LIME HOUSE SENIOR HOUSING, INCNon-Profit

Finding reference number: 2025-001 Assistance Listing (Federal award identification number and year): Supportive Housing for the Elderly, Assistance Listing No. 14.157, 122-EE136-WAH-NP and 2001 Auditor non-compliance code: N – Reserve for Replacement Deposits Finding resolution status: Resolved Universe population size: 12 months of deposits to the reserve for replacements Sample size information: 12 months of deposits to the reserve for replacements Statistically valid sample: Yes Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $27,908 Statement of condition 2025-001: As of December 31, 2025, deposits to the reserve replacement account of $27,908 has not been made. Criteria: Pursuant to item 5(a) of the Regulatory Agreement (form HUD-92466), the Corporation shall make monthly deposits into a separate reserve for replacements account in the amount prescribed by HUD. At December 31, 2025, $27,908 of the required monthly deposits had not been made. Effect: The Corporation is not in compliance with the regulatory agreement and the reserve for replacements is underfunded by $27,908 at December 31, 2025. Cause: The Corporation did not increase the monthly deposit according to the HUD approved 9250 requiring the increase in reserve for replacement deposits Recommendation: Management should make a deposit to the reserve for replacements for $27,908 for the delinquent deposits. In future periods, management should fund the reserve for replacements on an annual basis as required by the regulatory agreement. Management's response: Management concurs with the finding and agrees with the auditor's recommendation. Management made the delinquent deposit on March 11, 2026.

Finding reference number: 2025-002 Assistance Listing (Federal award identification number and year): Supportive Housing for the Elderly, Assistance Listing No. 14.157, 122-EE136-WAH-NP and 2001 Auditor non-compliance code: H – Unauthorized distribution of project assets Finding resolution status: Resolved Universe population size: The universe population size is not applicable to this finding Sample size information: The sample size information is not applicable to this finding Statistically valid sample: N/A Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $7,680 Statement of condition 2025-002: The Corporation paid entity costs of $7,680 from operating cash. Criteria: The Corporation shall not without the written approval of HUD disburse or payout any funds except for operation of the Property as provided in the Regulatory and Capital Advance Agreements. Effect: The Corporation is not in compliance with terms of the Regulatory and Capital Advance Agreements and the Property's operating account is underfunded by $7,680. Cause: Management oversight. Recommendation: The Sponsor should reimburse the Corporation $7,680 or management should request HUD approval for funds to be reimbursed from the reserve for replacement. Management's response: Management concurs with the finding and agrees with the auditor's recommendation. Management requested reimbursement from the reserve for replacement. HUD approval was received on February 25, 2026.

Finding reference number: 2024-001 Assistance Listing (Federal award identification number and year): Supportive Housing for the Elderly, Assistance Listing No. 14.157, 122-EE136-WAH-NP and 2001 Auditor non-compliance code: B – Failure to make required residual receipt deposit Finding resolution status: Resolved Universe population size: The universe population size is not applicable to the finding. Sample size information: The sample size information is not applicable to the finding. Statistically valid sample: N/A Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $30,965 Statement of condition 2024-001: The Corporation's required deposit of $30,965 to the residual receipts account per the December 31, 2023 Computation of Surplus Cash, Distributions and Residual Receipts was not deposited within 90 days of the fiscal year end. Criteria: Pursuant to the HUD regulations, surplus cash is required to be deposited into a separate residual receipts fund within 90 days after the fiscal period ends. Effect: The Corporation is not in compliance with terms of the Regulatory Agreement. Cause: Management did not deposit the funds timely. Recommendation: Management should make all required residual receipt deposits per the annual Computation of Surplus Cash, Distributions and Residual Receipts within 90 days after fiscal year end. Management's response: Management concurs with the finding and the auditor's recommendation. Management deposited $30,965 into the residual receipts fund on December 20, 2024. No further action is required.

Finding reference number: 2024-002 Assistance Listing (Federal award identification number and year): Supportive Housing for the Elderly, Assistance Listing No. 14.157, 122-EE136-WAH-NP and 2001 Auditor non-compliance code: H – Unauthorized distribution of project assets Finding resolution status: Unresolved Universe population size: The universe population size is not applicable to the finding. Sample size information: The sample size information is not applicable to the finding. Statistically valid sample: N/A Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $15,483 Statement of condition 2024-002: The Corporation made a payment to LAHD in the amount of $15,483 and did not obtain the required HUD approval. Criteria: The Corporation shall not without the written approval of HUD disburse or payout any funds except for operation of the Property as provided in the Regulatory and Capital Advance Agreements. In accordance with the applicable agreements, the annual payments to LAHD are required to be paid from residual receipts with prior approval from HUD. Effect: The Corporation is not in compliance with terms of the Regulatory and Capital Advance Agreements and the Property's operating account is underfunded by $15,483. Cause: The Corporation was billed by the lender and processed the payment without prior approval from HUD. Recommendation: The Corporation should request retroactive HUD approval to make the payment or request reimbursement from the lender. Management's response: Management concurs with the finding and the auditor's recommendation. Management has requested approval from HUD. As of the report date, no response has been received.

Finding reference number: 2023-001Assistance Listing (Federal award identification number and year): Supportive Housing for the Elderly, Assistance Listing No. 14.157, 2001 Auditor non-compliance code: Z - Other Finding resolution status: Resolved Universe population size: The universe population size is not applicable to the finding. Sample size information: The sample size information is not applicable to the finding. Statistically valid sample: N/A Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: N/A Statement of condition 2023-001: For the year ended December 31, 2022, the Corporation did not submit audited financial statements to the Federal Audit Clearinghouse within 30 calendar days after receipt of the auditor's report on August 31, 2023. The audited financial statements were submitted to the Federal Audit Clearinghouse on March 11, 2024. Criteria: Pursuant to 2 CFR 200.512(a), the Corporation is required to electronically submit audited financial statements to the Federal Audit Clearinghouse within the earlier of 30 calendar days after receipt of the auditor's report or nine months after the end of the audit period. Effect: The Corporation is not in compliance with the federal reporting requirements. Cause: This was an oversight by management. Recommendation: The Corporation should submit audited financial statements to the Federal Audit Clearinghouse within the time frames required. Management's response: Management concurs with the finding and agrees with the auditor's recommendation. The audited financial statements have been submitted to the Federal Audit Clearinghouse. No further action required.

Finding reference number: 2022-001 Assistance Listing (Federal award identification number and year): Supportive Housing for the Elderly, Assistance Listing No. 14.157, 2001 Auditor non-compliance code: B – Failure to make required residual receipts deposit Finding resolution status: Resolved Universe population size: The universe population size is not applicable to the finding. Sample size information: The sample size information is not applicable to the finding. Statistically valid sample: N/A Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $33,484 Statement of condition 2022-001: The Corporation's required deposit of $33,484 to the residual receipts account per the December 31, 2021 Computation of Surplus Cash, Distributions and Residual Receipts was not deposited within 90 days of the fiscal year end. Criteria: Pursuant to the HUD regulatory agreement, surplus cash is required to be deposited into a separate residual receipts fund within 90 days after the fiscal period ends. Effect: The Corporation is not in compliance with terms of the Regulatory Agreement. Cause: This was an oversight by management. Recommendation: Management should make all required residual receipt deposits per the annual Computation of Surplus Cash, Distributions and Residual Receipts within 90 days after fiscal year end. Management's response: Management concurs with the finding and the auditor's recommendation. Management deposited $33,484 into the residual receipts fund on June 13, 2022. No further action is required.

Finding reference number: 2022-002 Assistance Listing (Federal award identification number and year): Supportive Housing for the Elderly, Assistance Listing No. 14.157, 2001 Auditor non-compliance code: H – Unauthorized distribution of project assets Finding resolution status: In process Universe population size: The universe population size is not applicable to the finding. Sample size information: The sample size information is not applicable to the finding. Statistically valid sample: N/A Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: $16,742 Statement of condition 2022-002: The Corporation made a payment to LAHD in the amount of $16,742. The payment does not meet HUD's criteria of eligible Property expenses and the Corporation did not obtain HUD approval. Criteria: The Corporation shall not without the written approval of HUD disburse or payout any funds except for operation of the Property as provided in the Regulatory and Capital Advance Agreement. In accordance with the applicable agreements, the annual payments to LAHD are required to be paid from entity sources with prior approval from HUD. Effect: The Corporation is not in compliance with terms of the Regulatory Agreement and the Property's operating account is underfunded by $16,742. Cause: The Corporation was billed by LAHD and processed the payment without prior approval from HUD. Recommendation: The Corporation should request HUD approval for reimbursement from the residual receipts fund and deposit into the Property's operating account. Management's response: Management concurs with the finding and the auditor's recommendation. Management has requested approval from HUD. As of the report date, no response has been received.

Finding reference number: 2022-003 Assistance Listing (Federal award identification number and year): Supportive Housing for the Elderly, Assistance Listing No. 14.157, 2001 Auditor non-compliance code: Z - Other Finding resolution status: In process Universe population size: The universe population size is not applicable to the finding. Sample size information: The sample size information is not applicable to the finding. Statistically valid sample: N/A Name of Federal agency: U.S. Department of Housing and Urban Development Pass-through entity: N/A Questioned costs: N/A Statement of condition 2022-003: The Corporation was unable to furnish the entity's approved Affirmative Fair Housing Marketing Plan. Criteria: Pursuant to the Regulatory Agreement and HUD Handbook, owners of HUD insured and assisted multifamily housing projects must submit an Affirmative Fair Housing Marketing Plan to HUD for approval. Effect: The Corporation is not in compliance with terms of the Regulatory Agreement and HUD Handbook. Cause: Management did not retain the approved Affirmative Fair Housing Marketing Plan within their permanent files. Recommendation: The Corporation should request the filed Affirmative Fair Housing Marketing Plan from HUD or submit a new version for approval. Management's response: Management concurs with the finding and the auditor's recommendation. Management has requested the form from HUD. As of the report date, no response has been received.

Condition: On August 29, 2019, fraud and embezzlement was detected at the Project?s management company, HDSI Management, Inc. (?HDSI?). An HDSI employee (the ?Employee?) was fraudulently preparing false invoices to a certain vendor (the ?Vendor?) and forging HDSI company checks payable to the Vendor. The amount embezzled by the Employee from the Project totaled approximately $29,190, over a three-year period, which included $3,320 during 2019. During the year ended December 31, 2019, HDSI received reimbursement from its insurance company, and accordingly, HDSI reimbursed the Project for $29,190 on December 10, 2019. There is an on-going police investigation related to this fraudulent activity. Criteria: HDSI is required to have internal controls in place to prevent and detect fraudulent activity and provide for the protection of project assets. Effect of Condition: An HDSI employee was able to falsify records and embezzle project assets, and the fraudulent activity went undetected for three years. Cause of Condition: The Employee was an accounts payable clerk, had access to check stock, was able to prepare fraudulent invoices to the Vendor, and was able to forge the signatures of on-site managers and forge the signature of an authorized check signer. Management of the Project believes there might have been collusion between the Employee and the Vendor. In addition, the Vendor was not included on HDSI?s master vendor list, although HDSI had the Vendor?s documents; such as certificate of insurance, business license, and W-9. Questioned Costs: $29,190 Recommendation: Project management should ensure that HDSI implements processes and controls that provide for the proper segregation of duties between the authorization, execution, and review of transactions; such as, approval of all new vendors, regular review of its master vendor list, implement segregation of duties between the processing of vendor invoices and the review and authorization of disbursements by someone independent of the processing function, reviewing bank statements for unusual activity, and the on-site manager?s review of monthly expenditures. Additionally, Project management should develop policies and procedures to enhance its periodic reviews of the work performed by HDSI to ensure it is performing its functions as expected. Management?s response: The management company, HDSI, is in process of implementing additional internal controls that would ensure that such fraud and embezzlement will less likely occur. These controls include reviewing monthly bank statements for unusual vendors and reviewing copies of all checks for all disbursements to ensure that they were made out to the appropriate vendor, sending each on-site manager a list of monthly disbursements related to the Organization for review and to ensure that each disbursement is related to work performed on the building.

Condition: During our test work, we noted Lime House Senior Housing, Inc. had a cash surplus of $14,776 that was not transferred to the separate residual receipts account within 60 days, subsequent to year-end. Criteria: Per regulatory agreement, ?Within sixty (60) days, after the end of each fiscal year, any residual receipts realized from the operation of the mortgaged property shall be deposited in a separate residual receipts account.? Effect of Condition: Lime House Senior Housing, Inc.?s residual receipts may be improperly used in operations. Cause of Condition: Internal controls were not in place to ensure compliance with the requirement to transfer surplus cash from Lime House Senior Housing, Inc.?s operating bank account to its residual reserve account within 60 days of year-end. Questioned Costs: $14,776 Recommendation: Management should review and update year-end internal control policies to ensure residual receipts are being deposited in the separate bank account in the appropriate timeframe. Management?s response: The management company, HDSI, transferred funds to the residual receipts bank account to cover the deficit on April 24, 2020.

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