Update its procedures to allow automatic boarding for all partial claims paid to eliminate errors caused by manual boarding, including partial claim notes not boarded, and partial claim notes boarded but not yet paid by HUD.

Develop and implement procedures and controls to board all manually paid partial claims and record all lender payments received via claim remittances.

Develop and implement additional controls to ensure that it accepts only note and mortgage documents with correct amounts that could be matched to the amount recorded in SMART and that the note and mortgage documents marked as received are entered into SMART.

Develop and implement additional controls to ensure that it releases mortgages only when they have been satisfied.

Provide documentation to show that disbursements totaling $2,136,849 and any bank transfers to the owner’s non-project accounts that occurred outside of our audit period were reasonable and necessary expenses for the operation of the project or repay the project from non-project funds for any amount that it cannot support.

Provide documentation to show that project funds are segregated in the project’s name, in accordance with the regulatory agreement and HUD requirements.

Take immediate action to remove project bank accounts as security for the owner’s line of credit and, thereby put up to $100,000 to better use.

Submit a project owner’s or management agent’s certification, management entity profile, current budget and other required documentation to HUD for review and approval.

Develop and implement controls to ensure that the project complies with the regulatory agreement and applicable HUD requirements, including but not limited to policies and procedures for maintaining project funds in separate bank accounts in the project’s name, using project funds only for necessary expenses of the project, and reconciling bank accounts to the project’s computerized accounting records.

Provide training and technical assistance to the owner’s executive director and staff to ensure compliance with the terms of its regulatory agreement and applicable HUD requirements.

Pursue the collection of the $5,690,000 in surplus proceeds that HUD was entitled to receive from 2017 loan terminations.

Implement a policy to require servicers to send surplus proceeds notifications to the HUD Secretary-held assets servicing contractor and establish procedures to improve HUD’s surplus proceeds collection efforts.

Redesign the partial claim program to eliminate its weaknesses and ensure that partial claims benefit from a stronger lien position to put $6,770,000 to better use.

Reimburse its program $279 from non-Federal funds for the ineligible payment it made due to the conflict-of-interest situation identified by the audit.

Develop and implement controls to prevent and detect conflict-of-interest situations.

Provide documentation to show that indirect payroll expenses totaling $225,182 charged to the program were reasonable and necessary or repay its program from non-Federal funds for any amount that it cannot support.

Develop and implement a cost allocation plan to use as a basis for charging indirect payroll expenses to the program.

Provide documentation to show that administrative fees totaling $47,376 were used to perform administrative duties for the program or repay its program from non-Federal funds for any amount that it cannot support.

Develop and implement controls to ensure that administrative fees are used to perform administrative duties for the program.

Certify, along with the owners of the 10 units cited in the finding, that the applicable housing quality standards violations have been corrected.