MM III, Inc.

FINDING No. 2024-001: Section 202 Supportive Housing for the Elderly, ALN 14.157 Finding Resolution Status: Unresolved. Information on Universe Population Size: Eight moved-in tenants. Sample Size Information: Two moved-in tenants. Identification of Repeat Finding and Finding Reference Number: No. Criteria: HUD regulation requires the maintenance of a waiting list and the selection of applicants in chronological order of application date or adequate documentation of the reasoning for an applicant being passed over for an applicant with a later application date. Statement of Condition: The Project’s waiting list did not include information regarding when a potential tenant was offered a vacant unit, the date they moved into the Project, or an explanation and the date of why they were passed over. Cause: The Project did not update the status of moved-in and potential tenants. Effect or Potential Effect: Unable to determine the date and time for the receipt of applications for proper waiting list placement and subsequent selection to occupancy. Auditor Non-Compliance Code: R – Section 8 Program Administration. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations will be adopted. Recommendation: The Project should implement procedures to ensure tenant applications contain all the appropriate documentation, inclusive of the date and time received. In addition, the waiting list should contain explanations for passing over tenants. Response Indicator: Agree. Completion Date: 12/31/2025 Response: Staff training has been provided with additional HUD training inclusive of EIV reporting and tenant file maintenance and included in monthly reporting procedures.

FINDING No. 2024-002: Section 202 Supportive Housing for the Elderly, ALN 14.157 Finding Resolution Status: Resolved. Information on Universe Population Size: Eight tenants. Sample Size Information: Three tenants. Identification of Repeat Finding and Finding Reference Number: No. Criteria: As required by HUD regulations, the owner must refund the full security deposit plus accrued interest and/or provide the tenant with an itemized list of any unpaid rent, damages to the unit, and an estimated cost for repair, along with a statement of the tenant’s rights under state and local laws within 30 days from moveout. Statement of Condition: The Project refunded the security deposit 81 days after the tenant moved out, which is beyond the 30 day state and HUD requirement. Cause: The Project did not follow the state and HUD requirement for refunding security deposits within 30 days from tenant moveout. Effect or Potential Effect: The tenant was given their security deposit refund late, causing the Project to be noncompliant with state and HUD requirements. Auditor Non-Compliance Code: M – Security Deposits. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor's recommendations have been adopted. Recommendation: The Project should comply with state law and HUD regulations for refunding security deposits timely. Response Indicator: Agree. Completion Date: 09/19/2024 Response: Staff training has been provided and included in monthly reporting procedures.

FINDING No. 2023-001: Section 202 Supportive Housing for the Elderly, ALN 14.157 Finding Resolution Status: Resolved. Information on Universe Population Size: Forty-six tenants. Sample Size Information: Five tenants. Identification of Repeat Finding and Finding Reference Number: No. Criteria: HUD regulation requires all tenants to have income verified through the use of Enterprise Income Verification (EIV) reports with the corresponding documentation maintained. Statement of Condition: Of the tenant files selected, one tenant file did not have their EIV pulled within the required 90 day period. Cause: The Project did not perform and/or maintain the EIV report. Effect or Potential Effect: Unable to verify tenant eligibility and cost of assistance may be disallowed. Auditor Non-Compliance Code: R – Section 8 Program Administration. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor’s recommendations have been adopted: The Project agrees with the finding and the auditor’s recommendations have been adopted. Recommendation: The Project should implement procedures to ensure the verification of tenant income through the EIV system in a timely manner and maintain all required tenant documentation. Response Indicator: Agree. Completion Date: 2/15/2023. Response: Staff training has been provided and included in monthly reporting procedures.

FINDING No. 2023-002: Section 202 Supportive Housing for the Elderly, ALN 14.157 Finding Resolution Status: Unresolved. Information on Universe Population Size: All insurance and tax escrow deposits. Sample Size Information: All insurance and tax escrow deposits. Identification of Repeat Finding and Finding Reference Number: No. Criteria: As required by regulatory agreement, the Project is required to pay, when due, all taxes, assessments, and other charges. Statement of Condition: The Project is deficient in funding escrow deposits in the amount of $9,007. Cause: The Project did not properly fund the escrow account based on current period insurance premiums and tax rates. Effect or Potential Effect: The escrow deposits are not sufficient to meet future obligations. Auditor Non-Compliance Code: S – Internal Control Deficiencies. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor's recommendations will be adopted. Recommendation: The Project should make sufficient deposits to the escrow account in a timely manner. Response Indicator: Agree. Completion Date: 12/31/2024. Response: New procedures have been implemented to ensure appropriate amounts are reserved in escrow.

FINDING No. 2022-001: Section 202 Supportive Housing for the Elderly, ALN 14.157 Finding Resolution Status: Resolved. Information on Universe Population Size: Total assistance revenue. Sample Size Information: All monthly PRAC requests. Identification of Repeat Finding and Finding Reference Number: No. Criteria: As required by HUD regulations, applications for renewal of PRAC contracts must be completed 120 days prior to the PRAC expiration date. Statement of Condition: The Project did not complete the renewal process 120 days prior to the PRAC expiration date. Cause: The Project did not follow HUD regulations for a timely contract renewal resulting in the delay of HUD funding and short-term loans taken from the replacement reserve via HUD approved 9250s. Effect or Potential Effect: The Project is not in compliance with HUD regulations for timely renewal of PRAC contract resulting in delayed receipt of HAP funds. Auditor Non-Compliance Code: R ? Section 8 Program Administration. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor?s recommendations have been adopted. Recommendation: The Project should comply with HUD regulations for timely renewal of the PRAC contract to ensure no interruption in funding. Response Indicator: Agree. Completion Date: 11/10/2022 Response: Compliance Department is now monitoring and tracking PRAC contract renewals for properties. Going forward reminders and follow up to deadlines will be conducted to ensure the contract renewal is completed. -

FINDING No. 2022-002: Section 202 Supportive Housing for the Elderly, ALN 14.157 Finding Resolution Status: Unresolved. Information on Universe Population Size: Forty-eight tenants. Sample Size Information: Five tenants. Identification of Repeat Finding and Finding Reference Number: No. Criteria: HUD regulation requires all tenants to have income verified through the use of Enterprise Income Verification (EIV) reports with the corresponding documentation maintained. Statement of Condition: Of the tenant files selected, the Project did not complete nor retain timely verification of income through the use of EIV reports for three tenants. Cause: The Project did not perform/retain timely income verification. Effect or Potential Effect: Eligibility verification not performed nor retained in accordance with HUD regulations. Assistance may be disallowed. Auditor Non-Compliance Code: R ? Section 8 Program Administration. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor?s recommendations will be adopted.Recommendation: The Project should implement procedures to ensure the verification of tenant income through the EIV system in a timely manner and maintain all required tenant documentation. Response Indicator: Agree. Completion Date: 12/31/2023 Response: Management has conducted training on EIV and the importance of meeting the deadlines as well as maintaining EIV reports in tenant files. -

FINDINGS AND QUESTIONED COSTS ? MAJOR FEDERAL AWARD PROGRAMS AUDIT FINDING No. 2020-001: Section 202 Supportive Housing for the Elderly, CFDA 14.157 Finding Resolution Status: Unresolved. Information on Universe Population Size: Forty-four tenants. Sample Size Information: Five tenants. Identification of Repeat Finding and Finding Reference Number: Yes, 2019-002. Criteria: HUD requires timely verification of tenant?s initial income through the use of Enterprise Income Verification (EIV) reports, 50059 recertification be signed on or before the effective date, annual unit inspections performed in a timely manner, and all corresponding documentation maintained. Statement of Condition: Of the tenant files selected: ? two tenants? initial EIV report was not retained; ? one tenant?s 50059 recertification was signed after the effective date; and ? five tenants did not have annual unit inspections conducted due to safety precautions taken in regard to the coronavirus. Cause: The Project did not perform income verification timely, obtain tenant signatures on or before the effective date of a 50059 recertification, conduct annual unit inspections due to the coronavirus pandemic, nor maintain appropriate tenant documentation required by HUD. Effect or Potential Effect: Unable to verify tenant eligibility and cost of assistance and residency may be disallowed. Additionally, unable to determine and assess whether the property has sustained any damages that require repairs. Auditor Non-Compliance Code: R ? Section 8 Program Admin. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor?s recommendations will be adopted. Recommendation: Implement procedures to ensure that the Project verifies eligibility by obtaining all required documentation for potential tenants, obtain timely signatures for 50059 recertifications, perform annual unit inspections, and adequately maintain tenant files. Response Indicator: Agree. Completion Date: 12/31/2021 Response: The former manager did not complete all tenant file reviews per the company policy. New manager will be provided with additional HUD training and managements policies and procedures. Also, management did not allow unit inspections due to the pandemic for the sake of protecting the health of the seniors and staff.

FINDINGS AND QUESTIONED COSTS ? MAJOR FEDERAL AWARD PROGRAMS AUDIT FINDING No. 2020-002: Section 202 Supportive Housing for the Elderly, CFDA 14.157 Finding Resolution Status: Unresolved. Information on Universe Population Size: All elevator contract expenses. Sample Size Information: All elevator contract expenses. Identification of Repeat Finding and Finding Reference Number: No. Criteria: Per HUD compliance requirements, all disbursements from the regular operating account must be supported by approved invoices, bills, or other supporting documentation and should only be used to pay for activities of the Project. Project funds cannot be loaned or used on nonproject purposes. Statement of Condition: The Project erroneously paid an invoice in full which included services for another project in the amount of $8,456. Cause: A disbursement did not go through the appropriate review and approval process before payment. Effect or Potential Effect: Unauthorized use of project assets. Auditor Non-Compliance Code: H ? Unauthorized distribution of project assets. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor?s recommendations will be adopted. Recommendation: Management should enhance their procedures to ensure that all invoices are in the name of the Project and the associated costs are reasonable and necessary. Response Indicator: Agree. Completion Date: 12/31/2021 Response: The Project approved the invoice not seeing the service notification attached. Management has implemented an additional accounting review process before final approval and payment.

FINDINGS AND QUESTIONED COSTS ? MAJOR FEDERAL AWARD PROGRAMS AUDIT FINDING No. 2019-001: Section 202 Supportive Housing for the Elderly, CFDA 14.157 Finding Resolution Status: Resolved. Information on Universe Population Size: Forty-six tenants. Sample Size Information: Five tenants. Identification of Repeat Finding and Finding Reference Number: Yes, 2018-002. Criteria: HUD requires timely verification of tenant?s initial income through the use of Enterprise Income Verification (EIV) reports. Statement of Condition: Of the tenant files selected, two tenants? initial EIV report was completed after 90 days of submission to the TRACS system. Cause: The Project did not perform the income verification timely nor maintain appropriate tenant eligibility documentation required by HUD. Effect or Potential Effect: Unable to verify tenant eligibility and cost of assistance and residency may be disallowed. Auditor Non-Compliance Code: R ? Section 8 Program Admin. Reporting Views of Responsible Officials: The Project agrees with the finding and the auditor?s recommendations have been adopted. Recommendation: Implement procedures to ensure that the Project verifies eligibility by obtaining all required documentation for potential tenants and adequately maintains tenant files. Response Indicator: Agree. Completion Date: 12/1/2019 Response: Management has provided staff with additional training on HUD rules and regulations. We have also implemented a new policy where our regional directors will make periodic site visits inclusive of file reviews.

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