HRC Communities, Inc.Non-Profit

Finding Reference Number: 2024-01 Title and CFDA Number of Federal Program: Section 202 Capital Advance and Project Assistance Rental #14.157 Type of Finding: Financial Statement and Federal Award Finding Finding Resolution Status: Unresolved Information on Universe Population Size: n/a Sample Size Information: n/a Identification of Repeat Finding and Finding Reference Number: Not applicable Criteria: The HUD regulatory agreement states that any funds collected as security deposits should be kept in a separate interest bearing account, to the extent required by state or local law, and in an amount which shall, at all times, equal or exceed the aggregate of all outstanding obligations under said account. Statement of Condition: During the year ended September 30, 2024 tenant security deposit liabilities exceeded the amount of tenant security deposits on hand. Cause: Controls were not in place to ensure that tenant security deposits are equal to or exceed tenant security deposit obligations. Effect or Potential Effect: The project is not in compliance with the HUD regulatory agreement. Auditor Non-Compliance Code: M - Security deposits Questioned Costs: $509 Reportable Views of Responsible Officials: Management is in agreement with the finding, and will establish controls to ensure that tenant security deposits equal to or exceed tenant security deposit obligations. Context: Not applicable Recommendation: We recommend that management implement policies and procedures necessary to ensure that the tenant security deposits are always equal to or greater than the tenant security deposit liabilities. Response Indicator: Agree Completion Date: 9/30/2025 Response: Management is in agreement with the finding, and will establish controls to ensure that tenant security deposits equal to or exceed tenant security deposit obligations.

Finding #2020-001 Program: Project Rental Assistance Payments CFDA 14.157 Criteria: Management's policies and procedures for certifying and recertifying tenants under the Project Rental Assistance Payments ("PRAC") program should provide a sufficient level of assurance that the move in certifications and annual recertifications ("59 certifications") are prepared accurately in accordance with HUD requirements. Statement of Condition: In two of four tenant files tested, rent calculation issues were noted. The aggregate effect of the errors on the PRAC received during the year ended September 30, 2020 was not material. Context: Project rental assistance payments were received for twenty residents during the year ended September 30, 2020. Four tenant files were selected for testing. Rent calculation errors were noted in two files as described in the statement of condition above. Effect: Rent and PRAC amounts were incorrectly calculated in two of the four files tested. Cause: Policies and procedures for completing and reviewing the 59 certifications did not provide a sufficient level of assurance that rent calculation errors would be detected and corrected prior to finalizing the 59 certifications. Questioned Costs: None Repeat Finding: Yes (2019-001) Recommendation: Policies for completing and reviewing the 59 certifications should be strengthened so that a sufficient level of assurance exists that rent calculation errors are detected and corrected before the 59 certifications are finalized. Management?s Response: We have discussed the errors identified during the audit with the personnel responsible for preparing and reviewing the 59 certifications. Management continues to emphasize this area with and exercise increased oversight over the responsible personnel until the occurrence of errors in preparing and reviewing the 59 certifications has been reduced to an acceptable level.

Finding #2019-001 Program: Project Rental Assistance Payments CFDA 14.157 Criteria: Management's policies and procedures for certifying and recertifying tenants under the Project Rental Assistance Payments ("PRAC") program should provide a sufficient level of assurance that the move in certifications and annual recertifications ("59 certifications") are prepared accurately in accordance with HUD requirements. Statement of Condition: In three of four tenant files tested, rent calculation issues were noted. The aggregate effect of the errors on the PRAC received during the year ended September 30, 2019 was not material. Context: Project rental assistance payments were received for twenty-one residents during the year ended September 30, 2019. Four tenant files were selected for testing. Rent calculation errors were noted in three files as described in the statement of condition above. Effect: Rent and PRAC amounts were incorrectly calculated in three of the four files tested. Cause: Policies and procedures for completing and reviewing the 59 certifications did not provide a sufficient level of assurance that rent calculation errors would be detected and corrected prior to finalizing the 59 certifications. Questioned Costs: None Repeat Finding: No Recommendation: Policies for completing and reviewing the 59 certifications should be strengthened so that a sufficient level of assurance exists that rent calculation errors are detected and corrected before the 59 certifications are finalized. Management?s Response: We have discussed the errors identified during the audit with the personnel responsible for preparing and reviewing the 59 certifications and have reemphasized our existing policies and procedures for preparation and review of the 59 certifications. Supervisory personnel will increase oversight over the process to ensure that the occurrence of errors in preparing and reviewing the 59 certifications has been reduced to an acceptable level.