Anderson Place Apartments, Inc.

Criteria: The Organization is required to perform an annual recertification of all tenants by the tenant’s recertification anniversary date. The Organization is required to inform tenants, through written notice, of their responsibility to provide information needed to complete recertification process and copies of these notices should be maintained in the tenant files, along with required supporting documentation. Tenants must be provided 30-day notice of an increase in tenant portion of rent upon completion of recertification procedures. Statement of Condition: The Organization did not maintain copies of notices of recertification or all supporting documentation, such as the EIV reports, in the tenant files and did not complete the recertification process in a timely manner. In one instance, tenant was not provided 30-day notice of rent increase. Cause of condition: The Organization did not pursue tenant compliance after initial recertification notices were mailed to the tenants. Effect of condition: Annual recertifications are not completed on time. Recommendation: The design of the current controls should be reviewed to ensure tenants receive proper notice of annual recertification process and that the process is completed by the tenants certification anniversary date. Additionally, tenant files should be reviewed to ensure all supporting documentation is included. Views of Responsible Officials: Management agrees with the finding and will implement procedures to ensure tenant recertifications are completed in a timely manner and supporting documentation is maintained in tenant files in accordance with HUD guidelines.

Criteria: The Organization is required to hold all tenant security deposits in a separate interest bearing account. Statement of Condition: The Organization withdrew funds from the security deposit account in the current year leaving the amount of cash in the security deposit account lower than the total liability for current tenants’ security deposits. Cause of condition: The Organization does not keep an active listing to track the payment of tenant deposits and allocated interest earned on account. Effect of condition: Security deposit bank account is underfunded. Recommendation: The design of the current controls should be reviewed to ensure all tenant security deposits are properly tracked. Management should make transfers to the security deposit account to cover all deposits currently on hand. Views of Responsible Officials: Management agrees with the finding and will implement procedures to ensure proper tracking of security deposits and will make the necessary transfer to fund the security deposit account.

Criteria: The Organization is required to make monthly deposits to a reserve for replacements account which is to be used for replacements to structural elements or mechanical equipment in the facility. Statement of Condition: The Organization did not make all of its required monthly deposits during the year. Cause of condition: The Organization received notice of approval to increase the required reserve deposit effective February 1, 2025 in March 2025 before year end. The Organization had made the required deposits based on the previously required amount but did not make the additional deposits required based on the approval of new rate. Effect of condition: The reserve for replacement did not receive all the deposits required by the Regulatory agreement. Recommendation: The design of the current controls should be reviewed to ensure that all required monthly deposits are made to the reserve for replacement. The Organization should ensure that funds are deposited to the reserve to correct the shortage. Views of Responsible Officials: Management agrees with the finding and will implement procedures to ensure that all required deposits are made to the reserve for replacement. A deposit has been made to correct this shortage.

Criteria: The Organization is required to perform an annual recertification of all tenants, which requires verifying tenant income and documenting eligibility with HUD Form 50059. Tenants are required to sign the form, and it must be maintained within the Organization’s tenant file, along with supporting documentation. Statement of Condition: The Organization did not maintain signed annual recertification forms for the tenant files tested during the audit and did not maintain all of the information such as the EIV reports in the files to support the data used in its preparation. Cause of condition: The Organization did not pursue tenant compliance after letters for recertification were mailed to the tenants. Effect of condition: There is no evidence of a tenant’s eligibility for rent assistance maintained by the Organization in the tenant file. Recommendation: The design of the current controls should be reviewed to ensure tenant files are complete and accurate. The Organization should fill out and maintain HUD Form 50059 for each annual recertification and keep information in the files that support the data used in its preparation. Tenants should sign the recertification form. In addition, management should review all files and report any discrepancies to HUD in a timely manner. Views of Responsible Officials: Management agrees with the finding and will implement procedures to ensure tenant recertifications are documented in accordance with HUD guidelines and that proper documentation is maintained within the tenant files.

The year-end financial statements prepared for the Organization’s board members and management to assess ongoing operating results are not prepared in accordance with accounting principles generally accepted in the United States of America, in that they do not include certain year-end adjusting entries, a statement of cash flows, and full note disclosures.

The Organization did not maintain signed annual recertification forms for the tenant files tested during the audit and did not maintain all of the information such as the EIV reports in the files to support the data used in its preparation.

Excess residual receipts were not remitted to HUD as required.

Finding reference number: #2020-001 CDFA title and number (Federal award identification number and year): Supportive Housing for Persons with Disabilities, CFDA No. 14.181 (Section 811 loan identification number 083-HD050- NP-WPD, year 1999; PRAC identification number KY36-Q981-002, year 1999) Auditor non-compliance code: R - Section 8 Program Administration Finding resolution status: Unresolved Noncompliance Information: See statement of condition #2020-001 for noncompliance information. Universe population size: The universe population size is not applicable to the finding. Sample size information: The sample size is not applicable to the finding. Statistically valid sample: N/A Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: N/A Statement of condition #2020-001 (CFDA 14.181): During the year ended March 31, 2020, one resident selected for testing did not have a current, properly executed Form HUD-50059 on file. Criteria: Per HUD Handbook 4350.3.7, Chapter 4, a recertification of income must be conducted at least annually. Effect: The Organization is not in compliance with the HUD Regulations. Cause: Due to management oversight, the recertification was not completed in a timely manner. Recommendation: The management agent should recertify the resident immediately. Additionally, the management agent should make sure that adequate controls are in place to ensure that future resident income recertifications are completed in a timely manner. Completion date: In progress. Management's response: The management agent concurs with the recommendation and is working to have the resident recertified. Once recertified, the management agent will request HAP subsidy adjustments for the periods effected.

Finding reference number: #2020-002 CDFA title and number (Federal award identification number and year): Supportive Housing for Persons with Disabilities, CFDA No. 14.181 (Section 811 loan identification number 083-HD050- NP-WPD, year 1999; PRAC identification number KY36-Q981-002, year 1999) Auditor non-compliance code: B - Failure to make required residual receipts deposit Finding resolution status: Unresolved Noncompliance Information: See statement of condition #2020-002 for noncompliance information. Universe population size: The universe population size is not applicable to the finding. Sample size information: The sample size is not applicable to the finding. Statistically valid sample: N/A Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $7,433 Statement of condition #2020-002 (CFDA 14.181): On June 27, 2019, the management agent remitted residual receipt funds required to be deposited in the Property's residual receipts account directly to HUD without making the deposit to the residual receipts account or receiving an approved Form HUD-9250 allowing for the withdrawal of the funds from the residual receipts account. Criteria: Per HUD memorandum issued June 19, 2015 to owners of Section 811 and Section 202 financed properties with PRAC Contracts, residual receipts exceeding $250 per unit must be remitted to HUD upon "termination" of the PRACs, which generally fall on the annual contract anniversary date, even if that contract will be renewed. At the appropriate time, owners are required to submit Form HUD-9250 for the release of those residual receipts exceeding $250 per unit. Effect: The Organization is not in compliance with HUD regulations and the residual receipts fund was underfunded $7,433. Cause: The management agent was following the HUD memorandum issued June 19, 2015, which directed owners to remit residual receipt funds in excess of $250 per unit, once an approved Form HUD-9250 was received. The management agent misinterpreted this memorandum and incorrectly thought that they should transfer the funds directly to HUD. Recommendation: The management agent should submit Form HUD-9250 to their assigned HUD account executive, for approval of the prior remittance. Completion date: In progress Management's response: The management agent concurs with the recommendation. Management will submit Form HUD-9250 to the Property's HUD account executive for approval.

Finding reference number: #2020-003 CDFA title and number (Federal award identification number and year): Supportive Housing for Persons with Disabilities, CFDA No. 14.181 (Section 811 loan identification number 083-HD050- NP-WPD, year 1999; PRAC identification number KY36-Q981-002, year 1999) Auditor non-compliance code: J - Unauthorized Management Fees Finding resolution status: Unresolved Noncompliance Information: See statement of condition #2020-003 for noncompliance information. Universe population size: The universe population size is not applicable to the finding. Sample size information: The sample size is not applicable to the finding. Statistically valid sample: N/A Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $2,809 Statement of condition #2020-003 (CFDA 14.181): For the year ended March 31, 2020, management fees were overpaid by $2,809. Criteria: In accordance with the PRAC Contract and Regulatory Agreement, management fees collected should be in accordance with HUD Form 3839-B Project Owner's & Management Agent Certification. Effect: The Organization is not in compliance with the terms of the Regulatory Agreement and the Property's operating cash account is underfunded by $2,809. Cause: The management agent pays an estimated management fee each month, rather than calculate the property management fee earned on a monthly basis based on collections. Recommendation: The management agent should calculate and pay management fees on a monthly basis, in accordance with the Management Agent Certification. The management agent should repay $2,809 to the Property's operating account. Completion date: March 31, 2021 Management's response: The management agent concurs with the recommendation and will calculate management fees on a monthly basis, in accordance with the Management Agent Certification. The management agent will repay $2,809 to the Property's operating account.

Finding reference number: #2020-004 CDFA title and number (Federal award identification number and year): Supportive Housing for Persons with Disabilities, CFDA No. 14.181 (Section 811 loan identification number 083-HD050- NP-WPD, year 1999; PRAC identification number KY36-Q981-002, year 1999) Auditor non-compliance code: R - Section 8 Program Administration Finding resolution status: Unresolved Noncompliance Information: See statement of condition #2020-004 for noncompliance information. Universe population size: The universe population size is not applicable to the finding. Sample size information: The sample size is not applicable to the finding. Statistically valid sample: N/A Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: N/A Statement of condition #2020-004 (CFDA 14.181): During the year ended March 31, 2020, an applicant selected for testing under the HUD Consolidated Audit Guide was admitted to the Property, but did not appear on the waiting list. Criteria: In accordance with the PRAC and HUD Handbook 4350.3, Sections 4-15 and 4-16 the management agent must place applicants on the Property's waiting list and select applicants from the waiting list in chronological order in order to fill vacancies. Effect or potential effect: The Property is not in compliance with the terms of the PRAC or HUD Handbook 4350.3. Due to inadequate record keeping procedures the management agent may have applicants out of chronological order. Cause: The management agent was not properly maintaining the wait list in accordance with HUD Handbook 4350.3. Recommendation: The management agent should ensure that all the applicants are properly documented on the waiting list and applicants are contacted and selected in chronological order. Completion date: In progress Reporting views of responsible officials: The management agent concurs with the recommendation. The management agent will review and update its procedures to ensure that all applicants are included on the waiting list and applicants are selected in chronological order.