Audit 412343

FINDING #2025-001 SURPLUS CASH Type of Finding: Compliance: Special Tests Program: The Home Investment Partnership Program (Assistance Listing 14.239) Condition: At December 31, 2022 the Entity had surplus cash totaling $9,162, due to Home Funds. Park Ridge Apartments, Phase 3 had surplus cash in the amount of $4,000. Park Ridge Apartments, Phase 4 had surplus cash in the amount of $2,077. Park Ridge Apartments, Phase 5 had surplus cash in the amount of $1,379. Parsk Ridge Apartments, Phase 6 had surplus cash in the amount of $1,706. The Entity paid the surplus cash for Park Ridge Apartments, Phase 3 and Phase 6, leaving a balance of $3,456 at December 31, 2024. There were no deposits made for surplus cash during the current fiscal year. Criteria: The loan agreement between the Entity and the Home Investment Partnership Program requires the Entity to make payments of principal and interest on the note in an annual installment equal to a certain percentage of surplus cash, to the extent that surplus cash exists. Effect: The Entity is in direct violation of the Home Funds loan agreement. Cause: This was an oversight by the management agent. Recommendation: The management agent should compute an estimate of surplus cash for the fiscal year upon completion of that period. In the event that surplus cash exists at the completion of the fiscal period, the management agent should make an installment payment on the HOME note. Views of Responsible Officials and Planned Corrective Action: The management agent agrees with the finding and the auditor’s recommendations have been adopted. Surplus cash will be calculated upon the completion of an annual fiscal period. If it is concluded that surplus cash exists at the end of the annual fiscal period, an installment payment will be made on the loan.

FINDING #2025-002 RESERVE FOR REPLACEMENT Type of Finding: Compliance: Special Tests Program: The Home Investment Partnership Program (Assistance Listing 14.239) Condition: The Reserve for Replacement account balance for Cotton City Rental was underfunded by $2,400. Criteria: Owners shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in a federally insured depository in an interest-bearing account. All earnings including interest on the reserve must be added to the reserve. An amount as required by HUD will be deposited monthly in the reserve fund (Rental assistance contract item 2.6C Financial Requirements). All disbursements from the reserve must be approved by HUD (24 CFR Section 891.405). Annual deposits must be sufficient to rectify any previous account deficiencies. Effect: Failure on the part of the Entity to make required deposits to cure account deficiencies in a timely fashion is deemed to be a violation of the regulatory agreement between the Entity and HUD. Context: The required balance in the Reserve for Replacement account is calculated by adjusting the opening balance at the beginning of the fiscal year by the annual required monthly deposits; other required deposits; interest earned; and approved withdrawals. Cause: This was an oversight by the Entity’s management agent. Recommendation: The management agent should ensure that all required deposits are made to the Reserve for Replacement account and that the balance in that account meets the minimum required balance in accordance with the regulatory agreement between the Entity and HUD. View of Responsible Officials and Planned Corrective Action: The management agent agrees with the finding and the auditor’s recommendations have been adopted.