THOMASTON PROPERTY HOLDINGS, LLC

Finding 2019-001 ? Distribution of funds by owners in excess of allowable surplus cash CFDA ? 14.129, Noncompliance & Significant Deficiency Criteria: 24 CFR Part 232.254, gives the requirements of distributing Surplus Cash. The regulations state that ?upon each calculation of borrower surplus cash, as defined by HUD, which calculation shall be made no less frequently than semi-annually, borrower must demonstrate positive surplus cash, or to the extent surplus cash is negative, repay any distributions taken during such calculation period within 30 calendar days.? The HUD Regulatory Agreement further states that ?Surplus Cash shall be calculated semi-annually, at the end of the first six months of the Borrower?s annual fiscal year, and at the end of the Borrower?s fiscal year. This report is to be submitted with the annual year-end financial statements submitted to HUD. Payments of surplus cash are only allowed after demonstrating positive surplus cash at the end of a semi-annual period or the end of the year. Condition & Cause: Upon calculating the surplus cash with the audited financial statements, the HUD Form 93486 reflected a negative surplus cash balance of $29,991.08. This amount is mainly due from accruals for the subsequent payment due the mortgage company. The Company failed to hold back sufficient cash needed to cover the next month?s mortgage obligation. As a part of the operating procedures for the Company, distributions are made monthly for the operating account for all surplus cash that existed in the checking account. This does not allow for accruals of obligations for the first of the next month. Additionally, the Company has not demonstrated surplus cash by calculating surplus cash on the HUD Form 93486 on a semi-annual basis, but rather just distributing cash monthly. Effect: Failure to follow the method prescribed by HUD results in noncompliance with the Regulatory Agreement and the HUD Code of Federal Regulations. Recommendation: We recommend that no surplus cash distributions be taken by the owners of the Company unless first using the HUD 93486 on a semi-annual basis to support the distribution. Additionally, we recommend that the owners make a contribution back to the operating account in the amount of $29,991.08 to reimburse for the negative surplus cash as of December 31, 2019. Questioned Costs: $29,991.08 Repeat Finding: No Views of responsible officials: The Owners concur with the results of the audit and recommendation.

Finding 2019-001 ? Distribution of funds by owners in excess of allowable surplus cash CFDA ? 14.129, Noncompliance & Significant Deficiency Corrective Action Plan: The owners will redeposit all funds drawn out in excess of available amounts within 30 days of audit report issuance. We will also make sure that surplus cash distributed in the future will be based upon the HUD method of surplus cash by completing the HUD Form 93486 every six months. Person Responsible: Ryan Scates Anticipated Completion Date: 10/31/2020

2018-001

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