THE PINEMONT APARTMENTS, INC

Findings reference number: 2024-001 - Title and AL Number of Federal Program: Mortgage Insurance for purchase or Refinancing of Existing Multifamily Housing Projects (Sec 223(f)), AL 14.155 - Type of finding: Internal control - Resolution Status: In process. - Population size: N/A - Sample size: N/A -Repeat finding: No - Criteria: All transactions should be recorded in a proper and consistent manner. - Condition: The property suffered significant mold damage from a weather events during the year ended December 31, 2024. Mold remediation expenses were capitalized. - Cause: The Project Administrator miscoded mold remediation expenses as capital expenditure in error. - Effect: Audit adjustments of significant amounts had to be made to correct the situation. - Noncompliance code: S - Internal control deficiencies - Questioned costs: None - Reporting views of officials: Management agrees with the finding and will make every effort to record all transactions correctly. - Contract number: 114-11392 -Context: This was noted while performing the audit. - Recommendation: Procedures should be implemented to ensure that all transactions are classified and recorded correctly. - Auditors' summary of auditee's comments: They are in agreement. - Completion date: 12/31/2025 - Response: In the future, management will implement procedures to ensure all transactions are classified and recorded correctly.

Findings reference number: 2024-002 - Title and AL Number of Federal Program: Mortgage Insurance for Purchase or Refinancing of Existing Multifamily Housing Projects (Sec 223(f)), AL 14.155 - Type of finding: Internal control - Resolution Status: In process. - Population size: N/A - Sample size: N/A - Repeat finding: No - Criteria: Fixed assets recorded on the books should be accurate and complete. - Condition: The property suffered significant damages from two weather events during the year ended December 31, 2024, resulting in repairs and replacement expenditure. The fixed assets replaced were not written off. - Cause: The contract accountant who prepares the in-house financial statements and the detail fixed assets register overlooked disposing of the fixed assets that had been replaced. - Effect: Audit adjustments of significant amounts had to be made to correct the situation. - Noncompliance code: S - Internal control deficiencies - Questioned costs: None - Reporting views of officials: Management agrees with the finding and will make every effort to have the in-house financial statements completed at least quarterly. - Contract number: 114-11392 - Context: This was noted while performing the audit. - Recommendation: Procedures should be implemented to ensure that fixed assets recorded in the books of account actually exist. - Auditors' summary of auditee's comments: They are in agreement. - Completion date: 12/31/2025 - Response: In the future, management will implement procedures to reconcile fixed assets as reported on the books with the actual assets on the property.

Findings reference number: 2024-003 - Title and AL Number of Federal Program: Mortgage Insurance for Purchase or Refinancing of Existing Multifamily Housing Projects (Sec 223(f)), AL 14.155 - Type of finding: Internal control - Resolution Status: In process. - Population size: N/A - Sample size: N/A - Repeat finding: No - Criteria: Bank accounts should be reconciled on a monthly basis. - Condition: The operating account at year end was not reconciled and had many open items. - Cause: The contract accountant who prepares the in-house financial statements and bank reconciliations was unable to properly prepare the bank reconciliations. The Project also changed their accounting software mid year, leading to a lot of duplication and making the reconciliation process difficult. - Effect: An audit adjustment of a significant amount had to be made to correct the situation. - Noncompliance code: S - Internal control deficiencies - Questioned costs: None - Reporting views of officials: Management agrees with the finding and will make every effort to reconcile bank accounts each month. - Contract number: 114-11392 - Context: This was noted while performing the audit. - Recommendation: Procedures should be implemented to ensure that bank accounts are reconciled on a monthly basis. - Auditors' summary of auditee's comments: They are in agreement. - Completion date: 12/31/2025 - Response: In the future, management will implement procedures to reconcile the bank accounts each month.

Findings reference number: 2024-004 - Title and AL Number of Federal Program: Mortgage Insurance for Purchase or Refinancing of Existing Multifamily Housing Projects (Sec 223(f)), AL 14.155 - Type of finding: Compliance - Resolution Status: In process - Population size: N/A - Sample size: N/A - Repeat finding: Yes - Criteria: The financial statement submission to HUD's Real Estate Assessment Center (REAC) for the year ended December 31, 2024 is due by March 31, 2025. - The Data Collection Form (DCF) should be submitted to the by the earlier of 30 days after receipt of the final audit report or nine months after year end. - Condition: The financial statement submission for the year ending December 31, 2024 was filed late. - Cause: The bookkeeper for the Project was unable to close the books and complete the year-end accounting on a timely basis. - Effect: The REAC submission was filed late. - Noncompliance code: Z – Other - Questioned costs: None - Reporting views of officials: Management agrees with the finding and will make every effort to file future reports on a timely basis. - Contract number: 114-11392 - Context: This was noted while performing procedures on the reporting requirements. - Recommendation: The audited financial statements should be submitted to REAC by the reporting deadline. - Auditors' summary of auditee's comments: They are in agreement. - Completion date: 12/31/2025 - Response: In the future, management will ensure that the financial statements are submitted to REAC by the reporting deadline.

Findings reference number: 2023-001 Title and AL Number of Federal Program: Mortgage Insurance for Purchase or Refinancing of Existing Multifamily Housing Projects (Sec 223(f)), AL 14.155 Type of finding: Compliance Resolution Status: In process Population size: N/A Sample size: N/A Repeat finding: Yes Criteria: The financial statement submission to HUD's Real Estate Assessment Center (REAC) for the year ended December 31, 2023 is due by March 30, 2024. The Data Collection Form (DCF) should be submitted to the by the earlier of 30 days after receipt of the final audit report or nine months after year end. Condition: The financial statement submission for the year ending December 31, 2023 was filed late. Cause: The bookkeeper for the Project was dealing with certain personal issues and was unable to close the books and complete the year-end accounting on a timely basis. Effect: The REAC submission was late. Noncompliance code: Z Questioned costs: None Reporting views of officials: Management agrees with the finding and will make every effort to file future reports on a timely basis. Contract number: 114-11392 Context: This was noted while performing procedures on the reporting requirements. Recommendation: The audited financial statements should be submitted to REAC by the reporting deadline. Auditors' summary of auditee's comments: They are in agreement. Completion date: 12/31/2024 Response: Management will ensure that the financial statements are submitted to REAC by the reporting deadline.

Findings reference number: 2023-002 Title and AL Number of Federal Program: Mortgage Insurance for Purchase or Refinancing of Existing Multifamily Housing Projects (Sec 223(f)), AL 14.155 Type of finding: Compliance Resolution Status: In process Population size: N/A Sample size: N/A Repeat finding: No. Criteria: The regulatory agreement stipulates that a monthly deposit be made to the Reserve for Replacement Account of the amount determined by HUD. Condition: HUD approved an increase to the monthly required deposit to the Reserve for Replacement Account from $2,600 to $2,626 effective August 1, 2023. However, the increased amount was drafted beginning in September 2023. Cause: This was an oversight. Effect: The Reserve for Replacement Account has a shortfall of $26. Noncompliance code: N. Questioned costs: N/A. Reporting views of officials: This was an inadvertent error in timing and the correct amount was drafted one month late. Contract number: 114-11392 Context: The shortfall was noted at the time of performing the audit. Recommendation: Management should make an additional deposit of $26 to cover the shortfall. Auditors' summary of auditee's comments: They are in agreement. Completion date: 12/31/2024 Response: Management will issue a check for $26 to the lender for credit to the Reserve for Replacement Account to cover the shortfall.