SHAWL II SENIOR HOUSING OF MONTAGUENon-Profit

Finding 2025-001 -Considered to be immaterial noncompliance Condition: Based on the prior year surplus cash computation, the Project was required to deposit $10,582 to the residual receipts account. As of December 31, 2025, this required deposit had not been made to the residual receipts account. Criteria: Per the Regulatory Agreement and HUD requirements, surplus cash remaining after allowable distributions must be deposited into the residual receipts account. Residual receipts deposits are required to be made in the amount determined by the surplus cash calculation and must be maintained in the residual receipts account for project purposes in accordance with HUD regulations. Effect: Failure to deposit the required amount into the residual receipts account resulted in noncompliance with HUD requirements related to the proper handling and restriction of project funds. Cause: The required residual receipts deposit was not made because management did not properly identify the amount due from the prior year surplus cash calculation and did not complete the required transfer to the residual receipts account. Questioned Costs: $10,582, representing the required residual receipts deposit that had not been made as of December 31, 2025. Recommendation: We recommend that management implement procedures to review the surplus cash computation each year and ensure that all required residual receipts deposits are made timely in accordance with HUD requirements. Management Comments: We agree with the facts and circumstances described above. Subsequent to year end, the Project deposited the required amount of $10,582 to the residual receipts account, and the account is now in compliance with HUD requirements. Management has implemented procedures to review the surplus cash computation annually and ensure that all required residual receipts deposits are made on a timely basis going forward. Auditor Noncompliance Code: B – Failure to make required residual receipts deposits

Finding 2023-001- Considered a significant deficiency in internal control over compliance. Federal Program: Mortgage Insurance for the Purchase or Refinancing of Multifamily Housing Projects ALN #: 14.155 Federal agency: U.S. Department of Housing and Urban Development (HUD) Criteria: Organization management is responsible for ensuring the management fees are paid in accordance with the HUD approved management certification. Condition: The Organization overpaid management fees by $250 for the year ended December 31, 2023. Questioned costs: $250 Cause: Organization did not adjust the HUD-prescribed percentage of rental and other receipts used to calculate management fees after increasing rent rates during 2023. Effect: Management fees were overpaid for the year ended December 31, 2023. Recommendation: The HUD-prescribed percentage of rental and other receipts used to calculate management fees should be adjusted after changes to rent rates to ensure that the management fees charged are under the per-unit-per-month amount outlines in the management agent certification. Management Comments: We agree with the facts and circumstances of this finding and will pay back the 250 dollars that is owed back to the organization. Auditor Noncompliance Code: J – Unauthorized management fees