INDEPENDENT HOUSING II INC 022-EE-035Non-Profit

FINDINGS - MAJOR FEDERAL AWARD PROGRAM AUDIT Department of Housing and Urban Development Finding, 2024-001: Section 202 Supportive Housing for the Elderly Program, Capital Advance - Accumulated Balance, CFDA 14.157 STATEMENT OF CONDITION One of the Project’s bank balances exceeds the Federal Deposit Insurance Corporation (FDIC) limit of $250,000. CRITERIA HUD requires the Project’s bank balances to not exceed the $250,000 FDIC limit due to the risk of loss in the event the bank was to fail. EFFECT OF CONDITION The Project’s accounts with PeoplesBank totaled over the FDIC limit at December 31, 2024. CONTEXT Bank balances were reviewed to ensure the Project is properly managing bank account limits and exposure. Balances at one bank were over the $250,000 limit. CAUSE OF CONDITION The Project’s bank accounts at one bank exceeded the FDIC limit at December 31, 2024. RECOMMENDATION The auditor recommends ensuring all bank account balances at each bank remain below the FDIC limit. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS The Project will be monitoring bank accounts more frequently throughout the year to ensure bank balances do not exceed the FDIC limits.

FINDINGS - MAJOR FEDERAL AWARD PROGRAM AUDIT (CONTINUED) Department of Housing and Urban Development Finding, 2024-002: Section 202 Supportive Housing for the Elderly Program, Capital Advance - Accumulated Balance, CFDA 14.157 STATEMENT OF CONDITION The surplus cash calculated for the year ended December 31, 2024, is required to be deposited by the Project within 60 days after year end. CRITERIA The HUD Audit Guide considers this to be an unauthorized use of project funds. EFFECT OF CONDITION The surplus cash amount of $4,695 was not deposited into the residual receipts account by February 28, 2025. CONTEXT The Project’s surplus cash amount calculated for the year ended December 31, 2024, was required to be deposited by February 28, 2025. CAUSE OF CONDITION The 60-day surplus cash deposit requirement of the Regulatory Agreement was not made on time. The Project did not calculate the correct surplus cash amount for the year ended December 31, 2024, due to late accounting adjustments. RECOMMENDATION The auditor recommends depositing the surplus cash amount of $4,695 into the residual receipts account immediately. The auditor also recommends that the management company continue to monitor the 60 days after year-end deadline and transmit the funds to the residual receipts account prior to this deadline, if applicable, in future years. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS Management has deposited the surplus cash amount of $4,695 into the residual receipts account on March 31, 2025.

FINDINGS - MAJOR FEDERAL AWARD PROGRAM AUDIT (CONTINUED) Department of Housing and Urban Development Finding, 2024-003: Section 202 Supportive Housing for the Elderly Program, Capital Advance - Accumulated Balance, CFDA 14.157 STATEMENT OF CONDITION The Project improperly paid for one expense in the amount of $72 on behalf of another project during the year ended December 31, 2024. CRITERIA HUD Handbook 4350.3 Revision 1 for HUD Subsidized Multifamily Housing Programs requires owners to use funds in accordance with the Regulatory Agreement. EFFECT OF CONDITION The Project used funds to pay for an expense related to another project, which is in the same location as the Project. CONTEXT During the audit process, a sample size of 40 cash disbursements were tested to determine if the funds were properly disbursed in accordance with the Regulatory Agreement. One out of the 40 cash disbursements was not properly disbursed. CAUSE OF CONDITION Management mistakenly did not ensure the correct project was paying the appropriate share of a vendor’s invoice resulting in a payment on behalf of another project of $72. RECOMMENDATION The auditor recommends ensuring all disbursements are thoroughly reviewed prior to authorizing the expense to be paid. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTIONS The Project will be reimbursed by the other project for the expense paid on its behalf.

FINDINGS - MAJOR FEDERAL AWARD PROGRAM AUDIT Department of Housing and Urban Development Finding, 2023-001: Section 202 Supportive Housing for the Elderly Program, Capital Advance - Accumulated Balance, CFDA 14.157. STATEMENT OF CONDITION The surplus cash calculated for the year ended December 31, 2023, is required to be deposited by the Project within 60 days after year end. CRITERIA The HUD Audit Guide considers this to be an unauthorized use of project funds. CAUSE OF CONDITION The 60-day surplus cash deposit requirement of the Regulatory Agreement was missed due to a banking oversight. EFFECT OF CONDITION The surplus cash amount of $18,172 was not deposited into the residual receipts account by February 28, 2024. RECOMMENDATION The auditor recommends depositing the surplus cash amount of $18,172 into the residual receipts account immediately. The auditor also recommends that the management company continue to monitor the 60 days after year-end deadline and transmit the funds to the residual receipts account prior to this deadline, if applicable, in future years. MANAGEMENT’S RESPONSE Management has deposited the surplus cash amount of $18,172 into the residual receipts account and will continue to monitor the 60 days after year-end deadline in the future.

FINDINGS - MAJOR FEDERAL AWARD PROGRAM AUDIT Department of Housing and Urban Development Finding, 2021-001: Major Program: Section 202 Supportive Housing for the Elderly, Assistance Listing 14.157 STATEMENT OF CONDITION One tenant file, out of five files reviewed, had incorrectly accounted for a tenant?s income, which resulted in undercharging the tenant $5 a month in rent. CRITERIA HUD Handbook 4350.3 Revision 1 for HUD Subsidized Multifamily Housing Programs requires owners to properly calculate tenants rent derived from the appropriate documents on file for tenants. EFFECT OF CONDITION The tenant was improperly undercharged $45 of additional rent for the year ended December 31, 2021. HUD was overcharged $45 of rental assistance payments for the year ended December 31, 2021. CONTEXT During audit fieldwork, five tenant files from a statistically valid sample were examined for compliance with tenant eligibility criteria. Of the five tenant files examined, income for one tenant was incorrectly accounted for, therefore resulting in the wrong calculation of tenant rent and HUD tenant assistance payments. CAUSE OF CONDITION Management mistakenly did not ensure that the proper income was used to calculate the tenant?s rent. RECOMMENDATION The auditor recommends ensuring that all tenants? paperwork is thoroughly reviewed and accurately used in the calculation of the tenant?s required monthly rent and HUD?s tenant assistance payments. MANAGEMENT?S RESPONSE The Project billed the tenant $45 and reimbursed HUD for the additional tenant assistance of $45 due from the Project.

FINDINGS - MAJOR FEDERAL AWARD PROGRAM AUDIT Department of Housing and Urban Development Finding, 2021-002: Major Program: Section 202 Supportive Housing for the Elderly, Assistance Listing 14.157 STATEMENT OF CONDITION One tenant file, out of five files reviewed, was a new move-in and management did not properly generate the Enterprise Income Verification (EIV) report timely. CRITERIA HUD Handbook 4350.3 Revision 1 for HUD Subsidized Multifamily Housing Programs requires owners to review the EIV report within 90 days after transmission of the move-in certification to the Tenant Rental Assistance Certification System (TRACS). EFFECT OF CONDITION Income not being verified to determine the amount of housing assistance tenants are eligible to receive, if any, could result in improper use of HUD funds. CONTEXT During audit fieldwork, five tenant files from a statistically valid sample were examined for compliance with tenant eligibility criteria. Of the five tenant files examined, one tenant was a new move-in. The tenant?s file did not contain the EIV verified in the required 90-day timeframe. CAUSE OF CONDITION The procedures to ensure compliance over HUD tenant compliance, including EIV verification, were not followed timely. RECOMMENDATION The auditor recommends implementing greater oversight over HUD tenant compliance and proper employee training on these compliance requirements to ensure EIV verification promptly and help reduce errors in subsidy payments. MANAGEMENT?S RESPONSE The Project will be monitoring use of the EIV system for move-ins and recertifications and review the HUD tenant compliance requirements with their employees.

STATEMENT OF CONDITION The surplus cash calculated for the year ended December 31, 2020 is required to be deposited by the Lender within 60 days after year end. CRITERIA The HUD Audit Guide considers this to be an unauthorized use of project funds. CAUSE OF CONDITION The 60 day surplus cash deposit requirement of the Regulatory Agreement was missed due to a banking oversight. EFFECT OF CONDITION The surplus cash amount of $14,253 was not deposited into the residual receipts account by February 28, 2021. RECOMMENDATION The auditor recommends depositing the surplus cash amount of $14,253 into the residual receipts account immediately. The auditor also recommends that the management company continue to monitor the 60 days after year-end deadline and transmit the funds to the residual receipts account prior to this deadline, if applicable, in future years. MANAGEMENT?S RESPONSE Management plans to open a new residual receipts bank account and deposit the surplus cash amount of $14,253 to the residual receipts account and will continue to monitor the 60 days after year-end deadline in the future.

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