Lima Interfaith Senior Housing CorporationNon-Profit

During the year ended July 31, 2023, the Corporation paid appraisal and other costs totaling $9,750 from the Community's operating cash account in connection with a potential sale of the Community. These expenditures are not considered Reasonable Operating Expenses in accordance with the Regulatory Agreement and Program Obligations. Pursuant to Section 12 of the Regulatory Agreement, Community funds shall be withdrawn only in accordance with the provisions of the Regulatory Agreement for Reasonable Operating Expenses of the Community. Reasonable Operating Expenses means expenses that arise from the operation, maintenance and routine repair of the Community and that primarily benefit the Community (as opposed to Borrower) or as otherwise permitted by Program Obligations. These costs were inadvertently not reimbursed to the Community. As a result, the Corporation was not in compliance with the Regulatory Agreement.

Statement of condition #2022-001: The Corporation did not file the data collection form SF-SAC as of and for the year ended July 31, 2021, with the Federal Audit Clearinghouse by the required date of April 30, 2022. Criteria: Pursuant to Section 18 of the Regulatory Agreement, non-profit borrowers are to follow audit requirements specified in the OMB Compliance Supplement. The OMB Compliance Supplement requires the data collection form SF-SAC to be filed with the Federal Audit Clearinghouse in a timely manner, as required by 2 CFR 200.512. The required timeframe specified by 2 CFR 200.512 is the earlier of 30 calendar days after receipt of the auditor's report or nine months after the end of the audit period. The deadline to file the data collection form SF-SAC was April 30, 2022. Effect: The Corporation was not in compliance with the Regulatory Agreement or the OMB Compliance Supplement. Cause: Due to administrative delays, the Corporation did not file the data collection form SF-SAC by April 30, 2022. Recommendation: The data collection form SF-SAC should be filed with the Federal Audit Clearinghouse in a timely manner pursuant to the time frame set worth by OMB. Proposed completion date: May 4, 2022 Management's response: Management concurs with the finding and agrees with the recommendation. The data collection form SF-SAC as of and for the year ended July 31, 2021, was filed with the Federal Audit Clearinghouse on May 4, 2022. No further action is required.

Statement of condition #2021-001: The Corporation did not furnish HUD and the Lender with a complete annual financial report by October 29, 2021, as required by HUD. Criteria: Pursuant to Section 18 of the Regulatory Agreement, within ninety (90) days, or such period established in writing by HUD, following the end of each fiscal year, the Corporation shall furnish HUD and the Lender with a complete annual financial report based upon an examination of the books and records of the Corporation prepared in accordance with GAAP, audited in accordance with General Accepted Auditing Standards and Government Auditing Standards and any additional requirements of HUD unless the report is waived in writing by HUD. Effect: The Corporation was not in compliance with the Regulatory Agreement. Cause: Due to administrative delays, the Corporation did not submit the audited financial statements to HUD by October 29, 2021. Recommendation: The annual financial statements should be issued in a timely manner pursuant to the time frame set forth by HUD. Completion date: January 19, 2022 Management's response: Management concurs with the finding and agrees with the recommendation. The audit report as of and for the year ended July 31, 2021 has been submitted to HUD. No further action is required.

Statement of condition #2021-002: The Corporation did not file the data collection form SF-SAC as of and for the year ended July 31, 2020 with the Federal Audit Clearinghouse by the required date of April 30, 2021. Criteria: Pursuant to Section 18 of the Regulatory Agreement, non-profit borrowers are to follow audit requirements specified in the OMB Compliance Supplement. The OMB Compliance Supplement requires the data collection form SF-SAC to be filed with the Federal Audit Clearinghouse in a timely manner, as required by 2 CFR 200.512. The required timeframe specified by 2 CFR 200.512 is the earlier of 30 calendar days after receipt of the auditor's report or nine months after the end of the audit period. The deadline to file the data collection form SF-SAC was April 30, 2021. Effect: The Corporation was not in compliance with the Regulatory Agreement or the OMB Compliance Supplement. Cause: Due to administrative delays, the Corporation did not file the data collection form SF-SAC by April 30, 2021. Recommendation: The data collection form SF-SAC should be filed with the Federal Audit Clearinghouse in a timely manner pursuant to the time frame set forth by OMB. Completion date: October 28, 2021 Management's response: Management concurs with the finding and agrees with the recommendation. The data collection form SF-SAC as of and for the year ended July 31, 2020 has been filed with the Federal Audit Clearinghouse. No further action is required.

Statement of condition #2021-003: The resident security deposits fund did not equal or exceed the aggregate of all outstanding obligations under said account at various times throughout the year ended July 31, 2021. As of July 31, 2021, the outstanding obligations under said account exceeded the resident security deposits fund by $9,319. Criteria: Pursuant to Section 13 of the Regulatory Agreement, any funds collected as security deposits shall be kept (a) separate and apart from all other funds of the Property; (b) in interest bearing trust accounts, to the extent required by State or local law; and (c) in an amount which shall at all times equal or exceed the aggregate of all outstanding obligations under said account. Security deposit account interest shall be paid on a pro rata basis to residents or applied to sums due under their leases upon the termination of their tenancy in the Property. The use of resident security deposits for Property operations is prohibited unless the resident has forfeited the deposit. Effect: The Corporation is not in compliance with the Regulatory Agreement. Cause: The community administrator transferred funds from the resident security deposits fund to the operating cash account to fund operating cash shortfalls throughout the year ended July 31, 2021. Recommendation: Management should transfer funds from the operating cash account to the resident security deposits fund in an amount sufficient to exceed all outstanding obligations under said account. In addition, management should monitor the balance of the resident security deposits fund on a regular basis to ensure the fund at all times equals or exceeds all outstanding obligations under said account and refrain from using the resident security deposits fund for Property operations unless the deposit has been forfeited by the resident(s). Proposed completion date: March 31, 2022 Management's response: Management concurs with the finding and agrees with the recommendation. Management intends to transfer funds from the operating cash account to the resident security deposits fund in 2022 to ensure the fund is adequately funded to equal or exceed the aggregate of all outstanding obligations under said account.

Statement of condition #2021-004: An employee of the Community used operating funds totaling $2,702 for personal use. The use of such funds was not approved by the Corporation?s Board of Directors, nor were they approved by HUD. Criteria: Pursuant to Section 14 of the Regulatory Agreement, the Borrower shall not make or take, or receive and retain, nor allow any Affiliate or Principal to receive or retain any Distribution of assets or any income of any kind of the Project, except from Surplus Cash or in accordance with Program Obligations. Any distribution of any funds of the Project not permitted by the Regulatory Agreement or Program Obligations shall be returned to the appropriate Project account as specified by HUD immediately. Effect: The Corporation was not in compliance with the Regulatory Agreement. Cause: An employee of the Community utilized the Corporation?s cash accounts for personal use, which were not approved by the Corporation's Board of Directors. Recommendation: The Corporation should determine the amount of Community funds that were used for the employee?s personal use, and work with HUD to replenish the Community?s cash accounts in a reasonable time period. Proposed completion date: March 31, 2022 Management's response: Management concurs with the finding and agrees with the recommendation. The Corporation has dismissed the employee and filed a legal claim against the employee for retribution. In addition, the Corporation is working with its insurance carrier for relief for any lost and stolen funds.

Statement of condition #2021-005: During the year ended July 31, 2021, the Community advanced operating funds totaling $39,289 to an affiliated community, Pilgrim Place Apartments. Criteria: Pursuant to Section 36 of the Regulatory Agreement, the Corporation shall not, without the prior written approval of HUD, disburse any funds except for reasonable operating expense and necessary repairs of the Community. Effect: The Corporation was not in compliance with the Regulatory Agreement. Cause: An employee of the Community circumvented cash controls and utilized the Corporation?s cash accounts for operations of another affiliated community. Recommendation: The Corporation should determine the amount of Community funds that were used for the operations of the affiliated community, and work with HUD to replenish the Community?s cash accounts in a reasonable time period. Proposed completion date: March 31, 2022 Management's response: Management concurs with the finding and agrees with the recommendation. The Corporation has dismissed the employee and is working with the affiliated community for the return of the advanced funds to the Community?s cash accounts.

Statement of condition #2020-001: The Corporation did not furnish HUD and the Lender with a complete annual financial report by June 30, 2021, as required by HUD. Criteria: Pursuant to the HAP Contract and Section 18 of the Regulatory Agreement, within ninety (90) days, or such period established in writing by HUD, following the end of each fiscal year, the Corporation shall furnish HUD and the Lender with a complete annual financial report based upon an examination of the books and records of the Corporation prepared in accordance with GAAP, audited in accordance with General Accepted Auditing Standards and Government Auditing Standards and any additional requirements of HUD unless the report is waived in writing by HUD. HUD issued a global extension of the reporting due date to June 30, 2021. Effect: The Corporation was not in compliance with the Regulatory Agreement. Cause: Due to administrative delays, the Corporation did not submit the audited financial statements to HUD by June 30, 2021. Recommendation: The annual financial statements should be issued in a timely manner pursuant to the time frame set forth by HUD. Completion date: July 30, 2021 Management's response: Management concurs with the finding and agrees with the recommendation. The audit report as of and for the year ended July 31, 2020 has been submitted to HUD. No further action is required.