303.00 301 January 2020 to March 2020 90 days $4,011.00 Criteria: HUD believes the 60 days for vacancy payments is too long. HUD also wants to incentives owners, when appropriate, to see that vacant units are rented more expeditiously to eligible individuals and families. The rule would provide owners receive vacancy payments in the amount of 80 percent of the contract rent for the first 30 days of a vacancy. Cause: The Project overlooked requesting the 80 percent of the contract rent for the first 30 days of units that were vacated. Effect: The Project did not request 80 percent of the contract rent for the first 30 days of units that were vacated during 2020. Recommendation: We recommend that the Project following HUD?s rule regarding the owner receive vacancy payments in the amount of 80 percent of the contract rent for the first 30 days of vacancy.