Full Circle Communities, Inc.Non-Profit

Finding reference number: 2024-001 Assistance Listing (Federal award identification number and year): Section 8 Housing Assistance Program, Assistance Listing. No. 14.195, IL06M000196, 2012 Auditor non-compliance code: N. Special Tests and Provisions Finding resolutions status: In Process. Universe population size: 147 resident files. Sample size information: The sample size is not applicable to the finding. Statistically valid sample: Not applicable. Name of federal agency: U.S Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $0 Statement of condition 2024-001: During the year ended December 31, 2024, Villagebrook Apartments did not recertify all residents timely as required by HUD Handbook 4350.3. As of December 31, 2024, 67 of the units are not in compliance. Criteria: In accordance with the HAP Contract and HUD Handbook 4350.3, the Agent must certify and recertify residents and update other applicable forms in accordance with HUD regulations and contractual requirements. Effect: Villagebrook Apartments is not in compliance with the terms of the HAP Contract or HUD Handbook 4350.3. Current, future, and potentially prior funding under the HAP Contract could be impacted as a result of the recertifications not being completed timely. Cause: Villagebrook Apartments has suffered from staffing shortages beginning in 2022 and continuing during the year ended December 31, 2024. The employees responsible for completing recertifications were not doing so timely. Recommendation: The Agent should complete a review of all resident files and complete all recertifications that were not completed timely. The Agent should ensure that all residents are recertified timely in the future. Management's response: The Agent reported this concern and agrees with the finding and recommendation. The Agent is working to address the staffing issues at Villagebrook Apartments and to provide additional training to the employees regarding recertification requirements. As of December 31, 2024, the Agent has implemented the use of a third-party service to aid in the recertification process. Management intends to correct all noncompliance in 2025.

Finding reference number: 2024-002 Assistance Listing (Federal award identification number and year): Section 8 Housing Assistance Program, Assistance Listing. No. 14.195, IL06L000039, 2003 Auditor non-compliance code: N. Special Tests and Provisions Finding resolutions status: In Process. Universe population size: The universe population size is not applicable to the finding. Sample size population: The sample size information is not applicable to the finding. Statistically valid sample: Not applicable. Name of federal agency: U.S Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $42,201 Statement of condition #2024-002: During the year ended December 31, 2024, AR Preservation, LP prepaid management fees of $42,201. Criteria: Pursuant to the approved Project Owner's/Management Agent's Certification (Form HUD-9839-B) Section 1 (b), the Agent will manage the project for the term and fee described in Project Owner's/Management Agent's Certification. The Project Owner's/Management Agent's Certification provides for payment of management fees equal to 6% of residential and miscellaneous income collected. Effect: AR Preservation, LP is not in compliance with the Project Owner's/Management Agent's Certification. AR Preservation, LP's cash position at December 31, 2024 has been reduced by $42,201. Cause: Monthly management fee payments were made prior to collections. Recommendation: The Agent should reduce the fees charged in the following periods or repay management fees of $42,201 and limit future payment of management fees to management fees earned based on collections. Management's response: Management concurs with the finding and agrees with the recommendation. The Agent will reduce the fees charged in the following periods by $42,201.

Finding reference number: 2024-003 Assistance Listing (Federal award identification number and year): Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Projects, No. 14.155 071-35795 Auditor non-compliance code: N. Special Tests and Provisions Finding resolution status: In Process. Universe population size: The universe population size is not applicable to the finding. Sample size population: The sample size information is not applicable to the finding. Statistically valid sample: Not applicable. Name of federal agency: U.S Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $278,645 Statement of condition 2024-003: During the year ended December 31, 2024, Hollywood House Limited Partnership paid entity expenses of $278,645 in excess of surplus cash. Criteria: Pursuant to the regulatory agreement, Hollywood House Limited Partnership shall not make or take, or receive or retain, any distribution of assets or any income of any kind of the Project, except from surplus cash or in accordance with the program obligations. Effect: Hollywood House Limited Partnership is not compliance with the regulatory agreement. Cause: Management inadvertently paid entity expenses in excess of surplus cash. Payments of $278,645 were made in excess of surplus cash. Recommendation: Ownership should refund the overpayment to Hollywood House Limited Partnership and limit payments of entity expenses to surplus cash in the future. Management's response: Management concurs with the finding and the recommendation.

Finding reference number: 2024-004 Assistance Listing (Federal award identification number and year): Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Projects, No. 14.155 071-35795 Auditor non-compliance code: N. Special Tests and Provisions Finding resolution status: In Process. Universe population size: The universe population size is not applicable to the finding. Sample size population: The sample size information is not applicable to the finding. Statistically valid sample: Not applicable. Name of federal agency: U.S Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $0 Statement of condition 2024-004: Hollywood House Limited Partnership did not furnish HUD with a complete annual financial report within ninety (90) days following the end of the fiscal year ending December 31, 2024. Criteria: Pursuant to the regulatory agreements, within ninety (90) days, or such period established in writing by HUD, following the end of each fiscal year, Hollywood House Limited Partnership shall furnish HUD with a complete annual financial report based upon an examination of the books and records of Hollywood House Limited Partnership prepared in accordance with GAAP, audited in accordance with Generally Accepted Auditing Standards and Government Auditing Standards and any additional requirements of HUD. Effect: Hollywood House Limited Partnership is not compliance with the regulatory agreement. Cause: Due to the dissolution of the sole member of the Former General Partner, Former Special Limited Partner, and prior management agent, the management of Hollywood House Limited Partnership was assigned to a court ordered receiver and financial statements were not completed timely. Recommendation: Hollywood House Limited Partnership should file the December 31, 2024 financial statements as soon as possible and should ensure the annual financial report is filed within ninety (90) days in future periods. Management's response: Management concurs with the finding and the recommendation. Management is in the process of implementing internal control processes to ensure compliance with applicable regulations. The audit report for the year ended December 31, 2024 has been submitted to HUD. No further action is required.

Finding reference number: 2023-001 Assistance Listing (Federal award identification number and year): Section 8 Housing Assistance Program, Assistance Listing. No. 14.195, IL06M000196, 2012 Auditor non-compliance code: N. Special Tests and Provisions Finding resolution status: In process Universe population size: 147 resident files Sample size information: The sample size is not applicable to the finding. Statistically valid sample: Not applicable. Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $0 Statement of condition 2023-001: During the year ended December 31, 2023, Villagebrook Apartments did not recertify residents timely as required by HUD Handbook 4350.3. Criteria: In accordance with the HAP Contract and HUD Handbook 4350.3, the Agent must certify and recertify residents and update other applicable forms in accordance with HUD regulations and contractual requirements. Effect: Villagebrook Apartments is not in compliance with the terms of the HAP Contract or HUD Handbook 4350.3. Current, future, and potentially prior funding under the HAP Contract could be impacted as a result of the recertifications not being completed timely. Cause: Villagebrook Apartments was understaffed during the years ended December 31, 2023 and 2022 and the employees responsible for completing recertifications were not doing so timely. Recommendation: The Agent should complete a review of all resident files and complete all recertifications that were not completed timely. The Agent should ensure that all residents are recertified timely in the future. Management's response: The Agent reported this concern and agrees with the finding and recommendation. The Agent is working to address the staffing issues at Villagebrook Apartments and to provide additional training to the employees regarding recertification requirements. As of December 31, 2023, the Agent has completed a 100% file review and believes that all outstanding recertifications have been completed.

Finding reference number: 2023-002 Assistance Listing (Federal award identification number and year): Section 8 Housing Assistance Program, Assistance Listing. No. 14.195, IL060061003, 2011 Auditor non-compliance code: N. Special Tests and Provisions Finding resolution status: Cleared Universe population size: 70 resident files Sample size information: 7 resident files. Statistically valid sample: Yes. Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $0 Statement of condition 2023-002: During the year ended December 31, 2023, two resident files at Liberty Lake selected for testing under HUD Consolidated Audit Guide contained improper income or asset verification information in the completed resident certification. Criteria: In accordance with the HAP Contract and HUD Handbook 4350.3, the Agent must certify and recertify residents and update other applicable forms in accordance with HUD regulations and contractual requirements. Effect: Liberty Lake is not in compliance with the terms of the HAP Contract or HUD Handbook 4350.3. Residents may receive an improper amount of rental assistance under the HAP Contract. Cause: The Agent did not utilize proper third-party verification documents when completing resident certifications. Recommendation: The Agent should submit corrected resident certifications and implement additional policies to ensure future resident certifications are completed accurately. Management's response: The Agent agrees with the finding and recommendation. The Agent has processed corrected resident certifications and is in the process of implementing additional training for employees responsible for resident certifications.

Assistance listing title and number (Federal award identification number and year): Section 8 Housing Assistance Program, Assistance Listing. No. 14.195, IL06M000196, 2012 Finding resolution status: In process Universe population size: 147 resident files Sample size information: The sample size is not applicable to the finding. Noncompliance information: See statement of condition #2022-001 for noncompliance information. Statistically valid sample: Not applicable Name of Federal Agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $0 Statement of condition #2022-001 (Assistance Listing No. 14.195): During the year ended December 31, 2022, Villagebrook Apartments did not recertify residents timely as required by HUD Handbook 4350.3. Criteria: In accordance with the HAP Contract and HUD Handbook 4350.3, the Agent must certify and recertify residents and update other applicable forms in accordance with HUD regulations and contractual requirements. Effect: The Property is not in compliance with the terms of the HAP Contract or HUD Handbook 4350.3. Current, future, and potentially prior funding under the HAP Contract could be impacted as a result of the recertifications not being completed timely. Cause: The Property was understaffed during the year ended December 31, 2022 and the employees responsible for completing recertifications were not doing so timely. Recommendation: The Agent should complete a review of all resident files and complete all recertifications that were not completed timely. The Agent should ensure that all residents are recertified timely in the future. Reporting views of the responsible officials: The Agent reported this concern and agrees with the finding and recommendation. The Agent has taken actions to address the staffing at the Property and to provide additional training to the employees in recertification requirements. The Agent has undertaken a 100% file review and is in the process of completing all recertifications that were not previously completed timely.

Assistance listing title and number (Federal award identification number and year): Section 8 Housing Assistance Program, Assistance Listing No. 14.195, IL060061003, 2011 Finding resolution status: In process Universe population size: 12 months of deposits to the reserve for replacements. Sample size information: 12 months of deposits to the reserve for replacements. Noncompliance information: See statement of condition #2022-002 for noncompliance information. Statistically valid sample: Not applicable Name of Federal Agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $0 Statement of condition #2022-002 (Assistance Listing No. 14.195): During the year ended December 31, 2022, monthly deposits to the reserve for replacement account have not been made for Liberty Lake. Criteria: Pursuant to section 2.6(c) of the original HAP Contract (form HUD-52522D), Liberty Lake shall make monthly deposits into a separate reserve for replacements account. Effect: Liberty Lake is not in compliance with the terms of the original HAP contract. The reserve for replacements account is underfunded at December 31, 2022. Cause: The Corporation purchased the Property on September 24, 2021 and has not received correspondence from HUD related to required deposits to the reserve for replacements. Recommendation: Management should inquire with HUD to determine the amount of monthly funding required and transfer funds from the operating account to the reserve for replacements account to fully fund the reserve. Reporting views of the responsible officials: Management concurs with the finding and recommendation and will work with HUD to determine the funding required for the reserve for replacements.

Assistance listing title and number (Federal award identification number and year): Section 8 Housing Assistance Program, Assistance Listing. No. 14.195, IL06M000196, 2012 Finding resolution status: In process Universe population size: 147 resident files Sample size information: The sample size is not applicable to the finding. Noncompliance information: See statement of condition #2022-001 for noncompliance information. Statistically valid sample: Not applicable Name of Federal Agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $0 Statement of condition #2022-001 (Assistance Listing No. 14.195): During the year ended December 31, 2022, Villagebrook Apartments did not recertify residents timely as required by HUD Handbook 4350.3. Criteria: In accordance with the HAP Contract and HUD Handbook 4350.3, the Agent must certify and recertify residents and update other applicable forms in accordance with HUD regulations and contractual requirements. Effect: The Property is not in compliance with the terms of the HAP Contract or HUD Handbook 4350.3. Current, future, and potentially prior funding under the HAP Contract could be impacted as a result of the recertifications not being completed timely. Cause: The Property was understaffed during the year ended December 31, 2022 and the employees responsible for completing recertifications were not doing so timely. Recommendation: The Agent should complete a review of all resident files and complete all recertifications that were not completed timely. The Agent should ensure that all residents are recertified timely in the future. Reporting views of the responsible officials: The Agent reported this concern and agrees with the finding and recommendation. The Agent has taken actions to address the staffing at the Property and to provide additional training to the employees in recertification requirements. The Agent has undertaken a 100% file review and is in the process of completing all recertifications that were not previously completed timely.

Assistance listing title and number (Federal award identification number and year): Section 8 Housing Assistance Program, Assistance Listing No. 14.195, IL060061003, 2011 Finding resolution status: In process Universe population size: 12 months of deposits to the reserve for replacements. Sample size information: 12 months of deposits to the reserve for replacements. Noncompliance information: See statement of condition #2022-002 for noncompliance information. Statistically valid sample: Not applicable Name of Federal Agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $0 Statement of condition #2022-002 (Assistance Listing No. 14.195): During the year ended December 31, 2022, monthly deposits to the reserve for replacement account have not been made for Liberty Lake. Criteria: Pursuant to section 2.6(c) of the original HAP Contract (form HUD-52522D), Liberty Lake shall make monthly deposits into a separate reserve for replacements account. Effect: Liberty Lake is not in compliance with the terms of the original HAP contract. The reserve for replacements account is underfunded at December 31, 2022. Cause: The Corporation purchased the Property on September 24, 2021 and has not received correspondence from HUD related to required deposits to the reserve for replacements. Recommendation: Management should inquire with HUD to determine the amount of monthly funding required and transfer funds from the operating account to the reserve for replacements account to fully fund the reserve. Reporting views of the responsible officials: Management concurs with the finding and recommendation and will work with HUD to determine the funding required for the reserve for replacements.