Audit 36793

SECTION II ? FINDINGS ? FINANCIAL STATEMENTS AUDIT 2022-001 ? Significant deficiency ? segregation of duties Criteria ? Good internal control requires a segregation of duties and responsibilities such that no one employee has access to both physical assets and the related accounting records, or to all phases of a transaction. Condition ? The Cooperative has one employee that performs day to day management and accounting functions. Cause ? The size of the Cooperative?s accounting and administrative staff precludes certain internal controls that would be preferred if the office staff were large enough to provide optimum segregation of duties. Effect ? The lack of segregation of duties may result in undetected errors in financial statements and increases the possibility of misappropriation of Cooperative assets. Repeat Finding ? This finding was reported in the prior year as finding 2021-001. Recommendation ? The Board of Directors should remain involved in the financial affairs of the Cooperative on a regular ongoing basis to provide oversight and independent review functions and mitigate the weakness created by the lack of segregation. Auditee?s comment ? The Board of Directors is and will remain involved in the financial affairs of the Cooperative. Status ? Outstanding Auditor?s non-compliance code ? S ? Internal Control Deficiencies

SECTION III ? FINDINGS AND QUESTIONED COSTS ?MAJOR FEDERAL AWARD PROGRAM AUDIT 2022-002 ? Unauthorized distributions Department of Housing and Urban Development Assistance Listing Number 14.126 ?Mortgage Insurance ? Cooperative Projects Material Weakness and Noncompliance Category of Finding ? Special Tests and Provisions Criteria ? The HUD Regulatory Agreement specifies the amount of cash distribution is limited to surplus cash as defined and approved by HUD. Condition ? In June 2021, the Cooperative paid a $100,000 distribution to members?, from operations without a calculation of surplus cash and approval from HUD. Cause ? The Cooperative did not follow the calculation of surplus cash as defined and approved through HUD and the regulatory agreement. Effect ? The Cooperative paid a distribution to members? without approval from HUD, which could have resulted in cash flow issues. Recommendation ? We recommend that the Cooperative implement a control process to ensure adherence to the regulatory agreement and obtain HUD approval prior to payment of surplus cash. Auditee?s comment ? The Cooperative is aware of the HUD requirements and regulatory agreement and will follow them in the future. The Board of Directors and management will discuss with HUD in regard to the distribution of $100,000 to members and obtain HUD?s appropriate corrective action plan. Status ? Outstanding Auditor?s non-compliance code ? Z ? Other

SECTION II ? FINDINGS ? FINANCIAL STATEMENTS AUDIT 2022-001 ? Significant deficiency ? segregation of duties Criteria ? Good internal control requires a segregation of duties and responsibilities such that no one employee has access to both physical assets and the related accounting records, or to all phases of a transaction. Condition ? The Cooperative has one employee that performs day to day management and accounting functions. Cause ? The size of the Cooperative?s accounting and administrative staff precludes certain internal controls that would be preferred if the office staff were large enough to provide optimum segregation of duties. Effect ? The lack of segregation of duties may result in undetected errors in financial statements and increases the possibility of misappropriation of Cooperative assets. Repeat Finding ? This finding was reported in the prior year as finding 2021-001. Recommendation ? The Board of Directors should remain involved in the financial affairs of the Cooperative on a regular ongoing basis to provide oversight and independent review functions and mitigate the weakness created by the lack of segregation. Auditee?s comment ? The Board of Directors is and will remain involved in the financial affairs of the Cooperative. Status ? Outstanding Auditor?s non-compliance code ? S ? Internal Control Deficiencies

SECTION III ? FINDINGS AND QUESTIONED COSTS ?MAJOR FEDERAL AWARD PROGRAM AUDIT 2022-002 ? Unauthorized distributions Department of Housing and Urban Development Assistance Listing Number 14.126 ?Mortgage Insurance ? Cooperative Projects Material Weakness and Noncompliance Category of Finding ? Special Tests and Provisions Criteria ? The HUD Regulatory Agreement specifies the amount of cash distribution is limited to surplus cash as defined and approved by HUD. Condition ? In June 2021, the Cooperative paid a $100,000 distribution to members?, from operations without a calculation of surplus cash and approval from HUD. Cause ? The Cooperative did not follow the calculation of surplus cash as defined and approved through HUD and the regulatory agreement. Effect ? The Cooperative paid a distribution to members? without approval from HUD, which could have resulted in cash flow issues. Recommendation ? We recommend that the Cooperative implement a control process to ensure adherence to the regulatory agreement and obtain HUD approval prior to payment of surplus cash. Auditee?s comment ? The Cooperative is aware of the HUD requirements and regulatory agreement and will follow them in the future. The Board of Directors and management will discuss with HUD in regard to the distribution of $100,000 to members and obtain HUD?s appropriate corrective action plan. Status ? Outstanding Auditor?s non-compliance code ? Z ? Other