BREAKTHROUGH PHASE I, INC.Non-Profit

CORRECTIVE ACTION PLAN Breakthrough Phase I, Inc. respectfully submits the following corrective action plan for the year ended June 30, 2025. Purkey, Carter, Compton, Swann, & Carter, PLLC P.O. Box 727 Morristown, Tennessee 37815 Audit period: July 1, 2024 – June 30, 2025 The findings from the schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Section A of the schedule, Summary of Audit Results, does not include findings and is not addressed. FINDINGS – FINANCIAL STATEMENT AUDIT None FINDINGS – FEDERAL AWARD PROGRAMS AUDITS FINDING NO. 2025-001: Ineffective operation of internal controls by management Management did not conduct recertifications of the Project’s tenants during the fiscal year under audit. Criteria: According to HUD Handbook 4350.3, owners must conduct a recertification of family income and composition at least annually by the tenant’s recertification anniversary date. Owners then must recompute the tenants’ rents and assistance payments, if applicable, based on the information gathered. If a new recertification is not submitted within 15 months of the previous year’s recertification anniversary date, HUD will terminate assistance payments. Cause of Condition: Management did not have systems in place to ensure tenant files and recertification documentation were completed in accordance with HUD requirements. Recommendation: Auditor recommends management review HUD Handbook 4350.3 and put proper internal controls in place to ensure tenant files are in compliance with HUD and kept in accordance with HUD requirements. Action Taken: The Board is working closely with Breakthrough Corporation to ensure the Project is complying with HUD requirements and will ensure personnel complete HUD-related training. The Board is also considering contracting with a management agent to manage the Project. If the U.S. Department of Housing and Urban Development has questions regarding this plan, please contact Antonio Luna at 865-247-0065. Sincerely yours, Antonio Luna Financial Controller Breakthrough Corporation

CORRECTIVE ACTION PLAN Breakthrough Phase I, Inc. respectfully submits the following corrective action plan for the year ended June 30, 2023. Purkey, Carter, Compton, Swann, & Carter, PLLC PO. Box 727 Morristown, Tennessee 37815 Audit period: July 1, 2022 —June 30, 2023 The findings from the schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Section A of the schedule, Summary of Audit Results, does not include findings and is not addressed. FINDINGS — FINANCIAL STATEMENT AUDIT None FINDINGS — FEDERAL AWARD PROGRAMS AUDITS FINDING NO. 2023-001: Late REAC submission for Section 811 Supportive Housing for Persons with Disabilities, ALN #14.181 Criteria: The Project is required to submit audited financial statements with the REAC system within 90 days after year end. Cause of Condition: The Project did not have systems in place to submit the audited financial statements within the required 90 days. Recommendation: Auditor recommends management implement systems to ensure audited financial statements are submitted to REAC as required by the US. Department of Housing and Urban Development within 90 days after the fiscal year end. Action Taken: Personnel at Breakthrough Corporation have contracted with an outside accounting firm to handle the bookkeeping and will ensure that the year end financial reports will be provided to necessary third parties as soon as possible after the end of the fiscal year.

CORRECTIVE ACTION PLAN Breakthrough Phase I, Inc. respectfully submits the following corrective action plan for the year ended June 30, 2023. Purkey, Carter, Compton, Swann, & Carter, PLLC PO. Box 727 Morristown, Tennessee 37815 Audit period: July 1, 2022 —June 30, 2023 The findings from the schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Section A of the schedule, Summary of Audit Results, does not include findings and is not addressed. FINDINGS — FINANCIAL STATEMENT AUDIT None FINDINGS — FEDERAL AWARD PROGRAMS AUDITS FINDING N0. 2023-002: Ineffective operation of internal controls by management Management conducted recertifications of the Project’ 5 tenants; however, cannot locate any tenant files for the fiscal year under audit. Criteria: According to HUD Handbook 4350.3, owners must conduct a recertification of family income and composition at least annually by the tenant’s recertification anniversary date. Owners then must recompute the tenants’ rents and assistance payments, if applicable, based on the information gathered. Owners must also keep all tenant file and recertification documentation as required by HUD. Cause of Condition: Management did not have systems in place to ensure tenant files and recertification documentation were kept in accordance with HUD requirements. Recommendation: Auditor recommends management review HUD Handbook 4350.3 and put proper internal controls in place to ensure tenant files are in compliance with HUD and kept in accordance with HUD requirements. Action Taken: Personnel at Breakthrough Corporation that are handling the operations of the Project have gone through HUD—related training and are working diligently to get the tenant files up to date and in accordance with HUD compliance.

CORRECTIVE ACTION PLAN Breakthrough Phase I, Inc. respectfully submits the following corrective action plan for the year ended June 30, 2022. Purkey, Carter, Compton, Swann, & Carter, PLLC PO. Box 727 Morristown, Tennessee 37815 Audit period: July 1, 2021 ?June 30, 2022 The findings from the schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Section A of the schedule, Summary of Audit Results, does not include findings and is not addressed. FINDINGS ? FINANCIAL STATEMENT AUDIT None FINDINGS ? FEDERAL AWARD PROGRAMS AUDITS FINDING NO. 2022-001: Ineffective operation of internal controls by management Management did not conduct recertifications of the Project?s tenants during the ?scal year under audit. Criteria: According to the HUD Handbook 4350.3, owners must conduct a recertification of family income and composition at least annually by the tenant?s recertification anniversary date. Owners must then recompute the tenants? rents and assistance payments, if applicable, based on the information gathered. If a new recertification is not submitted within 15 months of the previous year?s recertification anniversary date, HUD will terminate assistance payments. Cause of Condition: Management had difficulties setting up the One Site Leasing software in order to conduct the recertifications in a timely manner. Recommendation: Auditor recommends management review HUD Handbook 4350.3 and put proper internal controls in place to ensure recertifications are completed as required by HUD. Action Taken: Personnel at Breakthrough Corporation that are handling the operations of the Project have gone through HUD?related training. The Board is working closely with Breakthrough Corporation to ensure the Project is complying with HUD requirements and completing training annually to stay up to date with HUD compliance. The difficulties with the leasing software has been resolved and recertifications have been completed after year end.

CORRECTIVE ACTION PLAN Breakthrough Phase I, Inc. respectfully submits the following corrective action plan for the year ended June 30, 2021. Purkey, Carter, Compton, Swarm, & Carter, PLLC P.O. Box 727 Morristown, Tennessee 37815 Audit period: July 1, 2020 ? June 30, 2021 The findings from the schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Section A of the schedule, Summary of Audit Results, does not include findings and is not addressed. FINDINGS ? FINANCIAL STATEMENT AUDIT None FINDINGS - FEDERAL AWARD PROGRAMS AUDITS FINDING N0. 2021-001: Late REAC Submission for Section 811 Supportive Housing for Persons with Disabilities, CFDA # 14.181 The Project did not timely submit audited financial statements with the US. Department of Housing and Urban Development, Real Estate Assessment Center (REAC). This is a repeat finding from the immediate previous audit, 2020-001. Criteria: The Project is required to submit audited ?nancial statements with the REAC system within 90 days after year end. Cause of Condition: The Project did not have systems in place to submit the audited financial statements within the required 90 days. Recommendation: Auditor recommends management implement systems to ensure audited financial statements are submitted to REAC as required by the US Department of Housing and Urban Development within 90 days after the ?scal year end. Action Taken: As of July 1, 2021, the Board of Directors made a motion to have Breakthrough Corporation, the Project?s non-profit corporate sponsor, begin managing the Project and relieve the previous management agent of their contract. The Project has adopted the sponsor?s accounting and finance internal controls. The Board is also working closely with Breakthrough Corporation on a continuous basis to ensure accounting records are closed periodically and that the year end financial reports will be provided to necessary third parties as soon as possible after the end of the fiscal year.

2020-001

CORRECTIVE ACTION PLAN Breakthrough Phase I, Inc. respectfully submits the following corrective action plan for the year ended June 30, 2021. Purkey, Carter, Compton, Swann, & Carter, PLLC P.O. Box 727 Morristown, Tennessee 37815 Audit period: July 1, 2020 ?June 30, 2021 The findings from the schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Section A of the schedule, Summary of Audit Results, does not include findings and is not addressed. FINDINGS ? FINANCIAL STATEMENT AUDIT None FINDINGS ? FEDERAL AWARD PROGRAMS AUDITS FINDING NO. 2021-002: Failure to make required monthly deposits into reserve for replacement account on a monthly basis and failure to place reserve funds into interest-bearing account, CFDA # 14.181 The Project did not make the required deposits into the reserve for replacement account on a monthly basis and did not place reserve funds into an interest-bearing account. Criteria: Per the Regulatory Agreement with HUD, the replacement reserve funds must be deposited into a federally insured depository in an interest-bearing account and an amount as required by HUD must be deposited monthly into the reserve fund. Cause of Condition: The Project did not have systems in place to ensure monthly required deposits were being made into the reserve fund and ensure funds were placed into an interest-bearing account. Recommendation: Auditor recommends management implement systems to ensure funds required by HUD are transferred from operating cash to the reserve for replacement account monthly and transfer reserve funds into an interest-bearing account. Action Taken: Breakthrough Corporation has funded required deposits subsequent to year end and has scheduled monthly automatic transfers with the bank. The Board is working closely with Breakthrough Corporation to ensure monthly deposits are completed as required.

2020-002

CORRECTIVE ACTION PLAN Breakthrough Phase I, Inc. respectfully submits the following corrective action plan for the year ended June 30, 2021. Purkey, Carter, Compton, Swann, & Carter, PLLC P.O. Box 727 Morristown, Tennessee 37815 Audit period: July 1, 2020 ?June 30, 2021 The findings from the schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Section A of the schedule, Summary of Audit Results, does not include findings and is not addressed. FINDINGS ? FINANCIAL STATEMENT AUDIT None FINDINGS ? FEDERAL AWARD PROGRAMS AUDITS FINDING NO. 2021-003: Failure of controls designed to safeguard assets from loss, damage, or misappropriation The management agent was unable to provide suf?cient audit evidence for cash receipts testing in order to ascertain that internal controls are working as designed by management. The management agent could not provide receipts of tenant payments to test for accuracy and timeliness of deposits and posting. Criteria: The 2 CFR section 200.62 of the Uniform Guidance states the internal control over compliance requirements for Federal awards. This is a process implemented by a non?Federal entity designed to provide reasonable assurance regarding the achievement of objections for Federal awards, including (1) transactions are properly recorded and accounted for, in order to (a) permit the preparation of reliable financial statements and Federal reports; (b) maintain accountability over assets; and demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award; (2) transactions are executed in compliance with (a) federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program and (b) any other Federal statutes and regulations that are identified in the Compliance Supplement; and (3) funds, property, and other assets are safeguarded against loss from unauthorized use or disposition. Cause of Condition: The management agent did not have systems in place to properly maintain internal controls over compliance designed to safeguard assets from loss, damage, or misappropriation. Recommendation: Auditor recommends management review cash receipt internal controls and implement controls designed to safeguard assets from loss, damage, and misappropriation. Auditor also recommends keeping a record of cash receipts that includes amount received, name of payer, date payment was received, and purpose of payment. Action Taken: The Project has adopted the sponsor?s accounting and financial internal controls. The Board is working closely with Breakthrough Corporation to ensure controls related to cash receipts are designed and working properly to safeguard assets.

CORRECTIVE ACTION PLAN Breakthrough Phase I, Inc. respectfully submits the following corrective action plan for the year ended June 30, 2021. Purkey, Carter, Compton, Swann, & Carter, PLLC P.O. Box 727 Morristown, Tennessee 37815 Audit period: July 1, 2020 ?June 30, 2021 The findings from the schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Section A of the schedule, Summary of Audit Results, does not include findings and is not addressed. FINDINGS ? FINANCIAL STATEMENT AUDIT None FINDINGS ? FEDERAL AWARD PROGRAMS AUDITS FINDING NO. 2021-004: Ineffective oversight and operation of internal controls by management The Project manager did not follow all HUD requirements when going through the tenant recertification process. The tenant file tested for internal controls over compliance contained multiple deficiencies, including missing manager signature and date on HUD Form 50059, HUD Form 9887A, tenant application, and lease; missing tenant signature on HUD Form 50059 and lease; incorrect calculation of tenant assets; and no unit inspections present in tenant?s file. Criteria: According to the HUD Handbook 4350.3: 1. The HUD?50059 certification must be signed and dated by both the manager and tenant. 2. The lease must be signed and dated by the head?of?household, spouse, co?head (if applicable), and any adult family members and the manager. 3. The HUD?9887?A must be signed by the applicant or tenant and manager. 4. The tenant application must be signed by the applicant or tenant and manager. 5. Landlords must verify all income, assets, expenses, deductions, family characteristics, and circumstances that affect family eligibility or level of assistance. For savings accounts, use the current balance. For checking accounts, use the average balance for the last six months. 6. Landlords in all HUD?subsidized multifamily properties are required to complete move?in and move-out inspections and owners must document these inspections. Owners perform unit inspections on at least an annual basis to determine whether the appliances and equipment in the unit are functioning properly and to access the need for repairs. Cause of Condition: The management agent did not have systems in place to ensure that all documents are completed per HUD requirements pursuant to the HUD Handbook 4350.3. Recommendation: Auditor recommends management review HUD Handbook 4350.3 and put proper internal controls in place to ensure manager of Project is complying with HUD requirements. Action Taken: Personnel at Breakthrough Corporation that are handling the operations of the Project have gone through HU D?related training. The Board is working closely with Breakthrough Corporation to ensure the Project is complying with HUD requirements and completing training annually to stay up to date with HUD compliance.

CORRECTIVE ACTION PLAN Breakthrough Phase I, Inc. respectfully submits the following corrective action plan for the year ended June 30, 2020. Purkey, Carter, Compton, Swann, & Carter, PLLC P.O. Box 727 Morristown, Tennessee 37815 Audit period: July 1, 2019 ? June 30, 2020 The findings from the schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Section A of the schedule, Summary of Audit Results, does not include findings and is not addressed. FINDINGS ? FINANCIAL STATEMENT AUDIT None FINDINGS ? FEDERAL AWARD PROGRAMS AUDITS FINDING NO. 2020-001: Late REAC Submission for Section 811 Supportive Housing for Persons with Disabilities, CFDA # 14.181 The Project did not timely submit audited financial statements with the U.S. Department of Housing and Urban Development, Real Estate Assessment Center (REAC). This is a repeat finding from the immediate previous audit, 2019-001. Criteria: The Project is required to submit audited financial statements with the REAC system within 90 days after year end. Cause of Condition: The Project did not have systems in place to submit the audited financial statements within the required 90 days. Recommendation: Auditor recommends management implement systems to ensure audited financial statements are submitted to REAC as required by the U.S. Department of Housing and Urban Development within 90 days after the fiscal year end. Action Taken: Management is working closely with the property management agent on a more continuous basis to ensure accounting records are closed periodically and that they year end financial reports will be provided to necessary third parties as soon as possible after the end of the fiscal year. If the U.S. Department of Housing and Urban Development has questions regarding this plan, please contact Kendrise Colebrooke at 865-247-0065. Sincerely yours, Kendrise Colebrooke Executive Director Breakthrough Corporation

2019-001

CORRECTIVE ACTION PLAN Breakthrough Phase I, Inc. respectfully submits the following corrective action plan for the year ended June 30, 2020. Purkey, Carter, Compton, Swann, & Carter, PLLC P.O. Box 727 Morristown, Tennessee 37815 Audit period: July 1, 2019 ? June 30, 2020 The findings from the schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Section A of the schedule, Summary of Audit Results, does not include findings and is not addressed. FINDINGS ? FINANCIAL STATEMENT AUDIT None FINDINGS ? FEDERAL AWARD PROGRAMS AUDITS FINDING NO. 2020-002: Failure to make required deposits into reserve for replacement account and failure to place reserve funds into interest-bearing account, CFDA # 14.181 The Project did not make the required deposits into the reserve for replacement account and did not place reserve funds into an interest-bearing account. This resulted in the reserve being underfunded by $4,200. Criteria: Per the Regulatory Agreement with HUD, the replacement reserve funds must be deposited into a federally insured depository in an interest-bearing account and an amount as required by HUD must be deposited monthly into the reserve fund. Cause of Condition: The Project did not have systems in place to ensure monthly required deposits were being made into the reserve fund and ensure funds were placed into an interest-bearing account. Recommendation: Auditor recommends management implement systems to ensure funds required by HUD are transferred from operating cash to the reserve for replacement account monthly and transfer reserve funds into an interest-bearing account. Action Taken: The management agent has funded required deposits subsequent to year end. Management is working closely with the property management agent to ensure monthly deposits are made in a timely manner. If the U.S. Department of Housing and Urban Development has questions regarding this plan, please contact Kendrise Colebrooke at 865-247-0065. Sincerely yours, Kendrise Colebrooke Executive Director Breakthrough Corporation

CORRECTIVE ACTION PLAN Breakthrough Phase I, Inc. respectfully submits the following corrective action plan for the year ended June 30, 2019. Purkey, Carter, Compton, Swann, & Carter, PLLC PO. Box 727 Morristown, Tennessee 37815 Audit period: July 1, 2018?June 30, 2019 The findings from the schedule of findings and questioned costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Section A of the schedule, Summary of Audit Results, does not include findings and is not addressed. FINDINGS - FINANCIAL STATEMENT AUDIT None FINDINGS - FEDERAL AWARD PROGRAMS AUDITS FINDING NO. 2019-001: Late REAC Submission for Section 811 Supportive Housing for Persons with Disabilities, CFDA if 14.181 The Project did not timely submit audited financial statements with the U. S. Department of Housing and Urban Development, Real Estate Assessment Center (REAC) Criteria: The Project is required to submit audited ?nancial statements with the REAC system within 90 days after year end. Cause of Condition: The Project did not have systems in place to submit the audited financial statements within the required 90 days. Recommendation: Auditor recommends management implement systems to ensure audited financial statements are submitted to REAC as required by the U5. Department of Housing and Urban Development within 90 days after the fiscal year end. Action Taken: Management is working closely with the property management agent on a more continuous basis to ensure accounting records are closed periodically and that the year end financial reports will be provided to necessary third parties as soon as possible after the end of the fiscal year. If the U.S. Department of Housing and Urban Development has questions regarding this plan, please contact Kendrise Colebrooke at 865-247-0065. Sincerely yours, Kendrise Colebrooke Executive Director Breakthrough Corporation

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