Audit 404677

Finding 2025-001 - Special Tests and Provisions U.S. Department of Housing and Urban Development Federal Program Name: Section 202 Supportive Housing for the Elderly Assistance Listing Number: 14.157 Criteria: The regulatory agreement requires that the project make monthly deposits to its replacement reserve. Condition: During the year ended September 30, 2024, the Project failed to make two required monthly deposits to the replacement reserve totaling $5,464. The required monthly deposit is $2,732. During the year ended September 30, 2025, the Project made a payment for one of the prior-year missed deposits but did not make the remaining prior-year missed deposit. Cause: The Project inadvertently deposited the funds into another entity's cash account. The other entity repaid the Project, however, the Project management did not remit the funds to the replacement reserve upon receipt. 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: $2,732 Context: The Project failed to make the required prior-year monthly deposits to the replacement reserve during the year ended September 30, 2025, resulting in an underfunding of $2,732. This represents a violation of the regulatory agreement. Identification as a Repeat Finding: Yes. See 2024-002 Recommendation: Management should implement procedures to ensure the funds are deposited into the correct account and to ensure that the replacement reserve is funded in accordance with the terms of the regulatory agreement. Auditor Noncompliance Code: N - Reserve for replacements deposits Finding Resolution Status: In Process. Reporting Views of Responsible Officials: North TX A/C refunded two months deposit of $5,464 to the property as of September 30, 2025. One month deposit was correctly deposited into the replacement reserve account, the second missed deposit was not deposited into the replacement reserve account.

Finding 2025-002 – Special Tests and Provisions U.S. Department of Housing and Urban Development Federal Program Name: Section 202 Supportive Housing for the Elderly Assistance Listing Number: 14.157 Criteria: Any withdrawal from the replacement reserve account requires HUD approval. Condition: During the year ended September 30, 2025, management withdrew $21,146 from the replacement reserve account without HUD approval. Cause: The amount was withdrawn from the replacement reserve account in error. Effect or Potential Effect: The withdrawal of $21,146 is an unauthorized withdrawal from the replacement reserve account. Questioned costs: $21,146 Context: During the year ended September 30, 2025, the Project did not provide documentation demonstrating HUD approval for a $21,146 withdrawal from the replacement reserve account. This unapproved withdrawal constitutes a violation of the Project's regulatory agreement. The staff member responsible for managing this process was on leave from beginning of January 2025 through beginning of March 2025. Identification as a Repeat Finding: No Recommendation: Management should immediately deposit $21,146 into the replacement reserve account or obtain evidence of HUD approval. Auditor Noncompliance Code: A - Unauthorized withdrawals from replacement reserve account Finding Resolution status: In process Reporting Views of Responsible Officials: Management acknowledges that two replacement reserve withdrawals dated February 14, 2025 were processed prior to obtaining HUD's written approval. This occurred due to a temporary lapse in oversight during a staff absence.

Finding 2025-003 - Reporting U.S. Department of Housing and Urban Development Federal Program Name: Section 202 Supportive Housing for the Elderly Assistance Listing Number: 14.157 Criteria: The FAC requires that the annual financial statements be submitted the earlier of 30 days after the report date or nine months after the fiscal year end. Condition: The Single Audit was not submitted to the Federal Audit Clearinghouse (FAC) within nine months after the fiscal year end of the Company for the year ended September 30, 2024. Cause: Management does not have controls in place to timely file its financial statements with the FAC. Effect or Potential Effect: Management is not in compliance with the requirement to timely submit the Single Audit to the FAC. Questioned Costs: None Context: Management does not have a process in place to ensure that all audits are submitted to the FAC timely. Identification as a Repeat Finding: No Recommendation: Management should implement procedures to ensure that the financial statements are submitted to the FAC in accordance with the FAC filing requirements. Auditor Noncompliance Code: Z – Other Finding Resolution Status: Resolved Reporting Views of Responsible Officials: Management agrees with the finding and is taking steps to address the issue that caused it

Finding 2025-004 – Special Tests and Provisions U.S. Department of Housing and Urban Development Federal Program Name: Section 202 Supportive Housing for the Elderly Assistance Listing Number: 14.157 Criteria: Loans are not permitted to be made from project cash without prior authorization from HUD. Statement of Condition: During the year ended September 30, 2025, shared costs paid on behalf of an adjacent property were not reimbursed by the other property in a timely manner. In addition, a related receivable of $783 from the other property has remained outstanding for an extended period. Cause: Procedures were not in place to ensure company policy was followed with respect to timely reimbursement for shared costs and related receivables. Effect or Potential Effect: The payments of $8,785 and related receivable of $783 were unauthorized loans and therefore considered to be questioned costs. Questioned Costs: $9,568 Context: During the year ended September 30, 2025, shared costs paid on behalf of an adjacent property, were not reimbursed on a quarterly basis in accordance with company policy. In addition, the related receivable balance remains outstanding. Identification as a Repeat Finding: No Recommendation: Management should immediately reimburse the amount due to the project and establish procedures to ensure reimbursement for shared costs and related receivables are made timely in accordance with established policy. Auditor Noncompliance Code: G – Unauthorized Loans of Project Assets Finding Resolution status: In process Reporting Views of Responsible Officials: Management stated they were unaware of HUD's expectation for consistent reimbursement; however, HUD requires shared costs to be reimbursed on a regular basis, with monthly or quarterly reimbursement most observed. Management noted they will follow this going forward.