SPRING MEADOWS II - VILLAGE OF SPRING MEADOWS II 047-EE047Non-Profit

Finding Type: - Immaterial noncompliance with major program requirements - Significant deficiency in internal control over compliance Title and Assistance Listing Number of Federal Program - 14.157 Supportive Housing for the Elderly - Project Rental Assistance Contract and Capital Advance Finding Resolution Status - None Information on Universe and Population Size - Expenditures charged to and paid by the Organization during the year ended June 30, 2025 Sample Size Information - A sample size of 25 cash disbursements was tested. Identification of Repeat Finding and Finding Reference Number - N/A Criteria - The Regulatory Agreement with HUD requires that the Organization's cash should be used only to pay for the Organization's expenses. Statement of Condition - The Organization paid for expenses and an invoice for professional service fees incurred by another project. Cause - The Organization failed to properly charge professional services invoices to the proper project. Effect or Potential Effect - The Organization paid $11,400 of professional fees related to another project during the year ended June 30, 2025. Auditor Noncompliance Code - H - Unauthorized distribution of project assets Recommendation - The related project should reimburse the Organization for its portion of the invoice during fiscal year 2026. In addition, management should ensure the invoice approval process is adequate for professional fees to ensure expenses are charged to the project that incurred the cost. Auditor's Summary of the Auditee's Comments on the Findings and Recommendations - The Organization should implement internal controls to ensure expenditures recorded and paid by the Organization are in the name of the Organization. Response Indicator - Agree Completion Date - June 30, 2026 Response - Management acknowledges noncompliance in the current fiscal year and has taken measures to improve internal controls over compliance. Management will seek reimbursement from the other project during fiscal year 2026.

Finding Type: - Immaterial noncompliance with major program requirements - Significant deficiency in internal control over compliance Title and Assistance Listing Number of Federal Program - 14.157 Supportive Housing for the Elderly - Project Rental Assistance Contract and Capital Advance Finding Resolution Status - In Process Information on Universe and Population Size - The total population size is the total number of units, which is 40. Sample Size Information - A total of 1 out of the 5 samples Identification of Repeat Finding and Finding Reference Number - N/A Criteria - HUD requires the Organization to utilize EIV, including having controls in place to ensure EIV is being properly utilized. Statement of Condition - During testing of tenant files, it was noted that the EIV report was missing for one tenant. Cause - The Organization failed to maintain the proper EIV document for one of the tenants tested. Effect or Potential Effect - EIV was not properly kept within the tenant file Auditor Noncompliance Code - S - Internal control deficiency Reporting Views of Responsible Officials - Management will implement internal control procedures to ensure that the EIV system is properly utilized Recommendation - Management should implement proper procedures and controls to ensure EIV is properly utilized. Auditor's Summary of the Auditee's Comments on the Findings and Recommendations - Management acknowledges the noncompliance and related internal control deficiency over compliance and will implement proper procedures and controls to ensure EIV is properly utilized. Response Indicator - Agree Completion Date - June 30, 2026 Response - Management will ensure controls in place are followed and that all required documents are properly retained in each respective tenant file.

Finding Type: - Immaterial noncompliance with major program requirements - Significant deficiency in internal control over compliance Title and Assistance Listing Number of Federal Program - Supportive Housing for the Elderly Project Rental Assistance Contract and Capital Advance (ALN #14.157) Finding Resolution Status - In progress Information on Universe and Population Size - N/A Sample Size Information - N/A Identification of Repeat Finding and Finding Reference Number - N/A Criteria - The Organization should have internal controls in place to reconcile the replacement reserve account to ensure all withdrawals have HUD approval and all required monthly deposits or repayments of HUD approved loans are made timely as required by the Regulatory Agreement and/or the loan terms. Statement of Condition - There was a lack of timely reconciliation performed by the Organization of the replacement reserve account activity. The Organization received approval in 2019 from HUD for a $22,427 loan advance to be repaid to the replacement reserve when the January 2019 voucher payment was received. Of this amount, $6,740 was received and deposited back into the replacement reserve in 2019. The remaining $15,687 was received by the Organization on February 6, 2023; however, this amount was not deposited back to the replacement reserve until after year end on August 16, 2023. Cause - The Organization failed to perform a timely reconciliation of the replacement reserve account to ensure that all required deposits were made into the replacement reserve based on the loan terms. Effect or Potential Effect - The lack of reconciliation procedures led to the reserve for replacement account being underfunded as of June 30, 2023. Auditor Noncompliance Code - S - Internal control deficiency and N Reserve for replacement deposits Reporting Views of Responsible Officials Management agrees with the finding as reported. Recommendation - The Organization should implement internal controls to properly reconcile the replacement reserve account in a timely manner. Response Indicator - Agree Completion Date - August 16, 2023 Response - Management acknowledges the significant deficiency in internal control over compliance that resulted in the late deposit back into the replacement reserve account as required and has taken measures to improve internal control over compliance.