Acres Homes Garden, Inc.

Findings reference number: 2022-001 Title and AL Number of Federal Program: Supportive Housing for Persons with Disabilities (AL 14.181) Type of finding: Compliance Resolution Status: In process Population size: N/A Sample size: N/A Repeat finding: No Criteria: Withdrawals from the residual receipt account should be approved by HUD. Condition: A withdrawal was made from the residual receipt account without HUD's approval. The funds were transferred to the operating account to pay for operating expenses. Cause: The Project did not have enough funds to pay its vendors. Effect: The Project may not have sufficient funds in the future to pay for major repairs and replacements. Noncompliance code: C, Unauthorized withdrawals from Residual Receipts account Questioned costs: N/A. Reporting views of officials: Management agrees with the finding. Contract Number: 114HD031 Context: The Project has practically no liquidity. Recommendation: The Project should bring this matter to the attention of the Center and request an injection of funds in fiscal 2023 to replace the funds withdrawn. Auditors' summary of auditee's comments: They are in agreement. Completion date: 8/31/2023 Response: Management has consulted the Center on this matter.

Corrective Action Plan Audit Finding 2022-001: A withdrawal was made from the residual receipt account without HUD approval. Response: The Project did not have enough funds to pay its vendors. Management will request an injection of funds from the Center in 2023 to replace the withdrawn funds. Responsible Party: Linda G. Holder Vice President/COO/Agent Houston Housing Management Corporation 2211 Norfolk, Suite 614 Houston, TX 77098

Findings reference number: 2022-002 Title and AL Number of Federal Program: Supportive Housing for Persons with Disabilities (AL 14.181). Type of finding: Compliance Resolution Status: Completed Population size: N/A Sample size: N/A Repeat finding: No Criteria: The Project should be maintained in decent, safe and sanitary conditions. Condition: HUD inspected the Project in July 2022 and found serious deficiencies relating to the Project's condition. Cause: The Project has not had sufficient working capital to maintain the property properly. Effect: The Center was in default of its agreement with HUD. Noncompliance code: I. Failure to maintain property Questioned costs: N/A. Reporting views of officials: Management agrees with the finding. During August 2022, the Center hired and paid contractors to correct the deficiencies listed in the HUD report. Contract number: 114HD031 Context: The Center and management should determine future cash needs which would enable the Project to make the necessary repairs in a timely basis. Auditors' summary of auditee's comments: They are in agreement. Response: Management indicated that all the repairs have been completed to HUD's satisfaction as of September 2, 2022. Recommendation: Management should provide the Center with information of any future repairs that would require the Center's assistance as soon as possible. Auditors' summary of auditee's comments: They are in agreement. Completion date: September 2, 2022

Audit Finding 2022-002: HUD inspected the Project in July 2022 and found serious deficiencies in the Project?s condition. Response: All of the repairs requested by HUD were completed to HUD?s satisfaction as of September 2, 2022. Responsible Party: Linda G. Holder Vice President/COO/Agent Houston Housing Management Corporation 2211 Norfolk, Suite 614 Houston, TX 77098

Findings reference number: 2021-001 Title and CFDA Number of Federal Program: Supportive Housing for Persons with Disabilities (CFDA 14.181) Type of finding: Compliance Resolution Status: In process Population size: N/A Sample size: N/A Repeat finding: Yes. 2020-002 and 2019-007. Criteria: Monthly deposits of $497 should be made to the reserve for replacement account. Condition: Only eleven monthly deposits were made during the fiscal year. Cause: The Project did not have enough funds to make the required deposits. Effect: The Project may not have sufficient funds in the future to pay for major repairs and replacements. Noncompliance code: N, Reserve for replacements Questioned costs: N/A. Reporting views of officials: Management agrees with the finding. Contract Number: 114HD031 Context: The Project has practically no liquidity. Recommendation: The Project should bring the delinquency to the attention of the Center and request an injection of funds in fiscal 2022 that would provide the capital to make the delinquent deposits and the future year's deposits to the reserve for replacement. Auditors' summary of auditee's comments: They are in agreement. Completion date: 8/31/2022 Response: Management has consulted the Center on this matter.

Corrective Action Plan Finding 2021-001 ? Monthly deposits of $497 should be made to the Reserve for Replacement account. With the help of the project sponsor, it was believed that the Reserve for Replacement deposits were caught up. Apparently, there are still 5 months of delinquent deposits, totaling $2,485. The property will catch up on these delinquent payments during fiscal 2022. Linda Holder Vice President & Chief Operating Officer Houston Housing Management Corporation 2211 Norfolk Street, Suite 614, Houston, Texas 77098

2020-002

Findings reference number: 2020-002 Title and CFDA Number of Federal Program: Supportive Housing for Persons with Disabilities (CFDA 14.181) Type of finding: Compliance Resolution Status: In process Population size: N/A Sample size: N/A Repeat finding: Yes. 2019-007. Criteria: Monthly deposits of $497 should be made to the reserve for replacement account. Condition: Only eight monthly deposits were made during the fiscal year. Cause: The Project did not have enough funds to make the required deposits. Effect: The Project may not have sufficient funds in the future to pay for major repairs and replacements. Noncompliance code: N, Reserve for replacements Questioned costs: N/A. Reporting views of officials: Management agrees with the finding. Contract Number: 114HD031 Context: The Project's expenses exceed the income collected. Recommendation: The Project should bring the delinquency to the attention of the Center and request an injection of funds in fiscal 2021 that would provide the capital to make the delinquent deposits and the future year's deposits to the reserve for replacement. Auditors' summary of auditee's comments: They are in agreement. Completion date: 8/31/2021 Response: Management has consulted the Center on this matter.

Finding 2020-002 ? Monthly deposits of $497 should be made to the Reserve for Replacement account. With the help of the project sponsor it was believed that the Reserve for Replacement deposits were caught up. Apparently there were 4 outstanding deposits from before the calculations of outstanding deposits were made. The property will pay double payments for four months until the deposits are caught up.

2019-007

Findings reference number: 2019-003 Title and CFDA Number of Federal Program: Supportive Housing for Persons with Disabilities, CFDA 14.181 Type of finding: Federal Award (Complaince) Resolution Status: In process Population size: NA Sample size: NA Repeat finding: No Criteria: The Project should have regular oversight from governance and this should be documented in the minutes. Condition: No minutes have been prepared because no meetings of the board of directors have been held during the last two fiscal years. Cause: The existing board members are unable to devote time to overseeing the Project. Effect: The Project has minimal oversight. Noncompliance code: P Questioned costs: NA. Reporting views of officials: Auditee agrees with the finding. Contract Number: I 14HD031 Context: No board meetings have been held during the last two fiscal years. Recommendation: Management should discuss the matter with governance and urge them to repopulate the board with members who will be able to devote time to oversee the Project. Auditors' summary of auditee's comments: They are in agreement. Completion date: 8131/2020 Response: Management has already brought this matter to the attention of governance several times, and will continue to do so. 30

Finding 2019?3 - The Project should have regular oversight from governance and this should be documented in the minutes. The when the Bylaws for Acres Homes Garden, Inc were created they included a rule that all directors had to added by the Sponsor. As a result, the Boards of Directors are not adequately populated. The Management Company is trying to work with the Sponsors to repopulate the Boards of all four of these properties.

Findings reference number: 2019-005 Title and CFDA Number ofFederal Program: Section 811 Capital Advance, CFDA 14.181 Type of finding: Federal Award (Compliance) Resolution Status: In process Population size: NIA Sample size: NA Repeat finding: No Criteria: Proper procedures need to be maintained in accordance with HUD program guidelines, to document tenant eligibility. Condition: Review of tenant files showed that EIV procedures were not documented. Cause: This happened due to staff oversight. Effect: The tenant files do not have the complete and proper documentation required per HUD program guidelines. Tenant eligibility could not be verified. Noncompliance code: E Questioned costs: NA. Reporting views of officials: Auditee agrees with the finding. Contract Number: 114-HD031 Context: The project is short staffed and the Property Managers are still learning about necessary documentation to be retained in the tenant files. Recommendation: Management should ensure that site staff are properly trained on the mandatory EIV policies and procedures. Auditee's comments: Auditee agrees with the finding. However, the Project has limited funds to employ trained staff. The Vice President of the management company is now handling all tenant related matters in an effort to improve the tenant file documentation. Auditors' summary of auditee's comments: They are in agreement. Completion date: 8/31/2020 Response: In the future, Management will make sure that all mandatory EIV procedures are adhered to, all periodic EIV reports are run according to the policies laid down and relevant reports are documented in the tenant files.

Finding 2019 - 5 - Proper procedures need to be maintained in accordance with HUD program guidelines, to document tenant eligibility. Site staff has been counseled on proper docwnentation for tenant files. This problem should be resolved going forward.

Findings reference number: 2019-006 Title and CFDA Number of Federal Program: Section 811 Capital Advance, CFDA 14.181 Type of finding: Federal Award (Compliance) Resolution Status: In process Population size: NA Sample size: NA Repeat finding: Yes. 2018-005 Criteria: The tenant security deposits bank account should have enough cash to cover the tenant security deposit liability. Condition: Review of the security deposit account showed that the balance as of August 31, 2019 was insufficient to cover the tenant security deposit liability. Cause: The Project had a shortfall of operational cash and used some funds from the security deposit account. Effect: The Project may not be able to refund the security deposit for tenants moving out. Noncompliance code: N Questioned costs: NA. Reporting views of officials: Auditee agrees with the finding. Contract Number: I 14-HD031 Context: The funds were withdrawn because of a shortfall of operating cash and need for necessary repairs to the property. Recommendation: Management must transfer enough funds to the security deposit account to cover the tenant security deposit liability. Auditee's comments: Auditee agrees with the finding and will replenish the money to the security deposit account as soon as possible. In the future, management will avoid withdrawing funds from the security deposit account for operational expenses. Auditors' summary of auditee's comments: They are in agreement. Completion date: 8131/2020 Response: Management will transfer money from the operations to security deposit account to cover the tenant security deposit liability, as soon as the funds become available.

Finding 2019 - 6 - The tenant security deposits bank account should have enough cash to cover the tenant security deposit liability. The property has been struggling financially. However, going forward the Sponsor has agreed to subsidize the shortfalls of the property. This should alleviate the need to scramble for funds to keep the property running.

2018-005

Findings reference number: 2019-007 Title and CFDA Number of Federal Program: Supportive Housing for Persons with Disabilities (CFDA 14. I 81) Type of finding: Compliance Resolution Status: In process Population size: NA Sample size: NA Repeat finding: No Criteria: Monthly deposits of $497 should be made to the reserve for replacement account. Condition: Only two monthly deposits were made during the fiscal year. Cause: The Project did not have enough funds to make the required deposits. Effect: The Project may not have sufficient funds in the future to pay for major repairs and replacements. Noncompliance code: N Questioned costs: NA Reporting views of officials: Management agrees with the finding. Contract Number: 1 l 4HD031 Context: The Project's expenses exceed the income collected. Recommendation: If the income cannot be increased and expenses cannot be decreased by a significant amount, then the Project should consider asking the Center for an injection of funds in fiscal 2020 that would provide the capital to make the delinquent deposits and the future year's deposits to the reserve for replacement. Auditors' summary of auditee's comments: They are in agreement. Completion date: 8131/2020 Response: Management has consulted the Center on this matter.

Finding 2019 - 7 - Monthly deposits of $497 should be made to the Reserve for Replacement account. With the help of the Sponsor to project should be able to run fmancially. The property has received a very small rent which should help some as well.

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2016-004

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2016-005

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