Village Cooperative of Lee's SummitNon-Profit

Significant Deficiency and Noncompliance – Unapproved General Operating Reserve Withdrawal Department of Housing and Urban Development Assistance Listing Number 14.126 –Mortgage Insurance - Cooperative Projects Significant Deficiency and Noncompliance Category of Finding – Special Tests and Provisions Criteria - The HUD regulatory agreement requires the Cooperative to establish and maintain a general operating reserve. Withdrawals from the reserve in excess of 20% of the balance of the previous year-end require prior written approval by HUD. Condition - Excess withdrawals of $20,419 were taken from the general operating reserve without obtaining the proper HUD approval. Cause - The Cooperative inadvertently omitted obtaining the proper HUD approval to withdrawal the general operating reserve funds in excess of 20% of the balance of the previous year-end. Effect - The Cooperative was out of compliance with their HUD regulatory agreement at March 31, 2024. Recommendation - We recommend that the Cooperative implement a control process to ensure adherence to the regulatory agreement and obtain the proper HUD approval to withdrawal general operating reserve funds. Auditee’s comment - In April 2024, prior to the conclusion of the audit, the Cooperative made deposits totaling $36,916 to the general operating reserve to fund the reserve to its proper balance. The management agent will implement a process to ensure withdrawals are made as required by the regulatory agreement. Status - Resolved Responsible party for corrective action – Alexis Anderson, President of Anderson Asset Property Group, LLC (Management Agent)

2023-001 – Significant deficiency – Segregation of duties Criteria - Good internal control requires a segregation of duties and responsibilities such that no one employee has access to both physical assets and the related accounting records, or to all phases of a transaction. Condition - The Cooperative has one employee that performs day to day management and accounting functions. Cause - The size of the Cooperative’s accounting and administrative staff precludes certain internal controls that would be preferred if the office staff were large enough to provide optimum segregation of duties. Effect - The lack of segregation of duties may result in undetected errors in financial statements and increases the possibility of misappropriation of Cooperative assets. Repeat Finding - This finding was reported in the prior year as finding 2022-001. Recommendation - The Board of Directors should remain involved in the financial affairs of the Cooperative on a regular ongoing basis to provide oversight and independent review functions and mitigate the weakness created by the lack of segregation. Auditee’s comment - The Board of Directors is and will remain involved in the financial affairs of the Cooperative. Status – Outstanding Auditor’s non-compliance code - S - Internal Control Deficiencies

SECTION II ? FINDINGS ? FINANCIAL STATEMENTS AUDIT 2022-001 ? Significant deficiency ? Segregation of duties Criteria - Good internal control requires a segregation of duties and responsibilities such that no one employee has access to both physical assets and the related accounting records, or to all phases of a transaction. Condition - The Cooperative has one employee that performs day to day management and accounting functions. Cause - The size of the Cooperative?s accounting and administrative staff precludes certain internal controls that would be preferred if the office staff were large enough to provide optimum segregation of duties. Effect - The lack of segregation of duties may result in undetected errors in financial statements and increases the possibility of misappropriation of Cooperative assets. Repeat Finding - This finding was reported in the prior year as finding 2021-001. Recommendation - The Board of Directors should remain involved in the financial affairs of the Cooperative on a regular ongoing basis to provide oversight and independent review functions and mitigate the weakness created by the lack of segregation. Auditee?s comment - The Board of Directors is and will remain involved in the financial affairs of the Cooperative. Status ? Outstanding Auditor?s non-compliance code - S - Internal Control Deficiencies SECTION III ? FINDINGS AND QUESTIONED COSTS ?MAJOR FEDERAL AWARD PROGRAM AUDIT No matters were reported.

SECTION II ? FINDINGS ? FINANCIAL STATEMENTS AUDIT 2021-001 ? Significant deficiency ? Segregation of duties Criteria - Good internal control requires a segregation of duties and responsibilities such that no one employee has access to both physical assets and the related accounting records, or to all phases of a transaction. Condition - The Cooperative has one employee that performs day to day management and accounting functions. Cause - The size of the Cooperative?s accounting and administrative staff precludes certain internal controls that would be preferred if the office staff were large enough to provide optimum segregation of duties. Effect - The lack of segregation of duties may result in undetected errors in financial statements and increases the possibility of misappropriation of Cooperative assets. Repeat Finding - This finding was reported in the prior year as finding 2020-001. Recommendation - The Board of Directors should remain involved in the financial affairs of the Cooperative on a regular ongoing basis to provide oversight and independent review functions and mitigate the weakness created by the lack of segregation. Auditee?s comment - The Board of Directors is and will remain involved in the financial affairs of the Cooperative. Status ? Outstanding Auditor?s non-compliance code - S - Internal Control Deficiencies SECTION III ? FINDINGS AND QUESTIONED COSTS ?MAJOR FEDERAL AWARD PROGRAM AUDIT No matters were reported.

2020-001 ? Significant deficiency ? Segregation of duties Criteria - Good internal control requires a segregation of duties and responsibilities such that no one employee has access to both physical assets and the related accounting records, or to all phases of a transaction. Condition - The Cooperative has one employee that performs day to day management and accounting functions. Cause - The size of the Cooperative?s accounting and administrative staff precludes certain internal controls that would be preferred if the office staff were large enough to provide optimum segregation of duties. Effect - The lack of segregation of duties may result in undetected errors in financial statements and increases the possibility of misappropriation of Cooperative assets. Repeat Finding - This finding was reported in the prior year as finding 2019-001. Recommendation - The Board of Directors should remain involved in the financial affairs of the Cooperative on a regular ongoing basis to provide oversight and independent review functions and mitigate the weakness created by the lack of segregation. Auditee?s comment - The Board of Directors is and will remain involved in the financial affairs of the Cooperative. Status - Outstanding

2020-002 ? Significant Deficiency and Noncompliance ? Required Payments to General Operating Reserve Department of Housing and Urban Development CFDA Number 14.126 ?Mortgage Insurance - Cooperative Projects Significant Deficiency and Noncompliance Category of Finding ? Special Tests and Provisions Criteria - Section three of the Cooperative?s regulatory agreement with HUD requires monthly payments to a General Operating Reserve. Deposits are 3% of member carrying charges until the balance of the reserve exceeds 15% of current annual member carrying charges. The required deposit is then reduced to 2% of monthly charges until the balance of the reserve exceeds 25% of annual carrying charges. Condition - Deposits to the segregated account for the General Operating Reserve during the year ended March 31, 2020 were $6,138 less than the required amount. Cause - The Cooperative inadvertently omitted transferring three monthly deposits of $2,046 each to the General Operating Reserve during 2020. The control in place to assure the required monthly deposits were made failed to work; however, a monitoring control identified the error and corrected the deficiency prior to the conclusion of the audit. Effect - The Cooperative was out of compliance with their HUD regulatory agreement at March 31, 2020, because the General Operating Reserve was underfunded. Recommendation - We recommend that the Cooperative implement a control process to ensure adherence to the regulatory agreement and make the required deposits to the General Operating Reserve. Auditee?s comment - On April 2, 2020, prior to the conclusion of the audit, the Cooperative made deposits totaling $6,138 to the General Operating Reserve to fund the reserve to its proper balance. The CFO of the management agent will implement a process to ensure deposits are made as required by the regulatory agreement. Status - Resolved Auditor?s non-compliance code - Z - Other Responsible party for corrective action - Craig Brinkman, CFO of REE Development (Management Agent)

2019-001 ? Significant deficiency ? segregation of duties Criteria ? Good internal control requires a segregation of duties and responsibilities such that no one employee has access to both physical assets and the related accounting records, or to all phases of a transaction. Condition ? The Cooperative has one employee that performs day to day management and accounting functions. Cause ? The size of the Cooperative?s accounting and administrative staff precludes certain internal controls that would be preferred if the office staff were large enough to provide optimum segregation of duties. Effect ? The lack of segregation of duties may result in undetected errors in financial statements and increases the possibility of misappropriation of Cooperative assets. Repeat Finding ? This finding was reported in the prior year as finding 2018-001. Recommendation ? The Board of Directors should remain involved in the financial affairs of the Cooperative on a regular ongoing basis to provide oversight and independent review functions and mitigate the weakness created by the lack of segregation. Auditee?s comment ? The Board of Directors is and will remain involved in the financial affairs of the Cooperative. Status ? Outstanding

2019-002 ? Filing of Single Audit Report Federal Program ?HUD insured mortgage under Section 213 of the National Housing Act CFDA# - 14.126 Significant Deficiency Category of Finding - Other Criteria ? Pursuant to 2 CFR section 200.512(a), the reporting package shall be submitted within the earlier of 30 days after receipt of the auditor?s report(s), or nine months after the end of the audit period. Condition ? The Cooperative did not submit the Single Audit Reporting Package for the year ended March 31, 2018 within nine months after the end of the audit period (December 31, 2018). Cause ? The Cooperative submitted a Single Audit Report prior to the required deadline, but it was rejected due to the omission of the Corrective Action Plan, a component of the report required by the OMB Uniform Guidance. The Corrective Action Plan was submitted in January 2019, and final approval of the Single Audit was received, but it was after the December 31, 2018 deadline. Effect ? Failure to submit the required Single Audit Reporting Package timely automatically results in the Cooperative not qualifying for low-risk auditee status for the subsequent year?s single audit. Recommendation ? We recommend the Cooperative develop, document, and implement policies and procedures for timely submission of the Single Audit Reporting Package. Auditee?s comment ? The Board of Directors will designate an individual to document financial statement preparation processes to ensure timely submission of the Single Audit Reporting Package. Status ? Resolved Auditor?s non-compliance code ? P ? Other Responsible party for correction action ? Craig Brinkman, CFO of REE Development (Management Agent)

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