Audit 413690

Finding No. 2025-002- Allowable Costs/Cost Principles - Significant Deficiency Name of Federal Agency: Department of Housing and Urban Development Federal Program Name: Section 8 Housing Assistance Payments Assistance Listing Number: 14.195 Federal Award Identification Number and Year: N/A Name of Pass-through Entity (if applicable): N/A Criteria The terms of the regulatory agreement/HAP contract require payments/repayments of related party fees/loans to be limited to available surplus cash computed on an annual basis unless approved by HUD. Condition During the year ended December 31, 2025, the project paid expenses in the amount of $12,897 on behalf of an affiliate from project cash without HUD approval. Cause Procedures were not in place to ensure that distributions of cash were limited to available surplus cash computed in accordance with HUD regulations. Effect or Potential Effect The payments/repayments of $12,897 were unauthorized distributions and therefore considered to be questioned costs. Questioned Costs $12,897 Context Costs paid on behalf of affiliate were for moving costs associated with transitioning 281 tenants to new properties. Identification as a Repeat Finding Repeat finding 2024-002 Recommendations Management should implement procedures to limit distributions of project cash to the annual surplus cash calculation amount required by the regulatory agreement/HAP contract. Management should immediately reimburse the project's cash account for the unauthorized distribution. Auditor Noncompliance Code G - Unauthorized loans from project assets Uniform Guidance Auditor Noncompliance Code B - Allowable Costs/Cost Principles Finding Resolution Status: Resolved. Views of Responsible Officials The Corporation agrees with the finding and the auditor's recommendations have been adopted. $12,747 was repaid back to the Corporation in March 2026 and $150 was repaid back in September 2026.

Finding No. 2025-003 - Special Tests and Provisions - Significant Deficiency Name of Federal Agency: Department of Housing and Urban Development Federal Program Name: Section 8 Housing Assistance Payments Assistance Listing Number: 14.195 Federal Award Identification Number and Year: N/A Name of Pass-through Entity (if applicable): N/A Criteria The HAP contract requires that the project makes monthly deposits to its replacement reserve for a total annual deposits of $360,000. Condition During the year ended December 31, 2025, the project did not make the required deposits to the replacement reserve in the amount of $270,000 and only $90,000 of the required annual deposits of $360,000 was deposited. Cause The project does not generate sufficient cash flow to make the required monthly deposits. Effect or Potential Effect Failure to make monthly payments resulted in an underfunding the replacement reserve and a violation of the HAP contract. Questioned Costs N/A Context Lack of funding due to costs related to the transition of tenants to new properties and incurring expenses related to the vacant building. Identification as a Repeat Finding N/A Recommendations Management should review the project budget to determine if nonessential costs can be cut (or request a loan from the owner) 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. Uniform Guidance Auditor Noncompliance Code N - Special Tests and Provisions Finding Resolution Status: Resolved Views of Responsible Officials Management deposited the delinquent required deposits of $270,000 to the replacement reserve in February 2026.