THE WILLOWS AT MELVIN PLACE

Finding 2026-001 Supportive Housing for Persons with Disabilities (Section 811), Federal Assistance #14.181 Information on Universe, Population Size: This was not found as a result of sampling. Sample Size Information: This was not found as a result of sampling. This was not a repeat finding. Criteria: Management is required to maintain, at all times, property insurance for the assets that are security for the capital advance agreement. Management is required to design, implement, and maintain internal controls such that management or employees, in the normal course of performing their assigned functions, will prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. Condition: Management did not renew their property insurance which expired 10/27/25 until new coverage was executed effective date 7/8/26. Cause: The entity changed insurance brokers and there was miscommunication between the broker and personnel regarding the property/liability insurance policy. Effect or Potential Effect: If something would have happened to the project during the period which the Project was uninsured, the effect of the noncompliance would have been devastating such that there would be no ability to comply with the federal program requirements either at such time or ever in the future. The Project could cease to exist or be substantially impaired and the Organization could be forced to dissolve. Perspective: Management identified their noncompliance on or about 6/15/2026, leaving the Project uninsured for approximately seven to eight months before the noncompliance was identified. Management obtained insurance from 7/8/26-10/27/27 leaving more than eight months of time uninsured. No events occurred that would cause a claim if insurance had been in place during that time. Questioned Costs: not applicable Recommendation: Review of financial information by management and the board should be in enough detail that the failure to pay for property/liability insurance would be identified. Views of Responsible Officials: There was confusion with our new broker, including that our errors and omissions policy was renewed 10/27/25 with continuous coverage but is a separate policy from our property/liability insurance. Please see our Corrective Action Plan.

Condition: Management did not renew their property insurance which expired 10/27/25 until new coverage was executed effective date 7/8/26. Corrective Action: We obtained property/liability insurance for the period 7/8/26-10/27/27 as of 7/10/26. The organization will maintain a centralized insurance and compliance calendar containing policy expiration dates, premium due dates, responsible parties, broker contact information and required documentation. Management will verify active insurance coverage monthly and retain current policies, certificates of insurance, invoices, and proof of payment in a centralized electronic file. The Finance Committee will review insurance coverage as part of its regular financial oversight and report to the full Board of Directors at the monthly meeting and no later than 90 days before policy expiration so that immediate action can take place. Person Responsible: Board President Date of Corrective Action: 7/10/26

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2016-002

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2017-001

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2017-002

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2016-002

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2016-003

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2015-002

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2015-003