Audit 414448

Finding No. 2025-001 - Allowable Costs/Cost Principles - Significant Deficiency Name of Federal Agency: Department of Housing and Urban Development Federal Program Name: Supportive Housing for the Elderly (Section 202) Assistance Listing Number: 14.157 Federal Award Identification Number and Year: N/A Name of Pass-through Entity (if applicable): N/A Criteria Loans are not permitted to be made from Project cash without prior authorization from HUD. Condition During the year ended December 31, 2025, the Project paid expenses in the amount of $1,550 on behalf of an affiliate from Project cash without HUD approval. The amount due to the Project as of December 31, 2025 is $1,550. Cause Procedures were not followed to ensure that cash disbursements of Project funds were limited to Project operating costs. Effect or Potential Effect The payments of $1,550 were unauthorized loans and therefore considered to be questioned costs. Questioned Costs $1,550 Context Staff entered an invoice from a related party, Council Towers II Housing Develpoment Fund Corporation, into the accounts payable system, and subsequently paid that invoice. Identification as a Repeat Finding No Recommendation Management has already reimbursed the Corporation. Management should revisit the procedures in place to ensure only invoices related to the Project are entered into the Project's accounts payable system. HUD 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 and Planned Corrective Actions: Management agrees with the findings and recommendation. The payment was made in error due to an oversight into the invoice approval process. Management implemented additional controls to help ensure invoices are charged to the correct property and prevents one project from paying expenses on behalf of another project or affiliate going forward. Management will continue to monitor compliance with these procedures.

Finding No. 2025-002 - Allowable Costs/Cost Principles - Significant Deficiency Name of Federal Agency: Department of Housing and Urban Development Federal Program Name: Supportive Housing for the Elderly (Section 202) Assistance Listing Number: 14.157 Federal Award Identification Number and Year: N/A Name of Pass-through Entity (if applicable): N/A Criteria The terms of the regulatory agreement require distributions to be limited to available surplus cash computed on a semi-annual or annual basis. Condition During the period ended December 31, 2025, the Corporation distributed $20,931 in excess of surplus cash available for distribution. Cause Procedures were not in place to ensure that distributions of cash were limited to available surplus cash in accordance with HUD regulations. Effect or Potential Effect The payments of $20,931 are unauthorized distributions and therefore considered to be questioned costs. Questioned Costs $20,931 Context The property over distributed surplus cash. Identification as a Repeat Finding No Recommendation 2025-2a Management should follow its procedures to limit distributions to the surplus cash amount calculated semi-annually and at year end. 2025-2b Management should immediately reimburse the project's cash account for the unauthorized distribution. HUD Auditor Noncompliance Code: H - Unauthorized distribution of project assets Finding Resolution Status: Resolved Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and recommendation. Procedures were not followed to ensure distributions were reviewed and limited to available surplus cash in accordance with HUD requirements. Management notes that as of December 31, 2025, there is $51,268 of available surplus cash. Had the questioned costs of $20,931 not been paid, then surplus cash would have been $72,199. Therefore, since current year surplus cash has been reduced, the questioned costs are deemed to be repaid.

Finding No. 2025-003 - Special Tests and Provisions - Significant Deficiency Name of Federal Agency: Department of Housing and Urban Development Federal Program Name: Supportive Housing for the Elderly (Section 202) Assistance Listing Number: 14.157 Federal Award Identification Number and Year: N/A Name of Pass-through Entity (if applicable): N/A Criteria In accordance with HUD Handbook 4350.3, Occupancy Requirements of Subsidized Multifamily Housing Programs, management is required to maintain tenant security deposit records that properly account for the amount of security deposits collected, and to deposit them timely. This will ensure that upon move out, tenants will receive credit for the proper amount of security deposit paid. Condition In connection with the procedures applied to a sample of two tenants that moved in and out of the Project during the year, we noted one instance where the tenant's security deposit amount listed in the lease and collected was not deposited in a timely manner and thus the amount per the lease did not agree to the amount recorded in the accounting records. Cause Management failed to follow the policies and procedures which have been established for maintaining security deposit records. Effect or Potential Effect The Project’s tenant security deposits liability could be misstated, tenant security deposit cash could be underfunded and tenant may receive incorrect refunds upon move out. Questioned Costs N/A Context The Project collected the funds on move in, but due to an administrative error, did not timely deposit them into the Projects security deposit account. Identification as a Repeat Finding No Recommendation Management should follow its procedures to ensure that tenant security deposits collected are properly recorded. HUD Auditor Noncompliance Code: M - Security deposits Uniform Guidance Auditor Noncompliance Code: N - Special Tests and Provisions Finding Resolution Status: Resolved Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and recommendation. Due to transfer of banks, the deposits were not timely set up and deposited. Funds were deposited in new accounts in December 2025 with the new bank.