South Fulton Homes, Inc.

2024-001 Tenant Leases and Annual Recertifications Not Signed by Tenant Criteria: The rules and regulations promulgated by the U.S. Department of Housing and Urban Development (HUD) require that the assistance applicants shall submit signed consent forms upon initial application and reexamination. Condition: During the audit, it was noted that Annual Recertifications and Tenant Leases were not signed by tenant. Cause: The individuals responsible for obtaining tenant signatures failed to provided signed documentation for file retention. Effect: The Organization is not in compliance with HUD’s requirement. Recommendation: We recommend the Organization develop policies and training practices to ensure all employees are aware of proper HUD requirements and that all documents are signed. Auditee Response: We concur with the finding and will ensure that documents are signed by tenants going forward.

2024-001 Tenant Leases and Annual Recertifications Not Signed by Tenant Recommendation We recommend policies are developed to ensure all required documents are signed. Action Taken We concur with the finding and will implement the recommendation immediately.

2023-002

2023-002 Tenant Leases and Annual Recertifications Not Signed by Tenant Criteria: The rules and regulations promulgated by the U.S. Department of Housing and Urban Development (HUD) require that the assistance applicants shall submit signed consent forms upon initial application and reexamination. Condition: During the audit, it was noted that Annual Recertifications and Tenant Leases were not signed by tenant. Cause: The individuals responsible for obtaining tenant signatures failed to provided signed documentation for file retention. Effect: The Organization is not in compliance with HUD’s requirement. Recommendation: We recommend the Organization develop policies and training practices to ensure all employees are aware of proper HUD requirements and that all documents are signed. Auditee Response: We concur with the finding and will ensure that documents are signed by tenants going forward.

2023-002 Tenant Leases and Annual Recertifications Not Signed by Tenant Recommendation We recommend policies are developed to ensure all required documents are signed. Action Taken We concur with the finding and will implement the recommendation immediately.

2022-002

2023-003 Clients Not Billed in Accordance with the Housing Owner's Certification and Application for Housing Assistance Payments Criteria: The rules and regulations promulgated by the U.S. Department of Housing and Urban Development (HUD) require that client rent is billed on a monthly basis in accordance with the Housing Owner’s Certification and Application for Housing Assistance Payments. Condition: During the audit we noted a significant deficiency in the internal controls related to billing procedures. It was noted that client rent was not billed in accordance with the Housing Owner’s Certification and Application for Housing Assistance Payments on numerous occasions. During the audit process, the Organization noted billing issues, performed an internal analysis, and brought the issue to the attention of the auditor. As a result, the Organization recorded an adjusting journal entry increasing client rent revenue by $2,316 and created additional billings for client rent to correct the billing errors. Cause: The Organization has had significant difficulties related to training and competency of accounting staff. Additionally, review procedures implemented were not sufficient to identify and correct billing errors in a timely manner. Effect: Client rent was not billed in accordance with the Housing Owner’s Certification and Application for Housing Assistance Payments, therefore revenue was understated and additional client billings were deemed necessary. Recommendation: We recommend that accounting staff responsible for client billing is provided sufficient training and oversight. Additionally, we recommend that monthly billing of client rent is reviewed and reconciled in accordance with the Housing Owner’s Certification and Application for Housing Assistance Payments. Auditee Response: We concur with the finding and have begun implementing the recommendations.

2023-003 Clients Not Billed in Accordance with the Housing Owner’s Certification and Application for Housing Assistance Payments Recommendation: We recommend that accounting staff responsible for client billing is provided sufficient training and oversight. Additionally, we recommend that monthly billing of client rent is reviewed and reconciled in accordance with the Housing Owner’s Certification and Application for Housing Assistance Payments. Auditee Response: We concur with the finding and have begun implementing the recommendations.

2022-002 Internal Controls Over Financial Reporting Finding Related to: Compliance ? CDFA No. 14.181 Criteria: : The rules and regulations promulgated by the U.S. Department of Housing and Urban Development (HUD) require that the assistance applicants shall submit signed consent forms upon initial application and reexamination. Condition: During the audit, it was noted that Annual Recertifications and Tenant Leases were not signed by tenant. Cause: The Organization had limited access to tenants due to COVID pandemic and the quarantine recommendations in place. Effect: The Organization is not in compliance with HUD?s requirement. Recommendation: We recommend that documents are signed via mail or electronically if in person contact is not available. Auditee Response: We concur with the finding and will ensure that documents are signed by tenants going forward.

2022-002 Internal Controls Over Financial Reporting Recommendation We recommend documents are signed via mail or electronically if in person contact is not available. Action Taken We concur with the finding and will implement the recommendation immediately.

2022-003 Required Deposit Into a Replacement Reserve Account Not Made Finding Related to: Compliance ? CDFA No. 14.181 Criteria: The rules and regulations promulgated by the U.S. Department of Housing and Urban Development (HUD) require that the Organization make quarterly deposits to the replacement reserve in an amount determined by HUD. Condition: South Fulton Homes, Inc. was required to deposit $2,958 into the replacement reserve during the year ended June 30, 2022. The Organization has not deposited the required reserve amount as of June 30, 2022. Cause: The Organization deposited past due arrearages to the replacement reserve account during the year ended June 30, 2022 and did not realize until after year end that there was an additional $2,958 owed. Effect: South Fulton Homes, Inc. should have deposited $2,958 for the year ended June 30, 2022, in the replacement reserve. South Fulton Homes, Inc. is not in compliance with HUD?s rules. Recommendation: We recommend that a deposit of $2,958 be made into the replacement reserve account in order for South Fulton Homes, Inc. to be in compliance with HUD regulations. Auditee Response: South Fulton Homes, Inc. concurs with the recommendation. South Fulton Homes, Inc. management had thought it made all the necessary past arrearages. Upon the discovery that there were amounts owed to the replacement reserve account, the Organization made a $2,958 deposit in October 2022.

2022-003 Required Deposit Into a Replacement Reserve Account Not Made Recommendation We recommend that a deposit of $2,958 be made into the replacement reserve account in order for South Fulton Homes, Inc. to be in compliance with HUD regulations. Action Taken We concur with the recommendation. The Organization made a $2,958 deposit in October 2022 to the replacement reserve account to correct this deficiency.

2021-002

2022-004 Project Rental Assistance Payment Adjustments Not Made Timely Finding Related to: Compliance ? CDFA No. 14.181 Criteria: Project rental assistance payments are made for qualified tenants that occupy the assisted unit. Cause: Project rental assistance payments were collected for a tenant that had vacated the assisted unit for five months during the year ended June 30, 2022. The adjustment was not identified until the audit was performed. In addition, approved changes to project rental assistance rates were not updated timely on HUD vouchers. Effect: Project rental assistance payments totaled approximately $38,500 for the year ended June 30, 2022. Of this amount approximately $2,200 was paid for a tenant that had vacated the assisted unit for five months during the year ended June 30, 2022. The adjustment was not identified and corrected until the audit was performed. No other instances of payments made for unadjusted vacancies were noted. Recommendation: Develop policies to identify changes in tenant vacancies and rent changes and make adjustments for these changes timely. Auditee Response: South Fulton Homes, Inc. concurs with the recommendation. The adjustments was made in the year ended June 30, 2023. Due to staffing shortages experienced since the COVID pandemic, another employee took over the responsibilities of this program during the year ended June 30, 2022. There has been a learning curve that resulted in these oversights. The employee has more experience and knowledge to identify and record adjustments timely.

2022-004 Project Rental Assistance Payment Adjustments Not Made Timely Recommendation Develop policies to identify changes in tenant vacancies and make timely adjustments. Action Taken We concur with the recommendation and will implement the recommendation immediately.

2021-002 Required Deposit Into a Replacement Reserve Account Not Made Finding Related to: Compliance ? CDFA No. 14.181 Criteria: The rules and regulations promulgated by the U.S. Department of Housing and Urban Development (HUD) require that the Organization make quarterly deposits to the replacement reserve in an amount determined by HUD. Condition: South Fulton Homes, Inc. was required to deposit $2,958 into the replacement reserve during the year ended June 30, 2021. The Organization has only deposited $2,219 as of June 30, 2021. Cause: The deposit has not been made due to cash flow deficits and the uncertainty surrounding the filling of vacancies in the Organization?s homes. Effect: South Fulton Homes, Inc. should have deposited $2,958 for the year ended June 30, 2021, in the replacement reserve. South Fulton Homes, Inc. is not in compliance with HUD?s rules. Recommendation: We recommend that a deposit of $739 be made into the replacement reserve account in order for South Fulton Homes, Inc. to be in compliance with HUD regulations. Auditee Response: South Fulton Homes, Inc. concurs with the recommendation. South Fulton Homes, Inc. is in the process of filling the vacancies in all 12 units. Once these vacancies are filled, and revenue is again being generated from HUD assistance payments and tenant rent, South Fulton Homes, Inc. will be in a position to pay the required deposit of $739.

2020-002 Required Deposit Into a Replacement Reserve Account Not Made South Fulton Homes, Inc. was required to deposit $2,958 into the replacement reserve during the year ended June 30, 2020. The Organization has only deposited $2,219 as of June 30, 2021. Recommendation We recommend that a deposit of $739 be made into the replacement reserve account in order for South Fulton Homes, Inc. to be in compliance with HUD regulations. Action Taken We concur with the finding and will make additional deposits in the replacement reserve account as funds are available. Contact: Whitney Fuchs

2020-002

Criteria: The rules and regulations promulgated by the U.S. Department of Housing and Urban Development (HUD) require that the Organization make quarterly deposits to the replacement reserve in an amount determined by HUD. Condition: South Fulton Homes, Inc. was required to deposit $2,958 into the replacement reserve during the year ended June 30, 2020. The Organization has only deposited $2,219 as of June 30, 2020. Cause: The deposit has not been made due to cash flow deficits and the uncertainty surrounding the filling of vacancies in the Organization?s homes. Effect: South Fulton Homes, Inc. should have deposited $2,958 for the year ended June 30, 2020, in the replacement reserve. South Fulton Homes, Inc. is not in compliance with HUD?s rules. Recommendation: We recommend that a deposit of $739 be made into the replacement reserve account in order for South Fulton Homes, Inc. to be in compliance with HUD regulations. Auditee Response: South Fulton Homes, Inc. concurs with the recommendation. South Fulton Homes, Inc. is in the process of filling the vacancies in all 12 units. Once these vacancies are filled, and revenue is again being generated from HUD assistance payments and tenant rent, South Fulton Homes, Inc. will be in a position to pay the required deposit of $739.

FINANCIAL STATEMENT FINDINGS 2020-001 Internal Controls Over Financial Reporting During the audit we noted a material weakness in the accounting function including the following: - Lack of effective monthly and year-end closing procedures - Multiple material misstatements in the financial statements (corrected during the audit process) - Lack of a timely reconciliation of significant accounts (including client funds) - Significant variances in intercompany accounts at year end - Insufficient authorization/approval over general journal entries. - A lack of sufficient oversight over the accounting staff Recommendation We recommend that those charged with governance monitor the accounting function including the aforementioned areas. Action Taken We concur with the finding and will implement the recommendation immediately. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS 2016-001 Required Deposit Into a Replacement Reserve Account Not Made Recommendation: We recommend that a deposit of $2,958 be made into the replacement reserve account in order for South Fulton Homes, Inc. to be in compliance with HUD regulations. Auditee response: South Fulton Homes, Inc. concurs with the recommendation. South Fulton Homes, Inc. is in the process of filling the vacancies in all 12 units. Once these vacancies are filled, and revenue is again being generated from HUD assistance payments and tenant rent, South Fulton Homes, Inc. will be in a position to pay the required deposit of $2,958. 2020-002 Required Deposit Into a Replacement Reserve Account Not Made South Fulton Homes, Inc. was required to deposit $2,958 into the replacement reserve during the year ended June 30, 2020. The Organization has only deposited $2,219 as of June 30, 2020. Recommendation We recommend that a deposit of $739 be made into the replacement reserve account in order for South Fulton Homes, Inc. to be in compliance with HUD regulations. Action Taken We concur with the finding and will make additional deposits in the replacement reserve account as funds are available. Contact: Whitney Fuchs

2019-002

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2015-001