COBURN WOODS, INC.Non-Profit

Type of Finding ? Federal Award Finding Resolution Status ? Resolved Criteria ? Owners may not make, receive, and/or retain any distribution of assets or any income of any kind of the project except surplus cash, and then only under certain conditions. Non-profit owners are not entitled to distributions of any project funds. Statement of Condition ? During the year ended June 30, 2018, the Project borrowed $6,000 from an affiliated party, Cascadia Housing, Inc., without prior consent from HUD to pay for operating expenses. The loan is non-interest bearing and originally due October 10, 2018 but extended to December 31, 2020. The loan is payable in installments ranging from $150 to $300 per month, beginning July 1, 2018, based on the anticipated cash flows from the Project. During the year ended June 30, 2021, $2,200 was paid back to Cascadia Housing Inc. Cause ? During the year ended June 30, 2018, the Project did not have sufficient funds to pay operating costs on a timely basis. Although advancing funds to the Project which do not encumber the assets of the Project is not considered a compliance exception, the repayment of the advance during the year ended June 30, 2021 is not allowed unless approved by HUD in advance of the repayment. Effect or Potential Effect ? The loan payments to Cascadia Housing, Inc. are considered distributions of project funds which are not allowed unless approved by HUD in advance. Auditor Non-Compliance Code ? H ? Unauthorized distribution of project assets. Questioned Costs ? $2,200. Reporting Views of Responsible Officials ? Due to the immediate need of funding to pay invoices, management did not have sufficient time for approval from HUD. We felt we could obtain that at a later date when the urgency was not as immediate. Approval was provided by the Cascadia Housing, Inc. board of directors and the funds were loaned by Cascadia Housing, Inc. to Coburn Woods. Recommendation ? Management should seek approval from HUD for the repayment of such advances from related parties. Auditor?s Summary of the Auditee?s Comments on the Finding and Recommendations ? We agree with auditee?s response. Response Indicator ? Agree Completion Date ? June 30, 2021 Response ? We have been seeking HUD approval on the matter since October 13, 2017, but have gotten no response or guidance on the matter.

The Company has received a loan funded by programs of U.S. Department of Housing and Urban Development. The loan balance outstanding at the beginning of the year is included in the federal expenditures presented in the Schedule. Such balance has been included as net assets in the financial statements of the Company as of June 30, 2020 since the likelihood of repayment is remote. The Company received no additional loans during the year ended June 30, 2020. The balance of the loan outstanding at June 30, 2020 consists of: CFDA Number Program Name Outstanding Balance 14.181 Supportive Housing for Persons with Disabilities (Section 811) $717,400

SECTION 3 - FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAM Finding No. 2019-001 ? Section 811 ? CFDA No. 14.181 Criteria or Specific Condition ? Owners may not make, receive, and/or retain any distribution of assets or any income of any kind of the project except surplus cash, and then only under certain conditions. Non-profit owners are not entitled to distributions of any project funds. Condition ? During the year ended June 30, 2018, the Project borrowed $6,000 from an affiliated party, Cascadia Housing, Inc., without prior consent from HUD to pay for operating expenses. The loan is non-interest bearing and originally due October 10, 2018 but extended to December 31, 2020. The loan is payable in installments ranging from $150 to $300 per month, beginning July 1, 2018, based on the anticipated cash flows from the Project. Cause ? The Project did not have sufficient funds to pay operating costs on a timely basis. Although advancing funds to the Project which do not encumber the assets of the Project is not considered a compliance exception, the proposed repayment of the advance is not allowed unless approved by HUD in advance of the repayment. Effect ? The future loan payments to Cascadia Housing, Inc. will be considered distributions of project funds which are not allowed unless approved by HUD in advance. Reporting Views of Responsible Officials ? Due to the immediate need of funding to pay invoices, management did not have sufficient time for approval from HUD. We felt we could obtain that at a later date when the urgency was not as immediate. Approval was provided by the Cascadia Housing, Inc. board of directors and the funds were loaned by Cascadia Housing, Inc. to Coburn Woods. Recommendation ? Management should continue to seek approval from HUD for the repayment of the advance from either the replacement reserve or from cash flow from future operations. Actions taken or Planned on the Finding ? We have been seeking HUD approval on the matter since October 13, 2017, but have gotten no response or guidance on the matter.

GSA_MIGRATION