Spectrum River Vale Apartments, Inc.Non-Profit

Finding: 2024-001 Program: U.S. Department of Housing and Urban Development Supportive Housing for Persons with Disabilities (Section 811) and Capital Advance Criteria or specific requirement: Management is required to make monthly deposits into the replacement reserve account at amounts that are set by HUD. Condition: Management made only nine of the twelve required monthly deposits into the replacement reserve account during the year under audit. Cause: The client experienced cash shortages during the year under audit which led to difficulties in having the available cash flow to make the required deposits. Effect: The replacement reserve account had a lower balance than was required as of December 31, 2024. Recommendation: We recommend that management of the Organization closely adhere to the HUD guidance requiring deposits. If monthly deposits cannot be made, the Organization should request an exemption form from HUD allowing them to postpone these deposits for a period of time. Views of responsible officials and planned corrective actions: Management is in agreement with the finding. See Corrective Action Plan.

Finding: 2022-002 Program: U.S. Department of Housing and Urban Development Supportive Housing for Persons with Disabilities (Section 811) and Capital Advance Criteria or specific requirement: In accordance with the HUD regulatory agreement, the Organization shall establish a replacement reserve account to aid in funding extraordinary maintenance and repair and replacement of capital items. All disbursements and transfers from the reserve account must be approved by HUD. Condition: The Organization made a transfer out of the replacement reserve account, totaling $7,940, without receiving proper approval from HUD. Cause: Due to operating cash flow shortages, the Organization made transfers as needed without obtaining proper HUD fund authorization. Effect: The transfer of funds out of the replacement reserve account require prior approval from HUD, therefore, the Organization is in violation of the HUD regulatory agreement. Recommendation: We recommend that the Organization obtain proper approval from HUD for all transfers or disbursements being made out of the replacement reserve account prior to the transfer of any funds. Views of responsible officials and planned corrective actions: Management is in agreement with the finding. See Corrective Action Plan.

Finding: 2022-003 Program: U.S. Department of Housing and Urban Development Supportive Housing for Persons with Disabilities (Section 811) and Capital Advance Criteria or specific requirement: In accordance with the HUD memorandum for Section 811 Project Rental Assistance Contract (?PRAC?) properties, the Organization shall establish a residual receipts account to house any surplus funds at the end of the fiscal year. Any balance greater than $250 per unit in a residual receipts account must be remitted to HUD?s Accounting Center upon ?termination? of the PRAC. Termination is defined as the expiration of the contract term, which for most PRACs falls on the annual contract anniversary date. Condition: The Organization had excess funds over $250 remaining in the residual receipts account which have not been remitted to HUD upon PRAC termination. Cause: The Organization?s understanding was that payments of excess residual receipts balances were to be made once requested from HUD. Effect: The Organization has not remitted any funds to HUD at the time of the PRAC termination, therefore, it is in violation of the HUD regulatory agreement. Recommendation: We recommend that the organization determine the appropriate excess funds which should be remitted to HUD?s Accounting Center and properly remit those funds on an annual basis upon PRAC termination to remain in compliance. Views of responsible officials and planned corrective actions: Management is in agreement with the finding. See Corrective Action Plan.

Finding: 2021-002 Program: U.S. Department of Housing and Urban Development Supportive Housing for Persons with Disabilities (Section 811) and Capital Advance Criteria or specific requirement: In accordance with the HUD regulatory agreement, the Organization shall establish a residual receipts account and make deposits into the account within 60 days after the close of the fiscal year based on the surplus cash calculation. Condition: The Organization had surplus cash in its December 31, 2021, financial statements of $32,966 which was required to be deposited by March 2, 2022, and was not deposited. Cause: There was significant turnover in the accounting department throughout the calendar year, with several key positions left unfilled for several months due to personnel issues. This led to the protracted audit, resulting in delays in completing the surplus cash calculation necessary to determine the amount of payment due to HUD. Effect: The Organization did not deposit the surplus cash within 60 days after the close of the fiscal year, therefore, it is in violation of the HUD regulatory agreement. Recommendation: We recommend a process be put in place to ensure the calculation and any necessary deposits are made timely.

Criteria: In accordance with the HUD regulatory agreement, the Project shall establish a residual receipts account and make deposits into the account within 90 days after the close of the fiscal year based on the surplus cash calculation. Condition: The Project had surplus cash in its December 31, 2019 financial statements of $79,694 which was required to be deposited by March 31, 2020 and was not deposited. Cause: The Project has been late in submitting its recertification documents and billings to HUD, which has resulted in cash flow shortages. This situation created the delay in making the required deposit in a timely manner as operating cash flows were not available. Effect or Potential Effect: The Project did not deposit the surplus cash within 90 days after the close of the fiscal year, therefore, it is in violation of the HUD regulatory agreement. However, this violation was rectified thereafter when the deposit was made on July 13, 2021.Recommendation: We recommend the Project continue to regularly monitor and update the calculation, especially as close to year-end as possible, to ensure necessary deposits can be made more timely. Management?s Response: Management will implement internal controls to address making deposits in a timely manner.Questioned Costs: None identified.

Finding No. 2019-002 ? Loans from Affiliates Information on the Federal Program: 14.181 Project Rental Assistance Under Section 811 Capital Grant Program, 14.181 Capital Grant (Mortgage) Finding Type: Noncompliance Criteria: In accordance with the HUD regulatory agreements, the Project is required to obtain authorization prior to receiving or paying loans from an affiliate. Condition: As of December 31, 2019 and 2018 the Project?s outstanding balances in due to affiliates were $67,087 and $60,793, respectively. During 2019 HUD disallowed the re-payment of these liabilities as the project did not obtain written authorization from HUD prior to these advances being disbursed. Cause: During 2018 and prior the Project utilized Spectrum for Living Development, Inc., an affiliated entity, as a common paymaster and therefore, the balances included within the due to affiliates accounts represent the expenditures related to the Project paid for by its affiliate on their behalf. The Project did not perform their recertification?s and invoicing to HUD in a timely manner and as a result, Spectrum for Living Development, Inc. paid the necessary and reasonable project expenses on behalf of the Project. This resulted in the increase of its balance due to affiliates. Effect or Potential Effect: The Project is in violation of its HUD regulatory agreement. If HUD does not approve the expenditures paid for on behalf of the Project, the Project could be responsible to pay funds back to the funding source. Questioned Costs: None identified. Recommendation: This condition has been partially resolved. During 2019 to avoid the use of intercompany transactions, the Project utilized its Project bank account to pay for expenditures. Also during 2019 the Project?s representative met with HUD enforcement Officer and explained that those expenses were legitimate of the Project and necessary to carry out the program. HUD enforcement Officer understood the situation and agreed to work with other colleagues within HUD to clarify the situation and allow for the loan to be re-pay. As of December 31, 2019, no formal resolution has been provided by HUD, we recommend that the Project representative continue to follow-up on this until a final decision is reached. Responsible Official?s Response: The Project has been in constant communication with its local representations as well as the DEC (compliance) to resolve this scenario. They have implemented all protocols by HUD and have followed the requirements. They are working with HUD officials to determine how to handle the funds held in the residual receipts account. Planned Implementation Date of Corrective Action: December 31, 2020 Person Responsible for Corrective Action: Chief Financial Officer

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