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Finding 2026-004: Unauthorized Use of Project Funds Federal Program: Supportive Housing for Persons with Disabilities (Section 811), Assistance Listing 14.181, U.S. Department of Housing and Urban Development; Capital Advance No. 032-HD019 and PRAC No. DE26Q981001; year ended March 31, 2026 Compliance Requirement: Special Tests and Provisions Type of Finding: Noncompliance Repeat Finding: No Criteria: The Project’s regulatory agreement with HUD and the Section 811 program regulations require that Project funds be used only for reasonable operating expenses and necessary repairs of the Project. Project funds may not be advanced, loaned, or transferred to the owner, the management agent, or their affiliates without prior HUD approval, and payments to related parties must be for goods or services actually received by the Project. Condition: On March 6, 2026, the Project transferred $25,000 in two transfers of $15,000 and $10,000 to Synetics Corporation, a related party. The transfers coincided with Synetics paying expenses on behalf of other affiliated properties. No invoice, payable, or other documentation was provided identifying goods or services received by the Project in exchange for the transfers, and the transfers were not approved by HUD. As of March 31, 2026, the $25,000 had not been returned to the Project and is recorded as a receivable due from affiliates on the accompanying statement of financial position. Context: We reviewed all related party transactions and the Project’s bank and bill payment activity for the year. Cause: Management did not require documented HUD approval before transferring Project funds to affiliates. The lack of compliance monitoring described in Finding 2026-001 contributed to the condition. Effect: The Project did not comply with the regulatory agreement and HUD’s restrictions on the use of Project funds. The transfers reduced the funds available for the Project’s operations by $25,000 at a time when rental assistance payments were suspended and required replacement reserve deposits had not been made. Unauthorized uses of Project funds may also lead HUD to take enforcement action, including requiring the funds to be repaid to the Project. Questioned Costs: $25,000 Recommendations: We recommend that Synetics Corporation return the $25,000 to the Project’s operating account, unless management can provide documentation demonstrating that the transfers settled an obligation of the Project. Management should also establish written policies and procedures for payments to related parties that conform with HUD and Uniform Guidance requirements. Views of Responsible Officials: We do not concur with the characterization of these transactions as unauthorized transfers. NAMI Delaware is the sponsor and management agent of the Project, and Synetics Corporation, a wholly-owned subsidiary of NAMI Delaware, is the Project’s developer. Under the longstanding shared-services structure among these entities and their affiliated affordable housing projects, including DIMA VIII, Inc., Synetics Corporation routinely incurs expenses on behalf of the projects, including property-related costs, workers’ compensation, umbrella and auto insurance, vehicle maintenance, and other operational expenses. As a result, intercompany balances fluctuate throughout the year as costs are allocated and reconciled. We believe these transactions should be evaluated within the context of these ongoing due-to/due-from relationships. The payments were intended to settle accrued management fees and costs earned in the current and prior years that remained unpaid. However, the payments were remitted to Synetics Corporation rather than directly to NAMI Delaware as the management agent, and, as such, were recorded as a receivable rather than against the related original obligations. Going forward, management will establish written procedures to ensure that related party payments are supported by documentation, remitted directly to the entity to which the obligation is owed, and recorded against the obligation being paid. Note: Finding 2026-001 is also a material weakness in internal control over compliance required to be reported under the Uniform Guidance and is presented in Section II.