RIVERCREST COMMONS HOUSING DEVELOPMENT FUND COMPANY, INC

Criteria - HUD requires that the reserve for replacements account be funded by $290.58 monthly in accordance with the regulatory agreement. Condition - The reserve for replacements account was underfunded by $1,162 during the year ended December 31, 2023. Additionally, the Company failed to deposit $872 underfunded from the year ended December 31, 2022. Cause - The Company failed to make 4 months of deposits required for 2023 as well as the 3 underfunded months from 2022. Effect - The Company was not in compliance with the above HUD regulations and the reserve for replacements account was underfunded by $2,034. Questioned Costs - None identified. Statistical Sampling - The sample was not intended to be, and was not, a statistically valid sample. Repeat Finding - This is a repeat of finding 2022-001 as reported for the year ended December 31, 2022. Recommendation - We recommend that the delinquent deposits totaling $2,034 be deposited into the reserve for replacements account as soon as possible. Management’s Response - Management understands HUD’s required deposit requirement and will deposit 12 months going forward, as well as the delinquent deposits totaling $2,034 by December 31, 2024.

Criteria - HUD requires that the reserve for replacements account be funded by $290.58 monthly in accordance with the regulatory agreement. Condition - The reserve for replacements account was underfunded by $872 during the year ended December 31, 2022. Cause - The Company's accountant failed to make 3 months of required deposits. Effect - The Company was not in compliance with the above HUD regulations and the reserve for replacements account was underfunded by $872. Questioned Costs - None identified. Recommendation - We recommend that the delinquent deposits totaling $872 for the year ended December 31 2022 be deposited into the reserve for replacements account as soon as possible. Management's Response - Management understands HUD's required deposit requirement and will deposit 12 months going forward.

Criteria - In accordance with HUD's Uniform Financial Reporting Standards (UFRS) rule and 24 CFR section 5.801, owners are required to submit financial information to HUD, no later than 90 days after the end of the fiscal year. Condition - The Company did not submit financial information to HUD within 90 days after the end of the fiscal year. Cause - The audit was scheduled for July 2023 creating the need for an owners certified (unaudited) submission to HUD but remained unsubmitted by the Company. Effect - The Company is not in compliance with financial reporting requirements. Questioned Costs - None identified. Repeat Finding - This is a repeat of finding 2021-002 as reported for the year ended December 31, 2021. Recommendation - The Company should review year end procedures to ensure timely and accurate reporting based on HUD's UFRS. Additionally, the Company may also elect to schedule the annual audit closer to the end of the fiscal year to bypass the need for the owner certified submission. Management's Response - The Company will work to engage its auditors to perform the December 31, 2023 audit in March of 2024 and complete the audited submission within 90 days after the end of the fiscal year.

Criteria - In accordance with the Section 811 Capital Advance Program Regulatory Agreement, residual receipts shall be under the control of HUD and shall be disbursed only at the discretion of HUD for such a purpose as it may determine to be necessary or appropriate. Condition - During the year end December 31, 2022, the Company made an unauthorized transfer of $5,000 from the residual receipts account. Cause - The Company never received or failed to retain proper approval - authorizing the withdrawal. Effect - The Company's residual receipts account was understated at December 31, 2022 and reimbursement is required. Questioned Costs - None identified. Recommendation - Management should be aware of HUD requirements and deposit $5,000 into the residual receipts accounts as soon as possible. Management's Response - Management understands HUD's residual receipts requirement and will deposit $5,000 by December 31, 2023.

Criteria - HUD requires that any surplus cash be deposited into the residual receipts account 60 days following year-end in accordance with the Regulatory Agreement. Condition - The surplus cash reported in Schedule 3 of the December 31, 2020 audited financial statements was not deposited into the residual receipts account during the year ended 2021. Cause - The Company only deposited the delinquent deposits to residual receipts of $15,593 which represented surplus cash through the year ended December 31, 2019. Effect - The Company?s residual receipts account at December 31, 2021 was underfunded by $71. Questioned Costs - None identified. Repeat Finding - This is a repeat of finding 2020-001 reported for the year ended December 31, 2020. Recommendation - Management should be aware of HUD requirements and deposit the 2020 surplus cash of $71 into the residual receipts accounts as soon as possible. Management?s Response - Management understands HUD?s reported surplus cash computation in the audited financial statements and will deposit the prior year (2020) surplus cash of $71 into the residual receipts account by June 30, 2022.

Criteria - In accordance with HUD?s Uniform Financial Reporting Standards (UFRS) rule and 24 CFR section 5.801, owners are required to submit financial information to HUD, no later than 90 days after the end of the fiscal year. Condition - The Company did not submit financial information to HUD within 90 days after the end of the fiscal year. Cause - The audit was scheduled for April 2022 creating the need for an owners certified (unaudited submission to HUD. A transition in the Company?s financial team lead to a breakdown in communication with regards to the reporting requirements. Effect - The Company is not in compliance with financial reporting requirements. Questioned Costs - None identified. Recommendation - The Company should review year end procedures to ensure timely and accurate reporting based on HUD?s UFRS. Additionally, the Company may also elect to schedule the annual audit closer to the end of the fiscal year to bypass the need for the owner certified submission. Management?s Response - The Company will engage its auditors to perform the annual audit in March and complete the audited submission within 90 days after the end of the fiscal year.

Criteria - HUD requires that any surplus cash be deposited into the residual receipts account 60 days following year-end in accordance with the Regulatory Agreement. Condition - The surplus cash through December 31, 2019 was neither calculated properly nor deposited into the residual receipts account. Cause - The Company has not been accurately calculating or monitoring its surplus cash in accordance with its Regulatory Agreement. Effect - The Company?s residual receipts account at December 31, 2020 was underfunded by $15,593. Questioned Costs - None identified. Recommendation - Management should be aware of HUD requirements and deposit the 2019 surplus cash of $15,593 into the residual receipts accounts as soon as possible along with the $71 of 2020 surplus cash as calculated on page 15 (schedule 3). Management?s Response - See Corrective Action Plan on page 29.

2019-001 ? Internal Controls over Financial Reporting Material Weakness CRITERIA Management is responsible for understanding internal control and designing formal or informal systems in such a way that reduces the risk that financial statements will be materially misstated to a relatively low level. CONDITION & CONTEXT The financial statements presented for audit contained errors requiring opening net position be reduced by $1,286,850. In one instance, the Company identified a required correction of $185,286 of accumulated depreciation from prior periods for the audit. The other instance involved the incorrect recording in a prior period of a capital advance of $1,101,564. CAUSE The Company?s year-end closing and financial reporting procedures were not sufficient to ensure accurate and timely financial reporting during a time in which the Company was undergoing a personnel transition in the accounting department. EFFECT The Company?s financial statements were materially misstated prior to the error corrections. QUESTIONED COSTS None identified. REPEAT FINDING This is not a repeat finding. RECOMMENDATION We continue to recommend that the Company enhance their system of internal control over financial reporting and consider the following corrective actions: ? Provide ongoing training on accounting and financial reporting. ? Implement the use of a comprehensive year-end closing checklist and ensure that the financial statements presented for audit reconcile to the underlying accounting records. AUDITEE?S RESPONSE AND CORRECTIVE ACTION See Corrective Action Plan.