Audit 9043

2023-001 – Significant deficiency - Segregation of duties Criteria - Good internal control requires a segregation of duties and responsibilities such that no one employee has access to both physical assets and the related accounting records, or to all phases of a transaction. Condition - The Cooperative has one employee that performs day to day management and accounting functions. Cause - The size of the Cooperative’s accounting and administrative staff precludes certain internal controls that would be preferred if the office staff were large enough to provide optimum segregation of duties. Effect - The lack of segregation of duties may result in undetected errors in financial statements and increases the possibility of misappropriation of Cooperative assets. Repeat Finding - This finding was reported in the prior year as finding 2022-001. Recommendation - The Board of Directors should remain involved in the financial affairs of the Cooperative on a regular ongoing basis to provide oversight and independent review functions and mitigate the weakness created by the lack of segregation. Auditee’s comment - On October 1, 2023, the Cooperative entered into a management agreement with Anderson Asset Property Group, LLC to manage the Cooperative. The management company has proper segregation of duties in place such that no one employee has access to both physical assets and the related accounting records. Status - Resolved Auditor’s non-compliance code - S - Internal Control Deficiencies

2023-002 – Real Estate Assessment Center (REAC) Inspection Report Department of Housing and Urban Development Assistance Listing Number 14.126 – Mortgage Insurance – Cooperative Projects Material Weakness and Noncompliance Category of Finding – Special Tests and Provisions Criteria - HUD regulations specify the mortgaged property must be maintained in decent, safe, sanitary condition and good repair, in accordance with the program obligations. Condition - In April 2023, HUD performed a REAC inspection at the Cooperative, which resulted in a score of 54c. Cause - The Cooperative did not maintain the mortgaged property in accordance with the HUD regulations. Effect - The Cooperative is not fulfilling the contractual obligations to HUD and members may not be receiving the quality of housing to which they are entitled. Recommendation - We recommend that the Cooperative implement a corrective action plan as required in the inspection report and provide HUD with a response to findings. Auditee’s comment - The Cooperative took corrective action as required in the inspection report and provided HUD with a response noting the corrections. Status - Resolved Auditor’s non-compliance code - Z – Other

2023-001 – Significant deficiency - Segregation of duties Criteria - Good internal control requires a segregation of duties and responsibilities such that no one employee has access to both physical assets and the related accounting records, or to all phases of a transaction. Condition - The Cooperative has one employee that performs day to day management and accounting functions. Cause - The size of the Cooperative’s accounting and administrative staff precludes certain internal controls that would be preferred if the office staff were large enough to provide optimum segregation of duties. Effect - The lack of segregation of duties may result in undetected errors in financial statements and increases the possibility of misappropriation of Cooperative assets. Repeat Finding - This finding was reported in the prior year as finding 2022-001. Recommendation - The Board of Directors should remain involved in the financial affairs of the Cooperative on a regular ongoing basis to provide oversight and independent review functions and mitigate the weakness created by the lack of segregation. Auditee’s comment - On October 1, 2023, the Cooperative entered into a management agreement with Anderson Asset Property Group, LLC to manage the Cooperative. The management company has proper segregation of duties in place such that no one employee has access to both physical assets and the related accounting records. Status - Resolved Auditor’s non-compliance code - S - Internal Control Deficiencies

2023-002 – Real Estate Assessment Center (REAC) Inspection Report Department of Housing and Urban Development Assistance Listing Number 14.126 – Mortgage Insurance – Cooperative Projects Material Weakness and Noncompliance Category of Finding – Special Tests and Provisions Criteria - HUD regulations specify the mortgaged property must be maintained in decent, safe, sanitary condition and good repair, in accordance with the program obligations. Condition - In April 2023, HUD performed a REAC inspection at the Cooperative, which resulted in a score of 54c. Cause - The Cooperative did not maintain the mortgaged property in accordance with the HUD regulations. Effect - The Cooperative is not fulfilling the contractual obligations to HUD and members may not be receiving the quality of housing to which they are entitled. Recommendation - We recommend that the Cooperative implement a corrective action plan as required in the inspection report and provide HUD with a response to findings. Auditee’s comment - The Cooperative took corrective action as required in the inspection report and provided HUD with a response noting the corrections. Status - Resolved Auditor’s non-compliance code - Z – Other