MIZPAH ASSISTED LIVING SERVICES INCNon-Profit

Criteria or specific requirement: Financial Report Requirements requires quarterly financial reports to be prepared and due within 60 days after the end of the reporting quarter. Condition: Quarterly financial statements were not submitted to loan servicer within the 60 day period requirement for at least one quarter. The Project was not able to provide support on the timing of each quarterly financial statement submitted. Questioned costs: None Context: During our testing, it was noted that the Project did not submit reports for the quarter ended August 31, 2023 until November 17, 2023. Support for the timing of the November 30, 2023 and February 29, 2024 quarterly financials was not provided. Cause: Turnover in controller position lead to oversight of the requirement and maintenance of support. Effect: The quarterly report was not submitted in time in accordance with the Regulatory Agreement. Repeat finding: Yes Recommendation: We recommend the Project review controls to include processes to ensure timely submission. Views of responsible officials: There is no disagreement with the audit finding.

Criteria or specific requirement: Financial Report Requirements required performance reports for required action plan to be submitted within 30 days of period end. Condition: The performance reports for the quarters ended June 30, 2023 and September 30, 2023 were submitted, but the Project was not able to support when. Questioned costs: None Context: During our testing, it was noted that the Project was not able to support the performance reports for the quarters referenced above were submitted within the required 30 days. Cause: Turnover in controller position lead to oversight of the requirement and maintenance of support. Effect: The quarterly report was not submitted in time in accordance with the Special Circumstances as defined in the HUD Handbook. Repeat finding: Yes Recommendation: We recommend the Project review controls to include processes to ensure timely submission. Views of responsible officials: There is no disagreement with the audit finding. Management believes all reporting has been cured because HUD acknowledged their compliance upon filing the quarter ended December 31, 2023 quarterly performance reports.

2023 – 001 Type of Finding: • Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Financial Report Requirements requires quarterly financial reports to be prepared and due within 60 days after the end of the reporting quarter. Condition: Quarterly financial statements not submitted to loan servicer within the 60 day period allotted, as the first quarter report was not submitted until November 4, 2022. Questioned costs: None Context: During our testing, it was noted that the Project did not submit reports until 3 days after they were due for the 1st quarter. Cause: Turnover in controller position lead to oversight of this being submitted in time. Effect: The quarterly report was not submitted in time in accordance with the Regulatory Agreement. Repeat finding: Not a repeat finding Recommendation: We recommend the Project review controls to include processes to ensure timely submission. Views of responsible officials: There is no disagreement with the audit finding.

2023 – 002 Type of Finding: • Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Financial Report Requirements required performance reports for required action plan to be submitted within 30 days of period end. Condition: The first 2 quarter reports, for period ending September 30, 2022 and December 31, 2022, were submitted one day late, on October 31, 2022 and January 31, 2023 respectively. Questioned costs: None Context: During our testing, it was noted that the Project did not submit for first two quarters within the required time. These were subsequently submitted and accepted by HUD. Cause: Turnover in controller position lead to oversight of this being submitted in time. Effect: The quarterly report was not submitted in time in accordance with the Special Circumstances as defined in the HUD Handbook. Repeat finding: Not a repeat finding Recommendation: We recommend the Project review controls to include processes to ensure timely submission. Views of responsible officials: There is no disagreement with the audit finding.

2019-001: Segregation of Duties Type of Finding: Significant deficiency in internal control over financial reporting Statement of Condition: As a part of the audit we gained an understanding of system user access rights and responsibilities. Based on that review we understand that the Controller has access to the general ledger, accounts payable, and resident billing system. In addition, within the disbursement process, the Controller reconciles certain bank accounts, performs intercompany billing, and transfers payments between entities. Criteria: In any system of internal accounting control, one primary goal is adequate segregation of duties. Because of the way certain duties are assigned and carried out within the various accounting cycles, an adequate segregation of duties and responsibilities is not always present. Effect of Condition: The potential exists that a misstatement or misappropriation of assets could occur and not be prevented or detected by the Project?s internal controls. Recommendation: The Project?s operational and accounting controls should be reviewed periodically and consideration should be given to improving the segregation of duties and developing procedures which additionally mitigate potential risks. Specifically, we recommend adjusting the Controller's access within resident billing system to `read only? access. While mitigating review and approval controls may exist we recommend a review of controls be performed in order to further segregate duties of the Controller. Management?s Response: Management is in the process of reviewing roles and responsibilities related to system access.

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