Audit 368220

FINDING 2024-003: Significant Deficiency in Internal Control over Compliance – 2019 Replacement Reserve Drawdowns Federal Program: ALN 14.157 – Supportive Services for the Elderly (Section 202) Pass-Through Entity: U.S. Department of Housing and Urban Development Award Number: N/A Compliance Requirement: N – Special Tests and Provisions Type of Finding: Significant Deficiency in Internal Control over Compliance Questioned Costs: $3,300 Criteria: All releases from the replacement reserve should be for qualified expenses and should be approved by HUD. Condition: Due to an administrative error, too much was distributed from the replacement reserve in 2019. Cause: An invoice was submitted by management, but was paid by the nonprofit sponsor’s foundation on the Project’s behalf. Effect or Potential Effect: The replacement reserve is underfunded by $3,300 at June 30, 2024. Recommendation: Due to cash flow constraints, the Project was not able to repay the nonprofit sponsor’s foundation for the submitted invoice paid on the Project’s behalf. The Project will repay the nonprofit sponsor’s foundation when cash is available. Auditee Response/Corrective Action Plan: Management agrees with the finding. The Project will repay the nonprofit sponsor’s foundation when cash is available. Repeat Finding: This is a repeat finding. The prior year finding reference number was 2023-003. Planned Implementation Date: There is not an anticipated completion date. Person Responsible for Corrective Action: Manager

FINDING 2024-004: Significant Deficiency in Internal Control over Compliance – 2020 Replacement Reserve Drawdowns Federal Program: ALN 14.157 – Supportive Services for the Elderly (Section 202) Pass-Through Entity: U.S. Department of Housing and Urban Development Award Number: N/A Compliance Requirement: N – Special Tests and Provisions Type of Finding: Significant Deficiency in Internal Control over Compliance Questioned Costs: $1,500 Criteria: All releases from the replacement reserve should be for qualified expenses and should be approved by HUD. Condition: Due to an administrative error, too much was distributed from the replacement reserve in 2020. Cause: An invoice was submitted by management, but was paid by the nonprofit sponsor’s foundation on the Project’s behalf. Effect or Potential Effect: The replacement reserve is underfunded by $1,500 at June 30, 2024. Recommendation: Due to cash flow constraints, the Project was not able to repay the nonprofit sponsor’s foundation for the submitted invoice paid on the Project’s behalf. The Project will repay the nonprofit sponsor’s foundation when cash is available. Auditee Response/Corrective Action Plan: Management agrees with the finding. The Project will repay the nonprofit sponsor’s foundation when cash is available. Repeat Finding: This is a repeat finding. The prior year finding reference number was 2023-004. Planned Implementation Date: There is not an anticipated completion date. Person Responsible for Corrective Action: Manager

FINDING 2024-005: Significant Deficiency in Internal Control over Compliance – Replacement Reserve Funding Federal Program: ALN 14.157 – Supportive Services for the Elderly (Section 202) Pass-Through Entity: U.S. Department of Housing and Urban Development Award Number: N/A Compliance Requirement: N – Special Tests and Provisions Type of Finding: Significant Deficiency in Internal Control over Compliance Questioned Costs: $291,545 Information on Universe Population Size: Monthly replacement reserve deposits. Sample Size Information: 12 monthly payments. Criteria: According to the regulatory agreement, a monthly deposit must be made into the replacement reserve at an amount mandated by HUD. Condition: The replacement reserve is underfunded at June 30, 2024. Cause: When the mortgage was refinanced in 2011, the regulatory agreement required the debt service savings to be deposited into the reserve for replacements account. HUD agreed to suspend the monthly required debt service savings deposit effective September 1, 2019. HUD is requesting the debt service savings from December 1, 2012 until August 31, 2019 be placed in the reserve for replacement account. The Project has been unable to pay the debt service savings portion of the monthly replacement reserve deposits due to their financial situation. Effect or Potential Effect: The replacement reserve was underfunded by $291,545 at June 30, 2024. Recommendation: The Project should make a deposit to the replacement reserve account in the amount of $291,545 or negotiate with HUD to get the past debt service saving deposit requirement suspended permanently. Auditee Response/Corrective Action Plan: Management is negotiating with HUD to get the past debt service saving deposit requirement suspended permanently. Repeat Finding: This is a repeat finding. The prior year finding reference number was 2023-005. Planned Implementation Date: There is not an anticipated completion date. Person Responsible for Corrective Action: Manager

FINDING 2024-006: Significant Deficiency in Internal Control over Compliance – 2021 Replacement Reserve Drawdowns Federal Program: ALN 14.157 – Supportive Services for the Elderly (Section 202) Pass-Through Entity: U.S. Department of Housing and Urban Development Award Number: N/A Compliance Requirement: N – Special Tests and Provisions Type of Finding: Significant Deficiency in Internal Control over Compliance Questioned Costs: $7,486 Criteria: All releases from the replacement reserve should be for qualified expenses and should be approved by HUD. Condition: Due to an administrative error, too much was distributed from the replacement reserve in 2020. Cause: Form HUD-9250 was submitted by management. The mortgage company transferred the amount from the replacement reserve to the insurance escrow. In addition, the mortgage company issued a check to the Project. Effect or Potential Effect: The replacement reserve is underfunded by $7,486 at June 30, 2024. Recommendation: Due to cash flow constraints, the Project was not able to repay the replacement reserve for the duplicate release. The Project will repay the replacement reserve when cash is available. Auditee Response/Corrective Action Plan: Management agrees with the finding. The Project will repay the replacement reserve when cash is available. Repeat Finding: This is a repeat finding. The prior year finding reference number was 2023-006. Planned Implementation Date: There is not an anticipated completion date. Person Responsible for Corrective Action: Manager