HEIGHTS TOWERS SERVICES COMPANY

Findings reference number: 2025-001 - Title and AL Number of Federal Program: Section 8 Housing Assistance (AL 14.195) - Type of finding: Federal Award. - Resolution Status: Resolved - Population size: N/A - Sample size: N/A - Repeat finding: No. - Criteria: Controls should be in place so that the monthly deposit to the reserve for replacement account stipulated by HUD is made for the correct amount. - Statement of Condition: During our testing of reserve for replacement account transactions, it was discovered that the Project had made deposits of an insufficient amount each month for 22 months through September 2024. - Cause: This happened due to an oversight by the lender. The communications from HUD stipulating the increases to the monthly deposits to the reserve for replacement account effective December 1, 2022 and December 1, 2023 were not implemented and the Project continued to make monthly deposits to the reserve for replacement account of the previously stipulated amount. - Effect: There was a shortfall of deposits to the reserve for replacement account, which was corrected in October 2024. - Noncompliance code: N - Questioned costs: None. - Reporting views of officials: Management agrees with the finding. - Contract number: 114-11440. - Context: A large lumpsum deposit made in October 2024 was noticed while performing the audit. - Recommendation: Although the reserve for replacement account is controlled by the lender and Management cannot change the amount of the required monthly deposit, Management should as a courtesy, inform the lender about changes to the required monthly deposits when notice of such change is received from HUD. - Auditors' summary of auditee's comments: They are in agreement, have expressed their inability to update the amount of required monthly deposits to the reserve for replacement account and have pointed out that the lender is notified of changes to the required monthly deposits directly from HUD. Management will try to alert the lender about increases to the monthly required deposit to the reserve for replacement in the future. - Completion date: 5/31/2026. - Response: Per Management, the reserve for replacement account is controlled by the lender and when the lender discovered the deficiency during the year ended May 31, 2025 a lumpsum amount was drafted from the Project's monthly payment to cover the shortfall. In future, Management will inform the lender of changes to the monthly required deposit to the reserve for replacement account made by HUD.

Findings reference number: 2025-002 - Title and AL Number of Federal Program: Section 8 Housing Assistance (AL 14.195) - Type of finding: Federal Award. - Resolution Status: Resolved - Population size: N/A - Sample size: N/A - Repeat finding: No. - Criteria: A withdrawal from the residual receipts account can only be made with the prior approval of HUD. - Statement of Condition: During our testing of residual receipts account transactions, it was discovered that the Project had withdrawn $47,420 and transferred it back after 3 months. - Cause: Management needed the funds to make a down payment on necessary improvements and repairs. Management later included this expenditure along with other major repairs and improvements in its request to HUD for withdrawal of funds from the reserve for replacement account. - Effect: A withdrawal was made from the residual receipts account without obtaining prior approval from HUD and the funds were later deposited back to the account. -Noncompliance code: C - Questioned costs: None. - Reporting views of officials: Management asserts that this withdrawal is included in its request for withdrawal from reserve for replacement account which was approved by HUD. - Contract number: 114-11440. - Context: A withdrawal of $47,420 from the residual receipts account and a later deposit of the same amount three months later was noticed during the audit. - Recommendation: Management should only withdraw funds from the residual receipts account with prior approval of HUD even in case of a temporary loan. - Auditors' summary of auditee's comments: They are in agreement, and will get prior approval from HUD for any withdrawal from the residual receipts account in the future. - Completion date: 5/31/2026. - Response: Management believed that including this expenditure in its request for withdrawal of funds from the reserve for replacement account was sufficient. Management also promptly replaced the funds taken temporarily from the residual receipts account, once they received the funds from the reserve for replacement account controlled by the lender. In the future, management will make sure to obtain prior approval from HUD before making any withdrawals from the residual receipts account.

Findings reference number: 2023-001 Title and AL Number of Federal Program: Section 8 Housing Assistance (AL 14.195) Type of finding: Federal Award. Resolution Status: In progress Population size: N/A Sample size: N/A Repeat finding: No. Criteria: Controls should be in place so that all income, assets, expenses, deductions, family characteristics, and circumstances affecting family eligibility of level of assistance are verified, and tenant rent calculations are reviewed for accuracy. Statement of Condition: During our testing of eligibility, we found that incorrect amounts of tenant income and expenses were used in the computation of tenant rent and HUD assistance in three of the tenants selected for testing. Cause: The move-in certifications are not being thoroughly reviewed for accuracy. Effect: The amounts of tenant rent and HUD assistance may be understated or overstated. Noncompliance code: R Questioned costs: None. Reporting views of officials: Management agrees with the finding. The staff responsible for tenant certification is still being trained. Contract number: 114-11440. Context: The amounts of income and expenses used for calculation of tenant rent and HUD assistance did not match the amounts shown in the source documents provided by the tenant. Recommendation: Management should conduct a complete review of certification of all move-in tenants. Auditors' summary of auditee's comments: They are in agreement, and will conduct a periodic review of certifications. Completion date: 5/31/2024 Response: Management will conduct a review of the tenant rent and HUD assistance for all move-in tenants and prepare recertifications in case of errors. Training and experience will also improve the accuracy of the staff handling tenant certifications.