CARING HEART REHABILITATION AND NURSING CENTER, INC.

Condition: The Project did not comply with HUD’s annual filing requirement prior to the deadline. Criteria: Projects are required to ensure that financial status reports are presented in accordance with the terms of the applicable agreement between the Project and HUD. Context: Audited financial statements are due to HUD and REAC no later than 90 days after the fiscal year end. Cause: Due to a change in software, the annual filing was not completed timely. Effect: Untimely financial reporting. Identification as a Repeat Finding: Yes, see prior audit finding 2023-001. Recommendation: The Project should implement policies and procedures to ensure that annual financial reports are filed prior to deadlines. Amount of Questioned Cost: None Reporting Views of Responsible Officials: Management agrees with the finding and has implemented policies and procedures to ensure that this does not recur. Please refer to management’s corrective action plan. The Project plans to comply for the year ending June 30, 2025.

Condition: The Project did not comply with HUD’s annual filing requirement prior to the deadline. Criteria: Projects are required to ensure that financial status reports are presented in accordance with the terms of the applicable agreement between the Project and HUD. Context: Audited financial statements are due to HUD and REAC no later than 90 days after the fiscal year end. Cause: Due to a change in audit firms engaged to conduct the annual audit, the annual filing was not completed timely. Effect: Untimely financial reporting. Identification as a Repeat Finding: Yes, see prior audit finding 2022-001. Recommendation: The Project should implement policies and procedures to ensure that annual financial reports are filed prior to deadlines. Amount of Questioned Cost: None Reporting Views of Responsible Officials: Management agrees with the finding and has implemented policies and procedures to ensure that this does not recur. Please refer to management’s corrective action plan. The Project plans to comply for the year ending June 30, 2024.

Condition: The Project did not comply with HUD’s timeline requirements for surplus cash deposits to the residual receipts account. Criteria: Projects are required to ensure that surplus cash is deposited to the residual receipts account within 90 days after the fiscal year end, in accordance with the terms of the regulatory agreement between the Project and HUD. Context: Surplus cash must be deposited to residual receipts within 90 days of the fiscal year end. Cause: Due to untimely filings of annual financial statements and turnover in personnel, surplus cash calculations were not completed timely, causing surplus cash deposits to the residual receipts account to be delayed as well. Effect: Untimely deposits of surplus cash to the residual receipts account. Identification as a Repeat Finding: N/A Recommendation: The Project should implement policies and procedures to ensure that deposits to the residual receipts account are done in a timely manner. Amount of Questioned Cost: None Reporting Views of Responsible Officials: Management agrees with the finding and implemented policies and procedures to ensure that this does not recur. Please refer to management’s corrective action plan. As of the date of these financial statements, this finding has already been corrected.

Criteria or Specific Requirement -Projects are required to ensure that financial status reports are presented in accordance with the terms of the applicable agreement between the Project and HUD. Condition -As part of our audit procedures, we determined that the Project did not comply with HUD?s annual filing requirement prior to the deadline. Context -Audited financial statements are due to HUD and REAC no later than 90 days after the fiscal year end. Questioned Cost - None.Cause - Due to turnover in personnel, filings were not completed timely Effect - Untimely financial reporting. Recommendation - The Project should implement policies and procedures to ensure that annual financial reports are filed prior to deadlines. Views of Responsible Officials and Planned Corrective Actions - Management agrees with the finding and will implement policies and procedures to ensure that this problem does not recur. Please refer to the corrective action plan. As a result of COVID curtailments and a resulting national staffing shortage in the accounting profession, there were challenges to completing the 2022 and 2021 annual filing requirements prior to the deadline. Management has reviewed staffing and monthly and annual close project plans to verify that staffing and plans to issue and furnish annual financial statements timely are sufficient. The Project plans on being back in compliance for the year ending June 30, 2023, requirements.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program: 14.129, Mortgage Insurance Nursing Homes, Intermediate Care Facilities, Board and Care Homes and Assisted Living Facilities Type of Finding: Control Deficiency in Internal Control, Noncompliance Criteria or Specific Requirement - All disbursements must be supported by approved invoices, bills, or other supporting documentation. Condition - As part of our audit procedures related to cash disbursements, we sampled a total of 25 disbursement transactions to test internal controls over compliance. During our testing of cash disbursement transactions, we noted the following deviation: - 4 disbursements in our sample totaling $52,998 were not accompanied by proof of approval. Context - Of the 1,663 disbursements during the year, we examined 25 and determined that four disbursements did not have proof of approval. Questioned Cost - None. Cause - Formal trail of approval processes not being consistently followed. Effect - Disbursements without accompanying approvals could be erroneously charged to the Project and either by unauthorized vendors or in the incorrect amounts. Identification as a Repeat Finding - N/A. Recommendation - The Project should implement policies and procedures to ensure that all cash disbursement transactions are accompanied by approved invoices, bills, or other supporting documentation. Views of Responsible Officials and Planned Corrective Actions - Management acknowledges the importance of effective internal controls designed to verify that cash disbursement transactions are accompanied by approved invoices, bills, or other supporting documentation. Effective April 2021, the Project has started using an online invoice workflow and approval platform, and currently nearly all of the invoices that come to the Project are going through the approval process and are being signed off on.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program: 14.129, Mortgage Insurance Nursing Homes, Intermediate Care Facilities, Board and Care Homes and Assisted Living Facilities Type of Finding: Reporting Criteria or Specific Requirement - Projects are required to ensure that financial status reports are presented in accordance with the terms of the applicable agreement between the Project and HUD. Condition - As part of our audit procedures we determined that the Project did not comply with HUD?s annual filing requirement prior to the deadline. Context - Audited financial statements are due to HUD and REAC no later than 90 days after fiscal year end. Questioned Cost - None. Cause - Due to turnover in personnel filings were not completed timely. Effect - Untimely financial reporting. Identification as a Repeat Finding - N/A. Recommendation - The Project should implement policies and procedures to ensure that annual financial reports are filed prior to deadlines. Views of Responsible Officials and Planned Corrective Actions - Management agrees with the finding and will implement policies and procedures to ensure that this problem does not recur. Please refer to the corrective action plan. As a result of COVID curtailments and a resulting national staffing shortage in the accounting profession there were challenges to completing the 2021 annual filing requirement prior to the deadline. Management has reviewed staffing and monthly and annual close project plans to verify that staffing and plans to issue and furnish annual financial statements timely are sufficient.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program: 14.129, Mortgage Insurance Nursing Homes, Intermediate Care Facilities, Board and Care Homes and Assisted living Facilities Type of Finding: Control Deficiency in Internal Control, Noncompliance Criteria or Specific Requirement - All disbursements must be supported by approved invoices, bills, or other supporting documentation. Condition - As part of our audit procedures related to cash disbursements, we sampled a total of 25 disbursement transactions to test internal controls over compliance. During our testing of cash disbursement transactions, we noted the following deviation: - 1 disbursement in our sample totaling $98.50 was not accompanied by supporting documentation. We, therefore, were unable to verify that the disbursement was recorded to the proper project, in the proper amounts, posted to the correct general ledger account, or properly authorized. Context - Of the 1,822 disbursements during the year, we examined 25, and determined that one disbursement was not accompanied by the required supporting documentation. Questioned Cost - None Cause - The invoice for the disbursement could not be located. Effect - Disbursements without accompanying documentation could be erroneously charged to the incorrect project and in the incorrect amounts. Identification as a Repeat Finding - A similar issue was reported in prior-year finding 2019-002. Recommendation - The Project should implement policies and procedures to ensure that all cash disbursement transactions are accompanied by approved invoices, bills, or other supporting documentation. Views of Responsible Officials and Planned Corrective Actions - Management agrees with the finding and will implement policies and procedures to ensure that this problem does not recur. Please refer to the corrective action plan.

Finding 2019-002 Federal Agency: U.S. Department of Housing and Urban Development Federal Program: 14.129, Mortgage Insurance Nursing Homes, Intermediate Care Facilities, Board and Care Homes and Assisted living Facilities Type of Finding: Control Deficiency in Internal Control, Noncompliance Criteria or Specific Requirement - All disbursements must be supported by approved invoices, bills, or other supporting documentation. Condition - As part of our audit procedures related to cash disbursements, we sampled a total of 25 disbursement transactions to test internal controls over compliance. During our testing of cash disbursement transactions, we noted the following deviation: - 2 disbursements in our sample totaling $235.77 were not accompanied by supporting documentation. We, therefore, were unable to verify that the disbursements were recorded to the proper project, in the proper amounts, posted to the correct general ledger account or properly authorized. Context - Of the 2,046 disbursements during the year, we examined 25, and determined that two disbursements were not accompanied by the required supporting documentation. Questioned Cost - None Cause - The disbursements were for educational or seminar expenses for employees and were wage accrual related. They, therefore, were not accompanied by supporting invoices or documentation. Effect - Disbursements without accompanying documentation could be erroneously charged to the incorrect project and in the incorrect amounts. Identification as a Repeat Finding - No Recommendation - The Project should implement policies and procedures to ensure that all cash disbursement transactions are accompanied by approved invoices, bills, or other supporting documentation. Views of Responsible Officials and Planned Corrective Actions - Management agrees with the finding and will implement policies and procedures to ensure that this problem does not recur. Please refer to the corrective action plan.

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