EL PASO LAS PUERTAS ABIERTAS, INC.

Compliance Requirement: Reporting

Criteria: In accordance with the Department of Housing and Urban Development Chapter 3 Audit Guidance, the regulatory agreement related to the Project requires that the Project submit an annual operating budget 30 days before the beginning of each fiscal year.

Condition: During our audit procedures and per review of prior year audit Finding 2022-005, it was noted that management failed to prepare and submit an annual operating budget to HUD for the fiscal year ending June 30, 2023. Management submitted an annual operating budget to HUD approximately 23 days after the fiscal year began.

Cause: Management was unaware of certain reporting requirements

Effect: The Organization is not in full compliance with the requirements prescribed in its regulatory agreement with HUD.

Recommendation: To avoid potential non-compliance, we recommend that the executive director and property manager prepare and submit an annual operating budget no later than 30 days prior to the beginning of the next fiscal year.

Management’s Response: Refer to Corrective Action Plan.

Compliance Requirement: Special Tests and Provisions

Criteria: In accordance with the Project’s regulatory agreement with HUD, management shall establish a residual receipts account and make deposits into the account in accordance with HUD requirements (within 90 days after the close of the fiscal year). Disbursements from such fund may be made only after written consent is received from HUD.

Condition: Based on the Computation of Surplus Cash, the deposit due to the residual receipts fund is $5,015. The deposit has not been made.

Cause: Management was unaware of how to calculate the amount due to the residual receipts funds.

Effect: The organization is not in compliance with this requirement.

Recommendation: To avoid potential non-compliance, we recommend that management only make deposits into the residual receipts account of surplus cash at the end of each fiscal year. The required deposit should be made within 90 days after the close of the fiscal year. Disbursements will only be made after obtaining written consent from HUD.

Management’s Response: Refer to Corrective Action Plan.

Compliance Requirement: Special Tests and Provisions

Criteria: In accordance with the Project’s regulatory agreement with HUD, management shall establish and maintain a replacement reserve account to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in a federally secured depository in an interest-bearing account. All earnings including interest on the reserve must be added to the reserve. An amount as required by HUD will be deposited monthly in the reserve fund. All disbursements from the reserve must be approved by HUD.

Condition: Based on the evaluation of the cash account that holds the replacement reserve funds, the account is not interest-bearing.

Cause: Management was unaware of replacement reserve compliance requirements.

Effect: The organization is not in compliance with this requirement.

Recommendation: To avoid potential non-compliance, we recommend that management transfer the funds into an interest-bearing account.

Management’s Response: Refer to Corrective Action Plan.

Compliance Requirement: Special Tests and Provisions

Criteria: In accordance with the Project’s regulatory agreement with HUD, management shall establish and maintain a replacement reserve account to aid in funding extraordinary maintenance and repair and replacement of capital items. HUD regulation mandates that permission be obtained prior to any withdrawals from the replacement reserve.

Condition: Based on the evaluation of withdrawal and permission obtained, it was noted that withdrawal took place prior to receiving permission from HUD.

Cause: Management was unaware of replacement reserve compliance requirements.

Effect: The organization is not in compliance with this requirement.

Recommendation: To avoid potential non-compliance, we recommend that management request and receive permission for withdrawals prior to processing any withdrawals.

Management’s Response: Refer to Corrective Action Plan.