INDEPENDENCE HEIGHTS INC

Findings reference number: 2025-001 - Title and AL Number of Federal Program: Supportive Housing for the Elderly - Section 202 Capital Advance (AL 14.157) - Type of finding: Federal Award (Compliance) - Resolution Status: In process - Population size: N/A - Sample size: N/A - Repeat finding: Yes - Criteria: Funds should not be withdrawn from the reserve for replacement without HUD's written authorization. - Condition: Review of the reserve for replacement account showed that $57,887 had been withdrawn in 2025 without HUD's approval. - Cause: The Project had shortfalls of operational cash and used some funds from the reserve for replacement account to pay for operating expenses and also used some of the funds to replace funds previously withdrawn from the security deposit account. - Effect: The Project has to redeposit such funds to the reserve for replacement or obtain authorization for the withdrawal. - Noncompliance code: A - Unauthorized withdrawals - Questioned costs: N/A. - Reporting views of officials: Auditee agrees with the finding. - Contract Number: 114-EE093 - Context: The funds were withdrawn because of shortfalls of operating and security deposit cash. - Recommendation: management should not withdraw funds from the reserve for replacement without HUD authorization. - Auditee's comments: Auditee agrees with the finding. - Auditors' summary of auditee's comments: They are in agreement. - Completion date: 12/31/2026 - Response: Management agrees with the findings and will deposit the unauthorized funds as soon as funds are available.

Finding reference number: 2025-002 - Title and AL Number of Federal Program: Supportive Housing for the Elderly - Section 202 Capital Advance (AL 14.157) - Type of finding: Compliance - Resolution Status: In process - Population size: N/A - Sample size: N/A - Repeat finding: No - Criteria: The Project missed one monthly deposit to the reserve for replacement in 2025. - Condition: During the year ended December 31, 2025, the eleven of the twelve required deposits to the reserve for replacement were made. - Cause: Management oversight - Effect: The Project will have to make an additional deposit of $1,317 in 2026, to cover the shortfall. - Noncompliance code: N - Failure to make required reserve for replacements deposits. - Questioned costs: N/A - Reporting views of officials: Auditee agrees with the finding. - Context: This was noted while performing audit procedures on the reserve for replacement. - Recommendation: The Project should ensure that the required monthly deposits are made to the reserve for replacement. - Auditors' summary of auditee's comments: They are in agreement. - Completion date: 12/31/2026 - Response: Management agrees with the findings and will make the additional deposit of $1,317 to the reserve for replacement account.

Findings reference number: 2024-001 - Title and AL Number of Federal Program: Project Rental Assistance Contract, AL 14.157 - Type of finding: Federal Award (Compliance) - Resolution Status: In process - Population size: N/A - Sample size: N/A - Repeat finding: No. - Criteria: The tenant security deposits bank account should have enough cash to cover the tenant security deposit liability and should be held in an interest bearing account. - Condition: Review of the security deposit account showed that the balance as of December 31, 2024 was insufficient to cover the tenant security deposit liability and was not held in an interest bearing account. - Cause: The Project had a shortfall of operational cash and used some funds from the security deposit account. The fees associated with an interest bearing bank account would outweigh the benefits of interest based on the size of the security deposit account. - Effect: The Project may not be able to refund the security deposit for tenants moving out. - Noncompliance code: M. Security deposits. - Questioned costs: N/A. - Reporting views of officials: Auditee agrees with the finding. - Contract Number: 114-EE093 - Context: The funds were withdrawn because of a shortfall of operating cash and need for necessary repairs to the property. - Recommendation: Management must transfer enough funds to the security deposit account to cover the tenant security deposit liability. If possible, management should attempt to transfer the security deposit account to an interest bearing account. - Auditee's Response: Auditee agrees with the finding and will replenish the money to the security deposit account as soon as possible. Management will also research the feasibility of finding a bank account that will pay sufficient interest to cover any fees charged. - Completion date: 12.31.25

Findings reference number: 2024-002 - Title and AL Number of Federal Program: Supportive Housing for the Elderly - Section 202 Capital Advance (AL 14.157) - Type of finding: Federal Award (Compliance) - Resolution Status: In process - Population size: N/A - Sample size: N/A - Repeat finding: No - Criteria: Funds should not be withdrawn from the reserve for replacement without HUD's written authorization. - Condition: Review of the reserve for replacement account showed that $8,468 had been withdrawn in 2024 without HUD's approval. - Cause: The Project had a shortfall of operational cash and used some funds from the reserve for replacement account to pay for operating expenses. - Effect: The Project has to redeposit such funds to the reserve for replacement or obtain authorization for the withdrawal. - Noncompliance code: A. Unauthorized withdrawal - Questioned costs: N/A. - Reporting views of officials: Auditee agrees with the finding. - Contract Number: 114-EE093 - Context: The funds were withdrawn because of a shortfall of operating cash. - Recommendation: Management should not withdraw funds from the reserve for replacement without HUD authorization. - Auditee's comments: Auditee agrees with the finding. - Auditors' summary of auditee's comments: They are in agreement. - Completion date: 12/31/2025