BERLIN RETIREMENT HOMES, INC.Non-Profit

Finding # 2024-002 – Allowable Costs Repeat Finding: Yes – 2023-001 AL# 10.415 U.S. Department of Agriculture - Rural Development Questioned Cost: $2,642.34 Criteria: 40 cash disbursements were tested and one was noted as applicable to another project of the management company and one was a duplicate payment to the management company for an invoice. Condition: Expenses charged to project operations, whether for management agent services or other expenses, must be reasonable, typical, necessary and show a clear benefit to the residents of the property. Cause: One payment was from a credit card statement with multiple invoices for various properties and although the invoice clearly stated the allocable property this was missed upon entry into the general ledger. The other payment was a duplicate payment of an invoice that was not properly marked as paid upon initial payment.Effect: The project paid for expenses that were not allocable to the project. Auditor’s Recommendation: Invoices should be scrutinized closely and applied to the appropriate project. All invoices should be defaced upon payment to ensure no duplicate payment occurs. View of Responsible Officials: Management agrees with the finding and has implemented a corrective action plan.

Finding # 2024-003 – Special Tests and Provisions AL# 10.415 U.S. Department of Agriculture - Rural Development Questioned Cost: $40,486 Repeat Finding: Yes – 2023-002 Criteria: Deposits to the reserve account were not made in accordance with the requirements of the program. Condition: Owners, as required, shall establish a reserve for replacement account and make deposits in accordance with RD requirements, usually the loan agreement or other similar business agreement. Cause: Staff missed setting up the recurring deposit but noted this prior to the audit and made the catch-up payment as required in 2025. Effect: The Project’s replacement reserve was underfunded for the year. Auditor’s Recommendation: Reserve deposits should be made timely. View of Responsible Officials: Management agrees with the finding and has implemented a corrective action plan.

Finding # 2024-004 – Special Tests and Provisions Repeat Finding: No AL# 14.195 U.S. Department of Housing and Urban Development Questioned Cost: $0 Criteria: For deposits held at institutions which exceed federally insured limits, HUD Handbook 4370.2, paragraph 2-6 requires that the management agent or entity owner monitor the financial institution’s rating on a quarterly basis to ensure consistency with minimally acceptable ratings as established by the Government National Mortgage Association and maintain documentation of the rating for at least 3 years. Condition: Combined deposits on hand at Clinton Savings Bank exceed federally insured limits and no monitoring of the institution was documented.Effect: The assets of the project could be subject to risk. Auditor’s Recommendation: A monitoring policy should be instituted to properly document that balances in excess of FDIC are not subject to significant risk. View of Responsible Officials: Management agrees with the finding and has implemented a corrective action plan. Cause: The account balances at Clinton Savings Bank exceed $250,000 and no formal policy is in place for monitoring.

AL# 10.415 U.S. Department of Agriculture - Rural Development Questioned Cost: $242 Criteria – 40 cash disbursements were tested and two were noted as applicable to other projects of the management company. Condition - Expenses charged to project operations, whether for management agent services or other expenses, must be reasonable, typical, necessary and show a clear benefit to the residents of the property. Cause – The two payments were from a credit card statement with multiple invoices for various properties and although the invoice clearly stated the allocable property this was missed upon entry into the general ledger. Effects or Potential Effects – The project paid for expenses that were not allocable to the project. Auditor’s Recommendation - Invoices should be scrutinized closely and applied to the appropriate project. View of Responsible Officials – Management agrees with the finding and has implemented a corrective action plan.

AL# 10.415 U.S. Department of Agriculture - Rural Development Questioned Cost: $14,048 Criteria: Deposits to the reserve account were not made in accordance with the requirements of the program. Condition - Owners, as required, shall establish a reserve for replacement account and make deposits in accordance with RD requirements, usually the loan agreement or other similar business agreement. Cause – There was a change in staffing and the new staff were not aware of the requirement for monthly deposits. Effects – The Project’s replacement reserve was underfunded for the year. Auditor’s Recommendation – Reserve deposits should be made timely. New staff should be trained on requirements for Rural Development Programs. View of Responsible Officials – Management agrees with the finding and has implemented a corrective action plan.

Questioned Cost: $0 Criteria ? Units that became available during the year were not rented to the required percentage of tenants with extremely low income. Condition ? HUD Section 8 requires at least 40% of the units that become available in the fiscal year be offered to extremely low-income tenants. If the units were actively marketed and the project was unable to achieve the 40% target, the units can be rented to other eligible tenants. During the 15-month period ended December 31, 2022, there were seven units that became available and only one was rented to an extremely low-income tenant. Evidence of proper marketing could not be produced justifying that the lower than 40% could be obtained. Cause ? The entity switched management companies during the year and prior to the new management company the tenant selection plan was inconsistently followed causing this finding. Effects or Potential Effects ? The project did not meet the HUD Section 8 housing requirements. Auditor?s Recommendation ? Resident selection plan should be reviewed and consistently followed. View of Responsible Officials ? Management agrees with the finding and has implemented a corrective action plan.

AL# 14.195 U.S. Department of Housing and Urban Development Questioned Cost: $0 Criteria ? Tenant file was missing the Enterprise Income Verification (EIV) system report. Condition ? For one file of the four tested, there was no EIV form maintained in the tenant file. Cause ? The entity switched management companies during the year and prior to the new management company the tenant files were inconsistently maintained causing this finding.Effects or Potential Effects ? Tenant files were not complete or maintained in accordance with HUD requirements. Auditor?s Recommendation ? The specific documentation require by HUD should be maintained in the tenant files and the files should be periodically reviewed for completeness. View of Responsible Officials ? Management agrees with the finding and has implemented a corrective action plan.

Questioned Cost: $0 Criteria ? Evidence that two individuals on the waitlist were reached out to sequentially was not maintained. Condition ? In testing the move-ins, wait-list and rejections, evidence could not be provided to support that the next two people on the waitlist were contacted prior to the open unit being offered to the third person in the waitlist. Cause ? The entity switched management companies during the year and, prior to the new management company, documentation around proper ordering of the waitlist was not maintained causing this finding. Effects or Potential Effects ? Waitlist procedures may not have been properly followed or if followed, not appropriately documented. Auditor?s Recommendation ? Maintenance and updates to the waitlist should be documented accordingly. View of Responsible Officials ? Management agrees with the finding and has implemented a corrective action plan.

AL# 10.415 U.S. Department of Agriculture - Rural Development Questioned Cost: $3,210 Criteria ? Funds collected as a security deposit shall be kept in the name of the project, separate and apart from all other funds of the project in a trust account. The amount of this account shall always equal or exceed the aggregate of all outstanding obligations under that account. Condition ? The Project?s tenant security deposits cash account did not equal or exceed the tenant security deposit liability. Cause ? The entity switched management companies during the year and security deposits were still in the process of reconciliation as of year-end.Effects or Potential Effects ? The project was not in compliance with requirements set forth by Rural Development. Auditor?s Recommendation ? We recommend regular reconciliation and comparison of the security deposit liability account and the cash account. View of Responsible Officials ? Management agrees with the finding and has implemented a corrective action plan.