Adams-Bodine 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 the 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 the 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 make adjustments to monthly billings as a result of recertifications. Statement of Condition: The Organization did not properly adjust monthly PRAC billings as a result of completed recertifications, resulting in overpayment of subsidy from HUD. Cause of condition: The Organization processed annual recertifications for seven tenants on the same voucher as the gross rent increase. The gross increase amounts were improperly calculated based on the assistance payments before annual recertifications causing overpayment of subsidy for several months. Effect of condition: For seven tenants, the Organization received five to six months of incorrect subsidy. Recommendation: The design of the current controls should be reviewed to ensure adjustments made to the monthly billings are accurate before submission. Excess subsidy payments should be repaid to HUD. Views of Responsible Officials: Management agrees with the finding and will implement procedures to ensure that all adjustments made to the monthly billings are reviewed for accuracy before submission. Overpayment of subsidy will be repaid to HUD through adjustments to monthly billings.

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 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 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 required supporting documentation. Additionally, the Organization should obtain an updated Form 9887/9887-A annually as part of the recertification process. Statement of Condition: The Organization did not obtain signed annual recertification forms for the tenant files tested during the audit and did not maintain all of the required 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 initial recertification notices 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 and also an updated Form 9887/9887-A. In addition, management should review all files and report and 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.

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 monthly deposits during the year. Cause of condition:The Organization did not properly reconcile its deposits during the year and incorrectly thought it had too many deposits. The Organization returned one deposit during the year due to this, resulting in the reserve for replacement receiving one too few deposits. 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 proper reconciliation of the reserve for replacement is performed. The Organization should ensure that all required deposits to the reserve for replacement are made during the year. 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’s tenant files are required to be maintained in accordance with HUD guidelines to ensure accurate calculations of tenant rent and rental subsidy. Statement of Condition: The Organization did not include all tenant assets in rent calculation on Form 50059. Cause of condition: The Organization did not pursue verification of tenant assets after initial tenant response. Effect of condition: Of the three tenant files sampled for the Organization, we noted discrepancies in one tenant file between the information reported on the Form 50059 and the information in the file for assets to be reported for the tenant. Tenant verified checking account was not included in the rent calculation on Form 50059 as the Organization was unable to obtain all six months of statements from tenant. Recommendation: The design of the current controls should be reviewed to ensure tenant assets are complete and accurate. The information in the files should support the tenant assets used in preparing the Form 50059 and calculating the corresponding tenant’s share of the rent. Views of Responsible Officials: Management agrees with the finding and will implement procedures to ensure tenant assets are verified in accordance with HUD guidelines.

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

Finding reference number: #2021-001 CFDA 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-HD073- NP-WPD, year 2005). Auditor non-compliance code: Z-Other Finding resolution status: Unresolved Universe population size: 211 invoices Sample size information: 25 invoices 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 Repeat finding: No Statement of condition #2021-001: During the year ended March 31, 2021, 7 of the 25 cash disbursements selected for testing were not supported by approved invoices, bills, or other supporting documentation. Criteria: In accordance with HUD Handbook 4370.2, Section 2-6, all disbursements from the project operating account must be supported by approved invoices, bills, or other supporting documentation. Effect or potential effect: The Property is not in compliance with the terms of the PRAC or HUD Handbook 4370.2. Due to inadequate record keeping procedures, the Agent may have paid incorrect amounts for operating expenses. Cause: The Agent did not maintain the required supporting documentation for all cash disbursements in accordance with HUD Handbook 4370.2 due to verbal or informal agreements with vendors. Recommendation: The Agent should ensure that all cash disbursements are supported by approved invoices, bills, or other supporting documentation. The Agent should require that vendors provide written documentation of services or goods provided prior to making payments to the vendors. Completion date: March 31, 2022 Management's response: The Agent concurs with the recommendation. The Agent will require all vendors to submit invoices or other support for work performed prior to making payments to vendors, and all documentation will be retained.

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-HD073- NP-WPD, year 2005; PRAC identification number KY36-Q021-001, year 2005) Auditor non-compliance code: N-Reserve for replacements deposits Finding resolution status: Resolved Noncompliance Information: See statement of condition #2020-001 for noncompliance information. Universe population size: 12 deposits Sample size information: 12 deposits Statistically valid sample: Yes Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $223 Statement of condition #2020-001 (CFDA 14.181): During the year ended March 31, 2020, the Organization only made 11 of the 12 required monthly deposits of $223 to the reserve for replacements account Criteria: Pursuant to Section 5 (a) of the HUD Regulatory Agreement, the Organization is required to make monthly deposits to the reserve for replacements account of $223. Effect: The Organization is not in compliance with the terms of the Regulatory Agreement and the reserve for replacements account is underfunded by $223 at March 31, 2020. Cause: Management oversight caused the missed deposit. Recommendation: The Organization should transfer $223 to the reserve for replacements fund to bring the fund current. Completion date: June 10, 2020 Management's response: Agree. Management transferred $223 into the reserve for replacements account on June 10, 2020.

Finding Reference number: #2020-002 CFDA 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-HD073- NP-WPD, year 2005; PRAC identification number KY36-Q021-001, year 2005) Auditor non-compliance code: R-Section 8 Program Administration 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 Questioned costs: N/A Statement of condition #2020-002 (CFDA 14.181): During the year ended March 31, 2020, 2 of the applicants selected for testing under the HUD Consolidated Audit Guide were admitted to the Property, but did not disappear 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 selected 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. Questioned Costs: N/A 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.