ENCINO TERRACE, INC.Non-Profit

Finding 2022-001: Tenant Selection Plan is in Conflict with Section 202 Eligibility Requirements. Criteria: The Project was originally established under Section 202 of the Housing Act of 1959, which requires such projects to serve exclusively elderly and disabled residents. For Housing projects established under Section 202 between 1965 and 1974, elderly is defined as single people aged 62 or more or households the head of which (or the spouse) is aged 62 or more. Ten percent of the units in a Section 202 project may be reserved for people with disabilities. Title VI, Subtitle D of the Housing and Community Development Act of 1992 (Title VI-D) authorizes owners to establish a preference for elderly families in certain Section 8 assisted properties that were designed primarily for occupancy by elderly families if certain requirements are met. Thirty units of the Project are subsidized under a Section 8 contract. Further, the Flexible Subsidy Loan agreement requires that the Project continues to be operated in accordance with the provisions of Section 202 of the Housing Act of 1959 throughout the duration of the contract. Condition: During our review of the tenant census provided as of April 2022, we noted that 21 tenants out of the total tenant census of 156 are between the ages of 55 and 61. Cause: The property manager has currently implemented a tenant selection plan for individuals aged 55 and older. While Section 8 assisted properties may be marketed towards elderly individuals and in certain circumstances, may admit near-elderly individuals and other populations, so long as they meet the requirements of the Housing and Community Development Act of 1992, the Project?s Flexible Subsidy agreement requires the original requirements of Section 202 be maintained until the contract expires or the original Section 202 Direct Loan is paid in full. The Direct Loan under Section 202 and the Flexible Subsidy Loan mature in January 2023. Effect: The current tenant selection plan implemented for the project is not reflective of Section 202 requirements. Eligibility requirements for Section 202 programs are not currently implemented. Recommendation: We recommend that the Project seek approval from HUD for waiving the elderly restriction and resolve any conflicts of eligibility requirements between Section 202, Section 8 and the Flexible Subsidy loan program. In accordance with Chapter 3, part 61 of the HUD manual 4350.3 REV-1 ( HUD Occupancy Handbook), projects may request to waive the elderly restriction due to market conditions and/or to maintain the economic soundness of the project. In such cases, HUD approval is required before the restriction can be waived and the waiting list opened to nonelderly persons. We recommend the tenant selection plan be updated in accordance with HUD?s written determination of eligibility requirements for the project. Management?s response: Management agrees with auditor recommendation. Refer to Corrective Action Plan.

Findings and Questioned Costs - Major Federal Award Programs Finding 2020-001 - Late Submission of Data Collection Form (Material or Other Noncompliance) CFDA Number: 14.157 Title: Supportive Housing for the Elderly Agency: HUD Period of Performance: April 1, 2019 to March 31, 2020 CFDA Number: 14.164 Title: Flexible Subsidy Loan Agency: HUD Period of Performance: April 1, 2019 to March 31, 2020 CONDITION Encino Terrace did not submit its data collection form package to the Federal Audit Clearinghouse by the statutory deadline. It was submitted after the statutory deadline. CRITERIA The data collection form reporting package must be submitted to the Federal Audit Clearinghouse the earlier of 30 calendar days after the issuance of the auditor?s report or nine months after the end of the audit period per 2 CFR 200.512 (a) (1). The fiscal year report for the year ending March 31, 2019 was issued December 23, 2019. The data collection form was submitted and accepted by the Federal audit clearinghouse on January 3, 2020, which is three days late. CAUSE Encino Terrace did not certify the Audit with the Federal Audit Clearinghouse within the nine months after the end of the audit period. EFFECT The agency was out of compliance with the federal statute for reporting results of the single audit. Information was not available to funding and oversight agencies when required. The finding might prevent a low risk auditee determination in a future period. RECOMMENDATIONS We recommend that the filing requirement be reaffirmed to staff to ensure the entity meets an on-time filing. This finding should not repeat. VIEWS OF RESPONSIBLE OFFICIALS AND CORRECTIVE ACTION PLAN

Findings and Questioned Costs ? Major Federal Award Programs Finding 2019-001: Late Submission of Owner Certified Financial Statements (Material or Other Noncompliance) CFDA Number 14.164 Titles: Flexible Subsidy Loan Agency: Department of Housing and Urban Development (HUD) Year: Fiscal Year Ending March 31, 2019 STATEMENT OF CONDITION: We noted that the Organization did not electronically submit its owner-certified financial statements to the U.S. Department of Housing and Urban Development, Public Indian Housing- Real Estate Assessment Center (PIH-REAC) within 90 days after fiscal year-end. The Organization?s submission was thirteen days late. CRITERIA: The Organization is required to electronically submit owner-certified financial statements within 90 days of fiscal year-end as required by the Real Estate Assessment Center Summary of Financial Reporting and Auditing Guidance for HUD Multifamily Program Participants and Independent Auditors and in accordance with its regulatory agreement. CAUSE OF CONDITION: The owner-certified submission was not filed timely because of scheduling conflicts with management staff. EFFECT OF CONDITION: The owner-certified financial statements were submitted late. RECOMMENDATION: We recommend that the Organization establish procedures to ensure that owner-certified financial statements are prepared for timely submission. VIEW OF RESPONSIBLE OFFICIALS: We concur with the finding that the owner certified financial statements were submitted late. The owner-certified submission must be filed timely. Additional management staff will be trained to complete the submission timely to avoid scheduling conflicts.

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