LUTHERAN HOUSING SERVICES, INC. NO.#3 DBA LUTHER OAKS 042-11109-WAH-L8

Finding Type - Immaterial noncompliance with major program requirements Title and Assistance Listing Number of Federal Program - 14.155 U.S. Department of Housing and Urban Development Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects Finding Resolution Status - None Information on Universe and Population Size - N/A Sample Size Information - N/A Identification of Repeat Finding and Finding Reference Number - N/A Criteria - The Organization should fund, on a monthly basis, the reserve for replacements account as required by the regulatory agreement in the amount specified in regulatory agreement and any subsequent amendments to required deposit amounts approved by HUD. Statement of Condition - The Organization failed to make, on a monthly basis, the required reserve for replacements deposits in the amounts specified in the subsequent amendments to required deposit amounts approved by HUD. Cause - The Organization failed to monitor the cash requirements of the reserve for replacement account as specified by the amendments to required deposit amounts approved by HUD. Effect or Potential Effect - A corrective deposit to the replacement reserve account was necessary in the current fiscal year to catch up previously underfunded amounts. Auditor Noncompliance Code - N - Reserve for replacements deposits Context - Updates to the monthly reserve for replacements account deposit amounts were not made timely by the lender to reflect the HUD-approved changes made to the required monthly deposit amounts. As a result of the corrective deposit made during the current year, the replacement reserve account is properly funded as of December 31, 2023. Recommendation - All required deposits should be made in accordance with the regulatory agreement and any subsequent amendments to required deposit amounts approved by HUD. The Organization should implement appropriate internal controls over compliance to ensure monthly deposits are made in the amount required by HUD. Auditor's Summary of the Auditee's Comments on the Findings and Recommendations Response Indicator - Agree Response - Management detected the error and worked with the Organization's lender to calculate and remit a corrective deposit in the current fiscal year to catch up previously underfunded amounts. Management acknowledges noncompliance and has taken measures to improve internal controls over compliance going forward.

Finding Type - Immaterial noncompliance with major program requirements Title and Assistance Listing Number of Federal Program - 14.155 U.S. Department of Housing and Urban Development Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects Finding Resolution Status - None Information on Universe and Population Size - N/A Sample Size Information - N/A Identification of Repeat Finding and Finding Reference Number - N/A Criteria - The Organization should deposit cash in their security deposit cash account in order to meet or exceed the security deposit liability account as required by the regulatory agreement. Statement of Condition - The Organization did not comply with the regulatory agreement requirement to have a security deposit cash account that meets or exceeds the security deposit liability account. Cause - Management's monitoring and review controls over tenant security deposits were not effective enough to ensure the security deposit cash account meets or exceeds the security deposit liability account. Effect or Potential Effect The security deposit cash account is underfunded at December 31, 2023 by $438. Auditor Noncompliance Code - M - Security Deposits Context - The underfunded amount at December 31, 2023 represented approximately 3 percent of the total security deposit liability account balance. Recommendation - The Organization should deposit funds in the security deposit cash account in order to meet its security deposit liability. The Organization should implement appropriate internal controls over compliance to ensure the security deposit cash account meets or exceeds the security deposit liability account. Auditor's Summary of the Auditee's Comments on the Findings and Recommendations Response Indicator - Agree Response - Management acknowledges noncompliance in the current fiscal year and has taken measures to improve internal controls over compliance. Management will deposit funds to the security deposit cash account in order to meet the regulatory agreement requirement.