The Pines Housing, Inc.

Finding No. 2023-002 Condition – As of December 13, 2024, management was unable to provide tenant income documents for 2 tenant files of 7 tenant files sampled out of the population (66 total tenant files). Management was unable to provide tenant security deposit documents for all 3 move-ins and move-outs sampled out of the population (9 total move-ins and 13 total move-outs during the audit period). Criteria – Occupancy personnel are expected to have a strong knowledge of the various compliance requirements regarding tenant eligibility and tenant security deposit as explained in the HUD regulatory agreement. Controls should be in place to ensure noncompliance is detected and corrected on a timely basis. Cause – The system of quality review that was in place was not sufficient to detect all instances of noncompliance with file documentation. Effect – There is a possibility that, under the HUD regulatory agreement, HUD may invoke any remedies available by law to redress the breach or compel compliance by the Organization with the tenant file requirements. Recommendation – We recommend that control systems are put in place to ensure there are regular reviews of tenant files to enable management to identify deficiencies and provide training, guidance, and procedures to eliminate errors and issues of noncompliance in the future. Auditor noncompliance code – S – Internal Control Deficiencies Reporting views of responsible officials - Management understands the importance of the matter and the issues that arise if tenant files are not properly maintained. The circumstances surrounding the documents that were not provided were reviewed, and a procedural change has been implemented. Concur or do not concur with this finding - Concur Agree or disagree with auditor recommendations – Agree Completion date or proposed completion date – December 18, 2024 Actions taken or planned on the finding – The Organization will implement procedures to ensure the management agent maintains complete tenant files.

Finding No. 2023-003 Condition – In September 2023, HUD suspended its HAP subsidy to the Organization due to noncompliance regarding the tenant recertifications requirements under the HAP Contract. Criteria – Occupancy personnel are expected to have a strong knowledge of the various compliance requirements regarding tenant recertifications. Controls should be in place to ensure noncompliance is detected and corrected on a timely basis. Cause – The system of quality review that was in place was not sufficient to detect all instances of noncompliance with file documentation. Effect – There is a possibility that, under the HAP Contract, HUD may invoke any remedies available by law to redress the breach or compel compliance by the Organization with the tenant recertification requirements. Recommendation – We recommend that control systems are put in place to ensure there are regular reviews of tenant files to enable management to identify deficiencies and provide training, guidance, and procedures to eliminate errors and issues of noncompliance in the future. Auditor noncompliance code – S – Internal Control Deficiencies Reporting views of responsible officials - Management understands the importance of the matter and the issues that arise if tenant recertifications are not completed. The circumstances surrounding the noncompliance related to tenant recertifications were reviewed, and a procedural change has been implemented. Concur or do not concur with this finding - Concur Agree or disagree with auditor recommendations – Agree Completion date or proposed completion date – December 18, 2024 Actions taken or planned on the finding – The Organization will implement procedures to ensure the management agent complies with the tenant recertification requirements.

Condition ? The security deposit liabilities of $20,052 exceeded the balance in the security deposit bank account of $18,496. There is a security deposit funding deficit of $1,556, resulting in an instance of noncompliance. (Questioned Costs ? $1,556) Criteria ? Under the HUD regulatory agreement, any funds collected as security deposits should be kept separate and apart from all other funds in an amount which shall at all times be equal to or exceed the aggregate balance of all outstanding obligations under said account. Cause ? The Organization did not ensure that tenant security deposit funds were not commingled with operating funds in accordance with the HUD regulatory agreement. Effect ? There is a possibility that, under the regulatory agreement, HUD shall invoke any remedies available by law to redress the breach or compel compliance by the Organization with the security deposit requirement. Recommendation ? We recommend that the Organization identify and implement policies and procedures to ensure that all security deposits received are directly deposited in the separate tenant deposit bank account in accordance with the HUD regulatory agreement. Auditor noncompliance code ? M ? Security deposits Reporting views of responsible officials ? The management agent, Quantum, is responsible for reconciling the security liability account with the security deposit funding. The Asset Management Director, Holly Vander Schaaf is responsible for reviewing the security deposit handling and accounting on a monthly basis. Concur or do not concur with this finding - Concur Agree or disagree with auditor recommendations ? Agree Completion date or proposed completion date - May 12, 2023 Actions taken or planned on the finding - The Organization will identify and implement policies and procedures to ensure that the security deposit bank account balance will at all times be equal to or exceed the aggregate balance of all outstanding security deposit liabilities.

Condition ? As of the May 12, 2023, the Organization has not submitted the reporting package and data collection form to the Federal Audit Clearinghouse (FAC) for the year ended June 30, 2022, which is nine months after the end of the audit period. Criteria ? The Uniform Guidance, 2 CF Section 200.512(a) requires the reporting package and data collection form to be submitted to the FAC by the earlier of 30 calendar days after the report is issued or nine months after the end of the audit period. Cause ? The Organization records were not completed on time to meet the criteria regarding the reporting package and data collection submission to submit within nine months after the end of the audit period. Effect ? As a result of this condition, the Organization will submit the reporting package and data collection form after the deadline. Recommendation ? We recommend that the Organization assign personnel to monitor the records to be completed timely to meet the requirement of the FAC submission process and ensure the reporting package and data collection form are submitted on time on an ongoing basis. Auditor noncompliance code ? Z ? other ? late submission to FAC Reporting views of responsible officials - The management agent, Quantum, is responsible for completing the annual close in a timely manner so that the audit process can begin. The Asset Management Director, Holly Vander Schaaf is responsible for monitoring the annual close process to ensure its timeliness and completeness. Concur or do not concur with this finding - Concur Agree or disagree with auditor recommendations ? Agree Completion date or proposed completion date - May 12, 2023 Actions taken or planned on the finding ? The Organization will assign personnel to monitor the records and to ensure they are completed timely to meet the requirement of the FAC submission process and ensure the reporting package and data collection form are submitted on time on an ongoing basis.

Condition ? The security deposit liabilities of $17,957 exceeded the balance in the security deposit bank account of $17,496. There is a security deposit funding deficit of $461, resulting in an instance of noncompliance. (Questioned Costs ? $461) Criteria ? Under the HUD regulatory agreement, any funds collected as security deposits should be kept separate and apart from all other funds in an amount which shall at all times be equal to or exceed the aggregate balance of all outstanding obligations under said account. Cause ? The Organization did not ensure that tenant security deposit funds were not commingled with operating funds in accordance with the HUD regulatory agreement. Effect ? There is a possibility that, under the regulatory agreement, HUD shall invoke any remedies available by law to redress the breach or compel compliance by the Organization with the security deposit requirement. Recommendation ? We recommend that the Organization identify and implement policies and procedures to ensure that all security deposits received are directly deposited in the separate tenant deposit bank account in accordance with the HUD regulatory agreement.

Condition ? The account balance of depreciable assets and operating and maintenance expense were materially misstated. There was a material on-going plumbing cost incurred during the audit year and was not capitalized. Criteria ? The Organization must ensure that proper internal controls are in place to initiate, authorize, record, process, and report financial data reliably in accordance with generally accepted accounting principles. Cause ? Controls are not in place to ensure that Organization initiate, authorize, record, process, and report financial data reliably in accordance with generally accepted accounting principles. Effect ? As a result of the condition, there is a reasonable possibility that a material misstatement of the Organization?s financial statements will not be prevented or detected by the Organization?s internal control. Recommendation ? We recommend the Organization to identify and capitalize costs in accordance with generally accepted accounting principles. Views of Responsible Officials and Planned Corrective Actions ? The Organization will identify and implement policies and procedures to ensure that all accounting records for the Organization are complete and accurate. Noncompliance code ? S ? Internal Control Deficiencies.

Condition ? On September 17, 2019, the Organization submitted the reporting package and data collection form to the Federal Audit Clearinghouse (FAC) for the year ended June 30, 2018 financial statements. Criteria? The Uniform Guidance, 2 CFR section 200.512(a), requires the reporting package and data collection form to be submitted to the FAC by the earlier of 30 calendar days after the report is issued or nine months after the end of the audit period. The report was issued on October 12, 2018 and was due by November 11, 2018. Cause ? The Organization was not aware of the deadline criteria regarding that the reporting package and data collection form must be submitted within 30 calendar days after the report is issued. Effect ? As a result of the condition, the Organization submitted the reporting package and data collection form after the due date. Recommendation ? The Organization should assign personnel to monitor the FAC submission process and ensure the reporting package and data collection form are submitted on time on an ongoing basis. Views of Responsible Officials and Planned Corrective Actions ? The Organization will assign personnel to monitor the FAC submission process and ensure the reporting package and data collection form are submitted on time on an ongoing basis. Noncompliance code ? Z ? other ? late submission to FAC.

Condition ? During the year ended June 30, 2019, Income Property Management (IPM) was the management agent from April 1, 2019 to June 30, 2019. The management agent did not obtain sufficient fidelity bond coverage (Questioned Costs - $0). Criteria? Pursuant to Chapter 2.14 of HUD Handbook 4381.5, the project?s management agent is required to obtain fidelity bonding coverage in an amount that equals or exceeds two months gross potential collections. Cause ? When the management agent changed on April 1, 2019, the new management agent failed to obtain sufficient fidelity bonding coverage. Effect ? As a result of the condition, the Organization did not comply with the requirement that the management agent obtain sufficient fidelity bonding coverage. Recommendation ? The Organization should ensure that the management agent obtains fidelity bonding coverage in an amount that equals or exceeds two months gross potential collections. Views of Responsible Officials and Planned Corrective Actions ? The Organization will ensure that the management agent obtains fidelity bonding coverage in an amount that equals or exceeds two months gross potential collections on an ongoing basis. Noncompliance code ? Z ? other ? insufficient insurance coverage.

Condition ? During the year ended June 30, 2019, M.L.K Property Management & Support Services, LLC (MLK) was the management agent from August 10, 2018 to March 31, 2019. The management agent did not obtain fidelity bond coverage (Questioned Costs - $0). Criteria? Pursuant to Chapter 2.14 of HUD Handbook 4381.5, the project?s management agent is required to obtain fidelity bonding coverage in an amount that equals or exceeds two months gross potential collections. Cause ? When the management agent changed on August 9, 2018, the new management agent failed to obtain fidelity bonding coverage. Effect ? As a result of the condition, the Organization did not comply with the requirement that the management agent obtain sufficient fidelity bonding coverage. Recommendation ? The Organization should ensure that the management agent obtain fidelity bonding coverage in an amount that equals or exceeds two months gross potential collections. Views of Responsible Officials and Planned Corrective Actions ? The Organization will ensure that the management agent obtains fidelity bonding coverage in an amount that equals or exceeds two months gross potential collections on an ongoing basis. Noncompliance code ? Z ? other ? insufficient insurance coverage.

Information on universe and population size The population size includes 3 move-outs and 1 move-in. Sample size information We sampled a total of 2 tenant files, which consisted of 1 move-in and 1 move-out. Condition ? Out of the 2 total move-in and move-outs tested, one move-in did not pay their entire security deposit agreed to in the lease and one move-out did not have a move-out inspection and was not refunded their security deposit. (Questioned Costs - $314) Criteria? Management agents are expected to understand HUD compliance standards regarding security deposit handling requirements as explained in chapter 6.2 and 6.18 in HUD Handbook(s) 4350.3, and any subsequent notices issued by HUD. Controls should be in place ensuring compliance with security deposit handling requirements. Cause ? The system of quality review that was in place was not sufficient to detect all instances of noncompliance regarding tenant security deposit requirements. Effect ? As a result of the condition, we noted the instance described in the above finding that caused a compliance exception. The extent of the compliance exception may range from 50% to 100% of total of move-ins and move-outs. Recommendation ? We recommend that control systems are put in place to ensure there are regular reviews of security deposit handling for move-ins and move-outs. Views of Responsible Officials and Planned Corrective Actions ? The Organization will ensure that there are control systems to ensure there are regular reviews of security deposit handling for move-ins and move-outs on an ongoing basis. Noncompliance code ? S ? Internal Control Deficiencies

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