LIGHTHOUSE LIVING CENTERS, INC.

Finding #2022-001 ? Significant Deficiency and Other Noncompliance Applicable federal programs: U. S. Department of Housing and Urban Development Supportive Housing for the Elderly Assistance Listing #: 14.157 Contract Number: TX24-T841006 Contract Year: 07/01/21 ? 06/30/22 Section 8 Rental Voucher Program Assistance Listing #: 14.855 Contract Number: TX24-T841006 Contract Year: 07/01/21 ? 06/30/22 Criteria: Special Tests and Provisions ? Under the terms of the Living Centers? Section 8 Housing Assistance Payment agreement with the U. S. Department of Housing and Urban Development (HUD), 39 of 40 units in the apartment project are available for federal subsidy. One unit was originally used as the manager unit. Condition and context: The Living Centers requested and received subsidy payments for one unit that was unavailable for subsidy. The error was identified after three month?s subsidy was received and was deducted from the following month?s subsidy payment from HUD. Cause: In the initial years of the agreement, one unit was intentionally left offline to be used as the manager unit. In subsequent years, the unit was no longer used in this manner and existing management was not aware that subsidy was not available for the unit. Effect: Living Center received improper subsidy payments of $1,766, which were later reimbursed to HUD through reduction of subsequent month?s subsidy payment. Questioned costs: None after reimbursement. Recommendation: Strengthen policies regarding understanding of contract terms. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.

Finding #2022-001 ? Significant Deficiency and Other Noncompliance Condition and context: The Living Centers requested and received subsidy payments for one unit that was unavailable for subsidy. The error was identified after three month?s subsidy was received and was deducted from the following month?s subsidy payment from HUD. Recommendation: Strengthen policies regarding understanding of contract terms. Planned corrective action: Management will refer to the contract for guidance for all compliance questions. Management will communicate with HUD in a clear and concise manner on any contract provisions that are in question. Responsible officer: Daniel Williams, Vice President of Operations Estimated completion date: Completed as of June 30, 2022.

Finding #2021-002 ? Significant Deficiency Applicable federal programs: U. S. Department of Housing and Urban Development Supportive Housing for the Elderly Assistance Listing #: 14.157 Contract Number: TX24-T841006 Contract Year: 07/01/20 ? 06/30/21 Section 8 Rental Voucher Program Assistance Listing #: 14.855 Contract Number: TX24-T841006 Contract Year: 07/01/20 ? 06/30/21 Criteria: Same as finding #2021-001. Condition and context: Same as finding #2021-001. Cause: Turnover in the President, Chief Financial Officer (CFO), and clerical staff positions lead to a weakness in internal controls during the year. Effect: Same as finding #2021-001. Questioned costs: None Recommendation: Same as finding #2021-001. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.

Finding #2021-002 ? Significant Deficiency Applicable federal programs: U. S. Department of Housing and Urban Development Supportive Housing for the Elderly Assistance Listing #: 14.157 Contract Number: TX24-T841006 Contract Year: 07/01/20 ? 06/30/21 Section 8 Rental Voucher Program Assistance Listing #: 14.855 Contract Number: TX24-T841006 Contract Year: 07/01/20 ? 06/30/21 Condition and context: During the fiscal year ended June 30, 2021, Living Centers had turnover in its President, Chief Financial Officer (CFO), and clerical staff positions. These changes in staffing resulted in a lack of segregation of duties between processing and reviewing cash disbursements. Throughout the year, the CFO or acting CFO had access to check stock and to the general ledger, and was responsible for submitting the Positive Pay file to the bank. Recommendation: Strengthen internal controls by eliminating incompatible duties. If duties cannot be adequately segregated, implement mitigating controls such as independent reviews of bank statements and reconciliations. Planned corrective action: Due to the COVID-19 pandemic and staff turnover, proper segregation of duties was not achievable. Lighthouse of Houston has hired key positions to ensure that proper segregation of duties exist. Mitigating controls have been put in place by having the President review all monthly bank reconciliations and bank activity, including ACHs and cancelled check images, in a timely manner. Responsible officer: Daniel Williams, Vice President of Operations Estimated completion date: August 16, 2021