SOUTHEASTERN HOUSING PRESERVATION, INC.

Statement of Condition: Sedgefield Apartments and Hillside Apartments share a site manager and the medical insurance costs for the manager is split between the two projects. During the year, Sedgefield paid a portion of Hillside's insurance coverage in the amount of $1,565.55. Criteria: Per USDA RD Handbook 2-3560 Chapter 4 guidelines, the project is only allowed to pay for project expenses. Effect: Project funds were used to pay another project's expense. Cause: Medical insurance expense was not properly allocated to the project for a portion of the year. Context: A test to compare current year expense and budgeted expense for medical insurance expense was performed. Upon review of invoices, it was determined the project paid insurance expense for another project. Questioned costs: $1,565.55 Recommendation: Management should review procedures for proper allocation of employee benefit expenses when site personnel are shared with another project. Management's Response and Corrective Action Plan: Management acknowledges that reimbursement for Hillside's medical insurance expense should be allocated to the proper project to insure payments are collected from the correct project at time of payment.

Southeastern Housing Preservation, Inc. Charlotte, North Carolina December 15, 2021 USDA, Rural Development 847 Curry Drive, Suite 104 Asheboro, North Carolina 27205 Southeastern Housing Preservation, Inc., respectfully submits the following Corrective Action Plan for the year ended September 30, 2021. Bernard Robinson & Company, L.L.P. 1501 Highwoods Blvd., Suite 300 Greensboro, North Carolina 27419-9608 Audit period: For the year ended September 30, 2021 The findings from the September 30, 2021 Schedule of Findings and Questioned Costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Finding 2021-001: Comment on the Finding and Recommendation: We concur with the finding and are in agreement with the recommendation. Action(s) Taken or Planned on the Finding: On October 20, 2021, the project was reimbursed $1,565.55 for the medical insurance expense for shared site personnel. If USDA RD has questions regarding this plan, please call Ira Slomka at 704-335-9112. Sincerely yours, Ira M. Slomka President

Statement of Condition: Management did not respond to inquiries regarding the annual financial statements of Hillside Apartments and Sedgefield Apartments within 30 days. Criteria: According to the 515 loan agreements with USDA RD, the owner or management agent must respond to all RD management review reports, physical inspection reports, and inquiries regarding annual financial statements or monthly accounting reports within 30 days. Effect: Noncompliance with RD regulations. Cause: Management oversight Context: A test to compare the date and completeness of management's response to USDA RD's inquiries regarding annual financial statements was performed. The date of USDA RD's inquiry was March 24, 2020. The date of management's response was October 5, 2020. Questioned costs: N/A Recommendation: The managing agent should put procedures in place to ensure responses to RD correspondence and inquiries are made within 30 days. Management's Response and Corrective Action Plan: Management acknowledges that the response to the 2019 Year End Report Review from RD was not submitted timely due to the effects of COVID-19. Management continues to monitor and track receipt of inquiries, reviews and inspections from RD to ensure timely response.

Southeastern Housing Preservation, Inc. Charlotte, North Carolina CORRECTIVE ACTION PLAN March 26, 2021 U. S. Department of Agriculture, Rural Development 4405 Bland Road, Suite 260 Raleigh, North Carolina 27609 Southeastern Housing Preservation, Inc., respectively submits the following Corrective Action Plan for the year ended September 30, 2020. Bernard Robinson & Company, L.L.P. 1501 Highwoods Blvd., Suite 300 Greensboro, North Carolina 27419-9608 Audit period: For the year ended September 30, 2020 The findings from the September 30, 2020 Schedule of Findings and Questioned Costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Finding 2020-001: Comment on the Finding and Recommendation: We concur with the finding and are in agreement with the recommendation. Action(s) Taken or Planned on the Finding: Management acknowledges that the response to the 2019 Year End Report Review from RD was not submitted timely due to the effects of COVID-19. Management continues to monitor and track receipt of inquiries, reviews and inspections from RD to ensure timely response. Finding 2020-002: Comment on the Finding and Recommendation: We concur with the finding and are in agreement with the recommendation. Action(s) Taken or Planned on the Finding: Management acknowledges that vendor invoices should have the proper project designation to insure payments are allocated to the correct project at time of payment. If USDA RD has questions regarding this plan, please call Ira Slomka at 704-335-9112. Sincerely yours, Ira M. Slomka President

Statement of Condition: Sedgefield Apartments and Hillside Apartments have the same provider for pest control. One of Hillside Apartments' pest control bills, totaling $2,086.00, was paid by Sedgefield Apartments during the fiscal year and was reimbursed by Hillside Apartments before year end. Criteria: Per USDA RD Handbook 2-3560 Chapter 4 guidelines, the project is only allowed to pay for project expenses. Effect: Project funds were used to pay another project's expense. Cause: A pest control expense was processed as a project payable under the wrong project. Context: A test to compare current year expense and budgeted expense for pest control was performed. Upon review of invoices, it was determined the project paid pest control services for another project. Questioned costs: $2,086.00 Recommendation: Management should review procedures for proper coding of invoices when projects are being billed by the same provider. Management's Response and Corrective Action Plan: Management acknowledges that vendor invoices should have the proper project designation to insure payments are allocated to the correct project at time of payment.

Southeastern Housing Preservation, Inc. Charlotte, North Carolina CORRECTIVE ACTION PLAN March 26, 2021 U. S. Department of Agriculture, Rural Development 4405 Bland Road, Suite 260 Raleigh, North Carolina 27609 Southeastern Housing Preservation, Inc., respectively submits the following Corrective Action Plan for the year ended September 30, 2020. Bernard Robinson & Company, L.L.P. 1501 Highwoods Blvd., Suite 300 Greensboro, North Carolina 27419-9608 Audit period: For the year ended September 30, 2020 The findings from the September 30, 2020 Schedule of Findings and Questioned Costs are discussed below. The findings are numbered consistently with the numbers assigned in the schedule. Finding 2020-001: Comment on the Finding and Recommendation: We concur with the finding and are in agreement with the recommendation. Action(s) Taken or Planned on the Finding: Management acknowledges that the response to the 2019 Year End Report Review from RD was not submitted timely due to the effects of COVID-19. Management continues to monitor and track receipt of inquiries, reviews and inspections from RD to ensure timely response. Finding 2020-002: Comment on the Finding and Recommendation: We concur with the finding and are in agreement with the recommendation. Action(s) Taken or Planned on the Finding: Management acknowledges that vendor invoices should have the proper project designation to insure payments are allocated to the correct project at time of payment. If USDA RD has questions regarding this plan, please call Ira Slomka at 704-335-9112. Sincerely yours, Ira M. Slomka President