HOMESIGHTNon-Profit

Finding 2024‐002 Significant deficiency in internal controls over compliance related to allowable costs/cost principles compliance requirement. Federal Agency: Department of Treasury Program Title: Community Development Financial Institutions Fund Equitable Recovery Program (CDFI ERP) Federal Assistance Listing Number: 21.033 Award Number: 22ERP061530 Award Period: April 10, 2023 through December 31, 2028 Criteria 2 U.S. Code of Federal Regulations (CFR) 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subpart E require that personnel expenses allocated both directly and indirectly to federal awards be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, properly allocated and supported by adequate documentation based on an after the fact determination. Condition/Context for Evaluation During the year ended December 31, 2024, allocations of compensation expenditures were supported by a predetermined allocation created by a supervising manager responsible for overseeing all employees working on federally funded grants. The internal control system did not include a documented after the fact review of the actual activity conducted by the employee. Effect or Potential Effect HomeSight did not fully comply with the allowable cost principles as specified in 2 U.S. Code of Federal Regulations (CFR) 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subpart E, Section 200.430. As a result, there may be charges to awards that do not have adequate allocation support. Questioned Costs Not determinable - HomeSight records lack established procedures of a documented after-the-fact level of activity. Accordingly, it is impossible to determine if there is a variance from pre-determined allocation levels. Cause HomeSight’s internal controls did not ensure that employees time allocated to federal awards was supported by adequate documentation. Repeat Finding Not a repeat finding. Recommendation We recommend that HomeSight implement the necessary internal control that includes processes to perform periodic after-the-fact reviews of charges made to a Federal award based on pre-determined allocation rates. View of Responsible Officials of Auditee Management agrees with the finding and has provided the accompanying corrective action plan.

See Schedule of Findings and Questioned Costs for chart/table Identification as a Repeat Finding: Elements of this finding are a repeat of Finding 2021-001. Finding: Internal control procedures over financial reporting were not performed consistently throughout the fiscal year to ensure accuracy in accounting for revenue and related accounts. Criteria: Consistent performance of internal controls is essential to an Organization?s operations. Sample Size and Population: N/A Condition and Context: The Organization was advanced federal Homeownership Assistance Funds under a contract that contained right of return language. The value of the advances was recorded as revenue rather than the value earned under the contract through the use of funds provided to program beneficiaries in 2022. Effect: As a result, more revenue was recognized in 2022 than was earned and the $213,661 liability for the return of unexpended funds was not recorded as of December 31, 2022. When errors in the performance of internal controls occur, the Organization is subject to the risk that management may use inaccurate financial information in decision making. Cause: HomeSight experienced finance and accounting staff turnover in early 2022. Gaps in staffing resulted in a lack of documentation and communication of accounting treatment for contracts as the Organization did not have a central repository for this information to guide new staff. Recommendation: We recommend the Organization maintain current, written documentation of accounting policies and procedures for new staff to reference for training purposes and establish a central repository for grant contracts can enable staff to easily access contracts, contract terms, and decisions made regarding accounting treatment. Questioned Costs: None Management Response: Management response is reported in the ?Corrective Action Plan? at the end of this report. Contact Person: Tammie Anders, Director of Finance

Identification as a Repeat Finding: Repeat of Finding 2021-002. Finding: The SEFA provided for audit omitted a major program and federal contracts and either understated or overstated the federal contracts listed in the condition and context section below, which resulted in an understatement of federal awards of $1.8 million. All errors were corrected in the attached SEFA; however, the errors indicate gaps in internal controls over financial reporting. Criteria: The Organization is responsible for maintaining accurate information about all federal programs and reporting requirements. The Organization is responsible for using this information to comply with the Uniform Guidance in carrying out federal programs. Sample Size and Population: N/A Condition and Context: The original SEFA provided for audit contained errors in identifying programs, program clusters and expenditures of federal awards including the following: Department of Housing and Urban Development: ? ALN 14.218 ? Community Development Block Grants: City of Seattle award 2022-001 expenditures overstated $60,748. ? ALN 14.169 ? Housing Counseling Assistance: Mon Valley award Oct. 2021 - Sept. 2022 understated $73,561. ? ALN 14.239 ? HOME Investment Partnerships: King County loan of $816,940 omitted. ? ALN 14.252 ? Section 4 Capacity Building: Award 40646-0063 expenditures of $30,247 omitted. Department of Treasury: ? ALN 21.011 ? Capital Magnet Fund: Award 181CM05555 expenditures of $134,433 omitted. ? ALN 21.020 ? Community Development Financial Institutions (CDFI): CDFI Fund Assistance Agreement award expenditures of $93,000 omitted. CDFI Program award expenditures overstated by $105,000.? ALN 21.024 ? CDFI Rapid Response (Major Program): Award expenditures of $527,565 omitted. ? ALN 21.026 ? Homeowner Assistance Fund (Major Program): Award expenditures understated by $134,192. ? ALN 21.027 ? Coronavirus State and Local Fiscal Recovery Funds: City of Seattle award N2021-0454 expenditures of $51,785 omitted. NeighborWorks America: ? ALN 21.000 ? Award 2019 Lending Capital expenditures of $125,620 omitted and award NWINVEST2019 expenditures of $2,650 omitted. Effect: Inaccurate identification of programs subject to the Single Audit increases the risk that the Organization will not comply with the terms and conditions of federal programs. Cause: HomeSight experienced finance and accounting staff turnover in early 2022. Gaps in staffing resulted in a lack of documentation and communication of accounting treatment for federal contracts as the Organization did not have a central repository for this information to guide new staff. Recommendation: The Organization must continue to increase its familiarity with federal grant compliance requirements and establish a process for timely identification of federal programs and a system for tracking contracts in order to ensure compliance with federal award programs and to ensure completeness and accuracy in SEFA reporting. Questioned Costs: None Management Response: Management response is reported in the ?Corrective Action Plan? at the end of this report. Contact Person: Tammie Anders, Director of Finance

See Schedule of Findings and Questioned Costs for chart/table.Identification as a Repeat Finding: Not a repeat finding Finding: The Organization disbursed federal funds to program beneficiaries in excess of program limits. Criteria: The Homeowner Assistance Fund (HAF) Foreclosure Grant Program Agreement grant agreement limited benefits to $60,000 but noted that ?because this program requires that any grant must terminate the ongoing foreclosure action, the published grant limit can be exceeded by an Application for Exception process.? Condition and context: At the conclusion of the HAF pilot program, which was conducted in 2022, HomeSight remitted $39,729 to the Washington State Housing Finance Commission for benefits that exceeded the threshold established by the Application for Exception process. Cause: In certain circumstances, funds in excess of the threshold established in the Application for Exception process were required to terminate the ongoing foreclosure action. Sample size and population: See Schedule of Findings and Questioned Costs for chart/tableEffect: Unallowable costs were charged to the program. Recommendation: HomeSight should have been tracking instances in which disbursed funds exceeded the threshold established in the Application for Exception process so that federal funds were not used for unallowable costs. Questioned Costs: $39,729 Management Response: Management response is reported in the ?Corrective Action Plan? at the end of this report. Contact Person: Tammie Anders, Director of Finance

GSA_MIGRATION

GSA_MIGRATION

2020-001 Grant Accounting Identification as a Repeat Finding: Not a repeat finding Finding: Revenue associated with new grant contracts was not recorded properly. Criteria: Grant accounting under US GAAP can be complex and nuanced. Careful evaluation of grant agreements is necessary in order to ensure grants are recorded correctly. Sample Size and Population: N/A Condition and Context: HomeSight was the sub-recipient of a Coronavirus Relief Fund grant that provided mortgage assistance to eligible homeowners. Under the terms of the grant, HomeSight is responsible for administrating the program and identifying beneficiaries based on eligibility criteria. The mortgage assistance provided to eligible homeowners was initially recorded as a fiscal agency transaction. However, under US GAAP, this treatment is only applicable when a non-profit organization is acting on the specific request of others. As HomeSight had variance power to determine program recipients, the grant reimbursements for mortgage assistance provided to homeowners is grant revenue to HomeSight. Additionally, HomeSight is the recipient of a Capital Magnet Fund grant to support the Othello Square Development Project. Funds from the grant were initially recognized related to costs that were covered by other grants. Effect: The error in recording the grant funds received for mortgage assistance benefits resulted in an understatement of revenue for internal reporting purposes. The error in recording the grant funds received for the Othello Square Development project resulted in an overstatement of revenue for internal reporting purposes. Both errors have been corrected in the audited financial statements but are material to the financial statements as a whole and could influence management decisions based on preliminary internal reporting. Cause: HomeSight experienced finance and accounting staff turnover in 2020. These staffing constraints coupled with delays in receiving timely information from funders during the COVID-19 pandemic resulted in errors in grant accounting not being identified and corrected on a timely basis. Recommendation: We recommend the Organization document and refine its process of evaluating and reconciling the accounting for grant agreements to ensure that all relevant components of US GAAP are included in the evaluation and that the related accounting is documented and reconciled on a timely basis. Questioned Costs: None Management Response: Management response is reported in the ?Corrective Action Plan? at the end of this report. Contact Person: Eddie Roldan, CFO

2020-002 Reporting ? Schedule of Expenditures of Federal Awards Identification as a Repeat Finding: Not a repeat finding Finding: The initial SEFA provided for audit did not properly present the federal awards expended for the year. Criteria: The Organization is responsible for maintaining accurate information about all federal programs and reporting requirements. The Organization is responsible for using this information to prepare a complete and accurate SEFA on an annual basis in order to comply with reporting requirements associated with the use of federal funds under the Uniform Guidance. Sample Size and Population: N/A Condition and Context: The SEFA provided for audit purposes contained the following errors: ? Capital Magnet Fund expenditures were overstated by $344,707 ? Coronavirus Relief Fund payments of $6,532,000 which were processed as fiscal agency payments to program beneficiaries were improperly reported as payments to sub-recipients. Effect: Information on the SEFA is used for audit planning and by grantors. The use of incomplete or incorrect information on the SEFA can result in improper identification of major programs and related compliance requirements. Management subsequently corrected the SEFA and related accounting entries. After receiving a corrected SEFA, planned federal program testing was modified to comply with the audit requirements of the Uniform Guidance. Cause: Errors or misclassification of the underlying accounting for transactions involving federal funds resulted in incorrect information being reported on the SEFA initially provided. These errors have been corrected in the attached SEFA and financial statements. Recommendation: The Organization must continue to improve and refine reconciliation procedures in order to actively maintain grant reporting requirements. These procedures should facilitate the preparation of the SEFA so that annual expenditures for all grant programs are accurately included on the SEFA and so that the Organization?s ongoing compliance monitoring is accurate. Questioned Costs: None Management Response: Management response is reported in the ?Corrective Action Plan? at the end of this report. Contact Person: Eddie Roldan, CFO