HOUSTON HEIGHTS TOWERS

Schedule 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: Yes. - Criteria: The regulatory agreement stipulates that all withdrawals exceeding $2,500 from the Reserve for Replacement Account need prior written consent of the lender. - Statement of Condition: Several withdrawals totaling $108,111 for emergency repairs and improvements, to cover payroll, pay audit fees and for other operating expenses were made from the Reserve for Replacement account without prior approval from the lender. - Cause: The Project had several major equipment failures and was short of cash to cover its monthly operating expenses. - Effect or Potential Effect: The Project is not in conformity with the terms of the regulatory agreement. - Auditor Non-Compliance Code: A. - Questioned costs: N/A. - Reporting views of responsible officials: Management was forced to draw funds from the Reserve for Replacement Account to cover the urgent repairs and other operating expenses. - Contract Number: 114-44098. - Context: The lack of prior approval for withdrawals was noticed at the time of performing the audit. - Recommendation: Management should obtain prior consent from lender for all withdrawals from the Reserve for Replacement Account exceeding $2,500. - Auditors' summary of auditee's comment: They are in agreement. Management has tried to rectify the deficiency by obtaining retroactive approval from the lender for the total amount withdrawn from the Reserve for Replacement Account, on April 30, 2025. - Proposed completion date: Completed. - Response: Management agrees with the finding, was aware of the requirement for prior approval and on April 30, 2025, and has obtained retroactive approval from the lender for the withdrawal of 108,111.

Schedule 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: The regulatory agreement stipulates that all withdrawals from the Reserve for Replacement Account be supported by invoices and payments as proof of amounts expended. - Statement of Condition: An invoice of $1,707 was duplicated while calculating the funds to be withdrawn from the Reserve for Replacement account . - Cause: Management oversight. - Effect or Potential Effect: There is an excess withdrawal of $1,707. - Auditor Non-Compliance Code: A. - Questioned costs: N/A. - Reporting views of responsible officials: Management inadvertently duplicated a previously included invoice for expenditure of $1,707 while drawing funds from the Reserve for Replacement Account. - Contract Number: 114-44098. - Context: The duplication of the expenditure in the withdrawal request was noticed at the time of performing the audit. - Recommendation: Management should have controls in place to make sure no expenditure is duplicated for withdrawals from the Reserve for Replacement Account. - Auditors' summary of auditee's comment: They are in agreement. Management asserts that it was a one-time error and they will put controls in place to ensure it does not happen again in the future. - Proposed completion date: Completed. - Response: Management agrees with the finding and has refunded $1,707 to the Reserve for Replacement Account on August 12, 2025.

Schedule reference number 2024-001 Title and AL Number of Federal Program: Home Improvement Partnership Grant (AL 14.239) Type of finding: Federal Award Resolution Status: In process. Population size: N/A Sample size: N/A Repeat finding: No. Criteria: The regulatory agreement stipulates that all withdrawals exceeding $2,500 from the Reserve for Replacement Account need prior written consent of the lender. Statement of Condition: A withdrawal of $37,000 for emergency improvements was made from the Reserve for Replacement account without prior approval from the lender. Cause: Management tried to get approval for the withdrawal from HUD, not realizing that the new regulatory agreement required them to get approval from the lender. Effect or Potential Effect: The Project is not in conformity with the terms of the regulatory agreement. Auditor Non-Compliance Code: N. Questioned costs: N/A. Reporting views of responsible officials: Management thought the approval was to be requested from HUD, as had been the case with the earlier regulatory agreement. Contract Number: 114-44098. Context: The error was noticed at the time of performing the audit. Recommendation: Management should obtain prior consent from lender for all withdrawals from the Reserve for Replacement exceeding $2,500. Auditors' summary of auditee's comment: They are in agreement. Proposed completion date: July 1, 2024. Response: Management agrees with the finding and on July 1, 2024, has obtained retroactive approval from the lender for the withdrawal of $37,000.