VAN BUREN APARTMENTS INCNon-Profit

Finding reference number: 2024-001 Assistance Listing (Federal award identification number and year): Mortgage Insurance – Rental Housing, Assistance Listing No. 14.134, 122-11398 and 2004 Auditor non-compliance code: N – Reserve for Replacement Deposits Finding resolution status: Resolved Universe population size: The universe population size is not applicable to the finding. Sample size information: The sample size information 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: $3,468 Statement of condition 2024-001: During the year ended December 31, 2024, the Corporation did not make the required deposits to the reserve for replacements. Criteria: Pursuant to the HUD regulatory agreement, the Corporation is required to make deposits to the reserve for replacements in the amount of $34,056 per year. Effect: The Corporation is not in compliance with the HUD regulatory agreement and the reserve for replacements is underfunded by $3,468 at December 31, 2024. Cause: The Corporation did not increase the monthly deposit according to the HUD approved 9250 requiring the increase in reserve for replacement deposits. Recommendation: Management should make a deposit to the reserve for replacements for $3,468 for the delinquent deposits. In future periods, management should fund the reserve for replacements on an annual basis as required by the HUD regulatory agreement. Management's response: Management concurs with the finding and agrees with the auditor's recommendation. Management made a deposit of $3,468 on March 11, 2025 for the delinquent deposits.

Finding reference number: 2023-001 Assistance Listing (Federal award identification number and year): Mortgage Insurance – Rental Housing, Assistance Listing No. 14.134, 122-11398 and 2004 Auditor non-compliance code: Z - Other Finding resolution status: Resolved Universe population size: The universe population size is not applicable to the finding. Sample size information: The sample size information 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 2023-001: For the year ended December 31, 2022, the Corporation did not submit audited financial statements to the Federal Audit Clearinghouse within 30 calendar days after receipt of the auditor's report on March 31, 2023. The audited financial statements were submitted to the Federal Audit Clearinghouse on May 11, 2023. Criteria: Pursuant to 2 CFR 200.512(a), the Corporation is required to electronically submit audited financial statements to the Federal Audit Clearinghouse within the earlier of 30 calendar days after receipt of the auditor's report or nine months after the end of the audit period. Effect: The Corporation is not in compliance with the federal reporting requirements. Cause: Management oversight. Recommendation: The Corporation should submit audited financial statements to the Federal Audit Clearinghouse within the time frames required. Management's response: Management concurs with the finding and agrees with the auditor's recommendation. The audited financial statements have been submitted to the Federal Audit Clearinghouse. No further action required.

Condition: On August 29, 2019, fraud and embezzlement was detected at the Project?s management company, H.D.S.I. Management, Inc. (?HDSI?). An HDSI employee (the ?Employee?) was fraudulently preparing false invoices to a certain vendor (the ?Vendor?) and forging HDSI company checks payable to the Vendor. Management believes there were no amounts embezzled from this Project. HDSI?s insurance company is reimbursing the affected projects, and there is an on-going police investigation related to this fraudulent activity. The investigation could result in the detection of embezzlement effecting this Project. Criteria: HDSI is required to have internal controls in place to prevent and detect fraudulent activity and provide for the protection of project assets. Effect of Condition: An HDSI employee was able to falsify records and embezzle project assets, and the fraudulent activity went undetected for three years. Cause of Condition: The Employee was an accounts payable clerk, had access to check stock, was able to prepare fraudulent invoices to the Vendor, and able to forge the signatures of on-site managers and forge the signature of an authorized check signer. Management believes there might have been collusion between the Employee and the Vendor. In addition, the Vendor was not included on HDSI?s master vendor list, although HDSI had the Vendor?s documents, such as certificate of insurance, business license, and W-9. Recommendation: Project management should ensure that HDSI implements processes and controls that provide for the proper segregation of duties between the authorization, execution, and review of transactions; such as, approval of all new vendors, regular review of its master vendor list, implement segregation of duties between the processing of vendor invoices and the review and authorization of disbursements by someone independent of the processing function, reviewing bank statements for unusual activity, and the on-site manager?s review of monthly expenditures. Additionally, Project management should develop policies and procedures to enhance its periodic reviews of the work performed by HDSI to ensure it is performing its functions as expected. Questioned Costs: None noted. Management?s response: The management company, HDSI, is in the process of implementing additional internal controls that would ensure that such fraud and embezzlement will be less likely to occur. These controls include reviewing monthly bank statements for unusual vendors and reviewing copies of all checks for all disbursements to ensure that they were made out to the appropriate vendor, sending each on-site manager a list of monthly disbursements related to the Organization for review and to ensure that each disbursement is related to work performed on the building.

GSA_MIGRATION