COUNCIL GROVES APARTMENTS, INC.

FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMS AUDIT Department of Housing and Urban Development Finding No. 2025-002, Section 207 Loan Pursuant to Section 223(f) Loan, Federal Assistance Listing Number 14.134 Criteria – HUD regulations and program requirements require that tenant security deposits be maintained in a separate account and fully funded in an amount equal to the related tenant security deposit liability. Statement of condition – The tenant security deposit bank account balance was less than the related tenant security deposit liability as of September 30, 2025. As a result, tenant security deposits were not fully segregated and safeguarded in accordance with applicable HUD requirements. Cause of Condition – The condition appears to be the result of inadequate monitoring and reconciliation of the tenant security deposit account during the fiscal year, including during a transition in property management. Effect of condition – Tenant security deposits were not fully safeguarded at year-end. No federal funds were expended to cover the deficiency, and no questioned costs were identified. Recommendation –Management should ensure that the tenant security deposit bank account is fully funded at all times and reconciled on a regular basis to the related liability balance. Management Response - Management agrees with the finding. Subsequent to year end, on December 12, 2025, the property manager transferred funds into the tenant security deposit bank account to fully fund the account in an amount equal to the related tenant security deposit liability. Management has implemented procedures to ensure the tenant security deposit account is reconciled regularly and maintained at a fully funded level going forward.

2025-002, Section 207 Loan Pursuant to Section 223(f), Federal Assistance Listing Number 14.134 Planned Corrective Action: Management has corrected the identified deficiency related to the tenant security deposit bank account. Subsequent to year end, on December 12, 2025, management transferred funds into the tenant security deposit bank account to fully fund the account in an amount equal to the related tenant security deposit liability. In addition, management has implemented procedures to ensure ongoing compliance with HUD requirements, including: • Monthly reconciliation of the tenant security deposit bank account to the related liability balance; • Management review of the reconciliation to ensure the account remains fully funded at all times; and • Enhanced monitoring of the tenant security deposit account, particularly during periods of property management transition. These actions are intended to ensure tenant security deposits are fully segregated and safeguarded in accordance with HUD regulations and program requirements. Anticipated Completion Date: Corrected as of December 12, 2025; ongoing monitoring thereafter. Status: Corrected.