ROSEWOOD HOUSING CORPORATION

The Project does not have enough funds in the security deposit account to cover the security deposit liabilities..

Finding 2023-001- Replacement Reserve Deposits Condition Found The Project only made 11 months of deposits for a total of $5,660. The deposits should have totaled $6,240 . Criteria: According to HUD’s guidelines, a Project must make monthly deposits to the reserve for replacement account. Cause: Project management did not make the required monthly deposit, causing a shortage in the reserve for replacement account for the year ending June 30, 2023. Effect The Project did not make the required deposit. Recommendation: The overall reserve shortage of $580 should be funded as soon as possible. Current Status Management will fund the reserves as soon as funds are available.

Finding 2022-001- Replacement Reserve DepositsCondition Found The Project only made 11 months of deposits for a total of $5,760. The deposits should have totaled $6,240.Criteria: According to HUD?s guidelines, a Project must make monthly deposits to the reserve for replacement account.Cause: Project management did not make the required monthly deposit, causing a shortage in the reserve for replacement account for the year ending June 30, 2022.Effect The Project held excess cash and did not make the required deposit.Recommendation: The overall reserve shortage of $480 should be funded as soon as possible.Current Status Management will fund the reserves as soon as funds are available.

FINDING 2020-001 ? Replacement Reserve Deposits Federal Agency: U.S. Department of Housing and Urban Development Pass through Entity: Not applicable Program Name: Section 811 Capital Advance Program Section 811 Project Rental Assistance Payments CFDA# and Program Expenditures: 14.181 ($1,377,900) 14.181 ($ 54,066) Award Number: N/A Federal Award Year: July 1, 2019 to June 30, 2020 Questioned Costs: None Condition Found: The Project made a lump sum deposit totaling $6,240 to the reserve for replacement account for the year ended June 30, 2020 instead of monthly deposits of $520 as required by the regulatory agreement. However, $6,240, $6240, and $2,600 is still due to the replacement reserve for required deposits from the years ended June 30, 2019, 2018, and 2016, respectively. In total, $15,080 is due to the replacement reserve account. Criteria: The regulatory agreement requires that $520 be deposited in the replacement reserve account each month from July 2019 through June 2020. The requirement has been in place since the regulatory agreement was signed. Cause: Due to cash flow issues, a lump sum payment was made for the current year funds instead of monthly deposits. The required deposits were not transferred from the operating account to the replacement reserve account for the years ended June 30, 2019, 2018, and 2016. Possible Asserted Effect: The Project was not following its regulatory agreement. The replacement reserve account did not earn as much interest income as it possibly could have if the deposits were made monthly. In addition, the replacement reserve was also underfunded by a total of $15,080 for the years ended June 30, 2019. 2018 and 2016. Repeat Finding: This finding was reported in the immediately prior audit as Finding 2019-001. Recommendation: The overall reserve shortage of $15,080 should be funded as soon as possible. Management should consider requesting a replacement reserve deposit waiver or a rent increase from HUD. Management Response: The management company will work with the local HUD office to determine if a waiver for replacement reserve deposits can be obtained for the years ended June 30, 2016, 2018, and 2019. If a waiver cannot be obtained, cash flow will be reviewed and the Project will create a Plan to fund the $15,080 due for the prior years while still making monthly replacement reserve deposits for the current year.

FINDING 2020-002 ? Residual Receipt Deposits Federal Agency: U.S. Department of Housing and Urban Development Pass through Entity: Not applicable Program Name: Section 811 Capital Advance Program Section 811 Project Rental Assistance Payments CFDA# and Program Expenditures: 14.181 ($1,377,900) 14.181 ($ 54,066) Award Number: N/A Federal Award Year: July 1, 2019 to June 30, 2020 Questioned Costs: None Condition Found: The $2,363 of surplus cash at June 30, 2019 was not deposited into the residual receipts account within ninety days. Criteria: According to HUD?s guidelines, a Project must deposit surplus cash due to residual receipts within ninety days after the fiscal period ends (REAC submission due date). Cause: Project management did not transfer the surplus cash of $2,363 from the operating account to the residual receipts account. Possible Asserted Effect: The Project held excess cash and did not make the required residual receipts deposits totaling $2,363. Repeat Finding: See Finding 2019-002 for a similar finding in the prior year. Recommendation: Surplus cash was recalculated at June 30, 2020. The Project was not required to make a residual deposit for the year ended June 30, 2020. The Project should wait for further instructions from HUD for the residual deposit that was due June 30, 2019. In addition, procedures should be improved to ensure that surplus cash is calculated and transferred to residual receipts timely. Management Response: The Project does not owe a residual receipts based on the June 30, 2020 surplus cash calculation. The Project should wait for further instructions from HUD for the residual deposit that was due June 30, 2019. In addition, procedures will be improved to ensure that surplus cash is calculated and transferred to residual receipts timely.

FINDING 2019-001 ? Replacement Reserve Deposits Federal Agency: U.S. Department of Housing and Urban Development Pass through Entity: Not applicable Program Name: Section 811 Capital Advance Program CFDA# and Program Expenditures: 14.181 ($1,377,900) Award Number: N/A Federal Award Year: July 1, 2018 to June 30, 2019 Questioned Costs: None Condition Found: The reserve for replacement was not funded for the year ended June 30, 2019. Monthly deposits totaling $6,240 for the year should have been deposited in the account. In addition, $6,240 and $2,600 is due to the replacement reserve for required deposits from the years ended June 30, 2018 and 2016, respectively. A total of $15,080 is due to the replacement reserve account. Criteria: The regulatory agreement requires that $520 be deposited in the replacement reserve account each month from July 2018 through June 2019. Cause: The required deposits were not transferred from the operating account to the replacement reserve account. Possible Asserted Effect: The replacement reserve was underfunded by $6,240 for the year ended June 30, 2019. The replacement reserve was also underfunded by $6,240 and $2,600 for the years ended June 30, 2018 and 2016. The cumulative total due to the replacement reserve fund is $15,080. Repeat Finding: This finding was reported in the immediately prior audit as Finding 2018-003. Recommendation: The overall reserve shortage of $15,080 should be funded as soon as possible. Management should consider requesting a replacement reserve deposit waiver or a rent increase from HUD. Management Response: Management will transfer fifty percent (50%) of the funds due from operating to reserve in September 2019. The remaining funds will be transferred over the next three months. The management company will create an automatic transfer with the bank to insure deposits are made in a timely fashion.

FINDING 2019-002 ? Residual Receipt Deposits Federal Agency: U.S. Department of Housing and Urban Development Pass through Entity: Not applicable Program Name: Section 811 Capital Advance Program CFDA# and Program Expenditures: 14.181 ($1,377,900) Award Number: N/A Federal Award Year: July 1, 2018 to June 30, 2019 Questioned Costs: None Condition Found: The $573 of surplus cash at June 30, 2018 was not deposited into the residual receipts account within ninety days. In addition, the $8,725 of surplus cash at June 30, 2017 has not deposited into the residual receipts account. Criteria: According to HUD?s guidelines, a Project must deposit surplus cash due to residual receipts within ninety days after the fiscal period ends (REAC submission due date). Cause: Project management did not transfer the surplus cash of $573 from the operating account to the residual receipts account. Possible Asserted Effect: The Project held excess cash and did not make the two required residual receipts deposits totaling $9,298. Repeat Finding: See Finding 2018-004 for a similar finding in the prior year. Recommendation: The $9,298 should be transferred to the residual receipts account as soon as possible. Procedures should be improved to ensure that surplus cash is calculated and transferred to residual receipts timely. Management Response: Management transferred $9,298 from operating to residual receipts in September 2019.

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