Audit 298017

Criteria: According to HUD Regulatory Agreement (Form HUD-92466M), Section 14, borrower shall not make or take, or receive and retain, nor allow any Affiliate or Principal to receive or retain any Distribution of assets or any income of any kind of the Project, except from Surplus Cash or in accordance with Program Obligations. Condition: Two owner's distributions were selected for testing. This represents 100% of the testing population. We noted that the total amount of distributions made during the year was in excess of the amount calculated as of the last day of fiscal year ending December 31, 2022. Cause: The LLC add up all calculated amounts of Surplus Cash from FY2018 to FY2022 to arrive at the amount available for distribution instead of distributing only the FY2022 year end calculated amount. Distributions, if taken, must be taken out within the accounting period immediately following the computation of Surplus Cash, and prior to the LLC's next calculation of Surplus Cash, and if not taken within the identified period, these funds remain as mortgaged property. Effect: Any failure by the LLC to comply with any of the provisions of the HUD Regulatory Agreement may lead to Declaration of Default. In such case, HUD could demand immediate repayment of the mortgage note. Questioned Cost: $250,739 Recommendation: We recommend any Distribution of funds of the Project not permitted by the Regulatory Agreement or Program Obligations to be returned to the appropriate project account as specified by HUD immediately. We recommend management reviews the Regulatory Agreement for more guidance on allowable distributions. Management's Views and Corrective Action Plan Management's response is included in "Management's View and Corrective Action Plan" at the end of this report after the schedule of findings and questioned cost.

Criteria: According to HUD Regulatory Agreement (Form HUD-92466M), Section 14, borrower shall not make or take, or receive and retain, nor allow any Affiliate or Principal to receive or retain any Distribution of assets or any income of any kind of the Project, except from Surplus Cash or in accordance with Program Obligations. Condition: Two owner's distributions were selected for testing. This represents 100% of the testing population. We noted that the total amount of distributions made during the year was in excess of the amount calculated as of the last day of fiscal year ending December 31, 2022. Cause: The LLC add up all calculated amounts of Surplus Cash from FY2018 to FY2022 to arrive at the amount available for distribution instead of distributing only the FY2022 year end calculated amount. Distributions, if taken, must be taken out within the accounting period immediately following the computation of Surplus Cash, and prior to the LLC's next calculation of Surplus Cash, and if not taken within the identified period, these funds remain as mortgaged property. Effect: Any failure by the LLC to comply with any of the provisions of the HUD Regulatory Agreement may lead to Declaration of Default. In such case, HUD could demand immediate repayment of the mortgage note. Questioned Cost: $250,739 Recommendation: We recommend any Distribution of funds of the Project not permitted by the Regulatory Agreement or Program Obligations to be returned to the appropriate project account as specified by HUD immediately. We recommend management reviews the Regulatory Agreement for more guidance on allowable distributions. Management's Views and Corrective Action Plan Management's response is included in "Management's View and Corrective Action Plan" at the end of this report after the schedule of findings and questioned cost.