Bellevue Rotary Senior Housing Corporation

Criteria: Compliance with USDA RD regulations and the Loan Agreement requires funds to be used for the project. Condition: During 2024, the Corporation paid various costs towards a Low-Income Housing Tax Credit application in the amount of $17,273 without consent from RD. The unallowable payments are included in accounts receivable at December 31, 2025 and 2024. Questioned Costs: $17,273. Cause: Management did not comply with the proper use of project cash requirement. Effect: The Corporation was not in full compliance with USDA RD regulations regarding improper use of project cash. Recommendation: Management should seek either approval from RD or repay the project as fiscally possible.

Management concurs with the findings and auditors’ recommendations to enhance internal controls to ensure compliance with the RD requirements. Furthermore, we would like to note that the questioned costs was paid from project cash for the ultimate benefit of improving the property for the tenants. The substantial rehabilitation tax credit transaction planned by the owner is anticipated to start within the next fiscal year will significantly enhance the living standards and experience for the tenants. The funds used for purposes directly related to the operations of the project will be repaid with the planned closing of the Low-Income Housing tax credit transaction during fiscal year 2026 unless an approval is granted by RD for payment of the questioned costs that will ultimately benefit the tenants of Rotary Commons. Furthermore, internal controls over funds used for purposes unrelated to the Corporation are being strengthened to prevent future noncompliance.

2024-001

Criteria: Compliance with USDA RD regulations and the Loan Agreement requires funds to be used for the project. Condition: During 2024, the Corporation used fund of $17,273 for purposes unrelated to the Corporation. Questioned Costs: $17,273 Cause: Management company failed to comply with the requirement. Effect: The Corporation was not in full compliance with USDA RD regulations and the Loan Agreement regarding improper use of project cash. Recommendation: Management should repay the amount as permitted by operating cash flow.

Management concurs with the findings and auditors’ recommendations to enhance internal controls to ensure compliance with the RD requirements. Furthermore, we would like to note that the questioned costs was paid from project cash for the ultimate benefit of improving the property for the tenants. The substantial rehabilitation tax credit transaction planned by the owner is anticipated to start within the next fiscal year will significantly enhance the living standards and experience for the tenants. The funds used for purposes directly related to the operations of the project will be repaid with the planned closing of the Low-Income Housing tax credit transaction during fiscal year 2025 unless an approval is granted by RD for payment of the questioned costs that will ultimately benefit the tenants of Rotary Commons. Furthermore, internal controls over funds used for purposes unrelated to the Corporation are being strengthened to prevent future noncompliance.