Audit 402286

Finding No. 2025-001 Department of Housing and Urban Development Federal Assistance Listing Number 14.157 Supportive Housing for the Elderly (Section 202) Criteria HUD regulations require that Project funds be used solely for reasonable and necessary expenses of the Project. Project funds must not be used to pay costs associated with other HUD or non‑HUD properties. Any ineligible disbursements must be promptly reimbursed to the Project. Condition During the year ended December 31, 2025, Project funds were used to pay an expense that was not related to the operations of the HUD‑assisted Project. Management identified the improper disbursement; however, the funds were not reimbursed to the Project in a timely manner after discovery. Cause Review procedures were not in place to ensure that cash disbursements of Project funds were limited to Project operating costs. Additionally, management did not ensure immediate reimbursement once the error was identified. Effect or Potential Effect While the issue was identified internally, reimbursement was not completed promptly, which extended the period during which Project funds were unavailable for allowable operating expenses and resulted in noncompliance with HUD requirements governing the use of Project funds. Questioned Costs $305 Context Management identified the improper transaction involving Project funds. Upon discovery, the transaction was appropriately recorded as a receivable. However, corrective action was not completed within the timeframe expected under HUD requirements, resulting in continued noncompliance. Identification as a Repeat Finding This is not a repeat finding. Recommendation Management should immediately reimburse the amount due to the Project and establish procedures to ensure that only eligible Project-specific expenses are paid from Project accounts. Auditor Noncompliance Code: G - Unauthorized loans from project funds Finding Resolution Status: Completed Views of Responsible Officials and Planned Corrective Actions Management agrees with the finding and has reimbursed the Project.

Finding No. 2025-002 Department of Housing and Urban Development Federal Assistance Listing Number 14.157 Supportive Housing for the Elderly (Section 202) Criteria The regulatory agreement requires that the project make monthly deposits to its replacement reserve. Condition During the year ended December 31, 2025, the project did not make the required monthly deposits to the replacement reserve in the amount of $2,521. Cause Management failed to implement adequate internal controls to ensure that replacement reserve deposits were made in full and on a timely basis. Effect or Potential Effect Failure to make monthly payments resulted in an underfunding of the replacement reserve and a violation of the regulatory agreement. Questioned Costs $0 Context One of the twelve required replacement reserve deposits was not made during the year. Identification as a Repeat Finding This is not a repeat finding. Recommendation Management should immediately deposit delinquent monthly deposit to ensure that the replacement reserve is funded in accordance with the terms of the regulatory agreement. Management should also review and update internal controls to ensure that all twelve monthly replacement reserve deposits are timely made during the year in accordance with the regulatory agreement. Auditor Noncompliance Code: N - Reserve for replacement deposits Finding Resolution Status: Completed Views of Responsible Officials and Planned Corrective Actions Management agrees with the finding and has made the delinquent replacement reserve deposit.