Village Cooperative of Albert LeaNon-Profit

Significant Deficiency and Noncompliance – Unapproved General Operating Reserve Withdrawal Department of Housing and Urban Development Assistance Listing Number 14.126 – Mortgage Insurance - Cooperative Projects Significant Deficiency and Noncompliance Category of Finding – Special Tests and Provisions Criteria - The HUD regulatory agreement requires the Cooperative to establish and maintain a general operating reserve. Withdrawals from the reserve in excess of 20% of the balance of the previous year-end require prior written approval by HUD. Condition - Excess withdrawals of $52,850 were taken from the general operating reserve without obtaining the proper HUD approval. Cause - The Cooperative did not obtain the proper HUD approval to withdraw the general operating reserve funds in excess of 20% of the balance of the previous year-end. Effect - The Cooperative was out of compliance with their HUD regulatory agreement at July 31, 2025. Recommendation - We recommend that the Cooperative implement a control process to ensure adherence to the regulatory agreement and obtain the proper HUD approval to withdrawal general operating reserve funds. Auditee’s comment - The Cooperative will make deposits to the general operating reserve to meet the HUD regulatory agreement. The management agent will implement a process to ensure withdrawals are made as required by the regulatory agreement. Status - Unresolved

Significant Deficiency and Noncompliance – Required Payments to General Operating Reserve Department of Housing and Urban Development Assistance Listing Number 14.126 – Mortgage Insurance - Cooperative Projects Significant Deficiency and Noncompliance Category of Finding – Special Tests and Provisions Criteria - The HUD regulatory agreement requires the Cooperative to deposit monthly payments at 3% of annual member carrying charges until the balance of the reserve exceeds 15% of current annual member carrying charges. The required deposit may be reduced to 2% of annual member carrying charges until the balance of the reserve exceeds 25% of annual member carrying charges. Condition - Due to withdrawals from the general operating reserve in 2025, the reserve balance fell below 25% of annual member carrying charges and deposits were not continued. Cause - The Cooperative did not make monthly deposits to the general operating reserve in accordance with the HUD regulatory agreement. Effect - The Cooperative was out of compliance with their HUD regulatory agreement at July 31, 2025, because the general operating reserve was underfunded. Recommendation - We recommend that the Cooperative implement a control process to ensure adherence to the regulatory agreement and make the required monthly deposits to the general operating reserve. Auditee’s comment - The Cooperative will make deposits to the general operating reserve to meet the HUD regulatory agreement. The management agent will implement a process to ensure deposits are made as required by the regulatory agreement. Status - Unresolved

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

2022-001 ? 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 2021-001. 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 - The Board of Directors is and will remain involved in the financial affairs of the Cooperative. Status - Outstanding Auditor?s non-compliance code - S - Internal Control Deficiencies

2021-001 ? 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 2020-001. 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 - The Board of Directors is and will remain involved in the financial affairs of the Cooperative. Status - Outstanding Auditor?s non-compliance code - S - Internal Control Deficiencies

2020-001 ? 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 2019-001. 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 - The Board of Directors is and will remain involved in the financial affairs of the Cooperative. Status - Outstanding Auditor?s non-compliance code - S - Internal Control Deficiencies

SECTION II ? FINDINGS - FINANCIAL STATEMENTS AUDIT 2019-001 ? 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 2018-001. 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 - The Board of Directors is and will remain involved in the financial affairs of the Cooperative. Status - Outstanding Auditor?s non-compliance code - S - Internal Control Deficiencies SECTION III ? FINDINGS AND QUESTIONED COSTS ?MAJOR FEDERAL AWARD PROGRAM AUDIT No matters were reported.

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