LITTLE TOKYO TOWERS, INC.

Condition Tenants that were previously non-Section 8 tenants and transferred to a Section 8 unit during the year were not refunded the excess amount of security deposit in accordance with HUD Handbook Guidelines and state and local laws. Criteria Per HUD Handbook 4350.3 Rev-1, Little Tokyo Towers, Inc. is to refund security deposits with 30 days after move-out or shorter time required by state and/or local laws. Effect The security deposit held exceeded the amount required by $1,529 in aggregate for those units. Cause Management identified the required reduction of the security deposit at the initial certification for the tenant but did not refund the excess security deposit in a timely manner. Context Management did not refund to the tenant the excess security deposit collected in a timely manner. Auditor?s Recommendations We recommend that Little Tokyo Towers, Inc. pay to the tenant the excess security deposit received. Views of Responsibility Officials and Planned Corrective Actions Management agrees with the finding and will return the excess security deposit amounts as soon as possible.

Finding 2020-001 - Refund of Security Deposit Liability: Recommendation The Corporation should pay to the tenant the excess of security deposit liability previously received when the tenant moved in as a conventional unit. Action Taken Management agrees with the finding and will return the excess security deposit liability as soon as possible.

Condition Certain replacement reserve funds were not deposited to an interest bearing account, and interest earned from certificates of deposit designated for the replacement reserve were deposited into the operating account without HUD approval. Criteria In accordance with the provisions of the Regulatory Agreement, all withdrawals from the replacement reserve shall be approved by the Commissioner, and replacement reserve funds are to be deposited to interest bearing accounts. Effect The replacement reserve is under-funded by $222. Cause Once the certificates of deposits matured, the interest income check was deposited into the operating account, and the cash portion of the replacement reserve was not earning any interest. Context Management did not have HUD approval to withdraw and deposit the interest earned into an account other than the designated replacement reserve. Auditor?s Recommendations We recommend that Little Tokyo Towers, Inc. transfer $222 of interest earned back into one of the designated replacement reserve accounts from the operating account. Views of Responsibility Officials and Planned Corrective Actions Management agrees with the finding and will deposit the $222 of interest earned into the replacement reserve.

Finding 2020-002 - Unauthorized Withdrawals From Replacement Reserve: Recommendation The Corporation should deposit $222 of interest earned back into one of the designated replacement reserve accounts. Action Taken Management agrees with the finding and will deposit the $222 of interest earned into the replacement reserve.

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