Audit 2251

Finding Number: 2023‐001 Repeat Finding: No Program Name/Assistance Listing Title: CBDG‐Entitlement Grants Cluster Assistance Listing Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Federal Award Numbers: B‐20‐MC‐04‐0503, B‐21‐MC‐04‐0503, B‐22‐MC‐04‐0503, and B‐20‐MW‐04‐0503 Pass‐Through Agency: N/A Questioned Costs: $0 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Reporting Criteria Under 2 CFR §200.303, the City is required to establish and maintain effective internal controls over Federal awards that provide reasonable assurance that the City is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. CDBG program regulations require the City to file financial reports throughout the year. First, the City is required to file accurate PR26‐CDBG Financial Summary and the PR26‐CDBG‐CV Financial Summary Reports within 90 days after fiscal year end. Second, the City is also required to file PR29 – CDBG Cash on Hand and PR29 – CDBG‐CV Cash On Hand Reports by the end of the month subsequent to each quarter end. 2 CFR Part 170 requires the City to submit subaward information through the FFATA Subaward Reporting System (FSRS) in compliance with the Federal Funding Accountability and Transparency Act by the end of the month subsequent to the award. Condition Reporting obligations were not completed timely or accurately. Cause The Community Assistance Office experienced turnover and vacancies in key positions responsible for reporting during fiscal year 2020‐21. Training was needed for program employees to fully understand reporting responsibilities for the City. In some cases information was not retained and required recreation. Effect The City was not fully in compliance with reporting requirements. Context We noted the following items when reviewing reports submitted for the CDBG program.  The PR26 reports for the 2020 and 2021 program years contained inaccuracies in the beginning unexpended CDBG funds, program income, or expenditure activity for each year. The City corrected these inaccuracies to properly present information on the PR26 report for program year 2023.  The City did not submit PR29 reports for both the CDBG and CDBG‐CV programs quarterly. The last PR29 report submitted was for the quarter ended December 31, 2021 before the City completed all delinquent reporting in October 2023.  The City was submitting the FFATA reporting annually rather than by the end of the month subsequent to an award. Recommendation The City should dedicate time and resources to allow individuals to resolve discrepancies in reporting within the Community Assistance Office. Views Of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐002 Repeat Finding: No Program Name/Assistance Listing Title: CDBG‐Entitlement Grants Cluster Assistance Listing Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Federal Award Number: B‐20‐MC‐04‐0503 Pass‐Through Agency: N/A Questioned Costs: $255,750 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Special Tests and Provisions Criteria 24 CFR §58.22 requires Housing and Urban Development (HUD) to approve a request for release of funds (RROF) before the City can obligate or expend CDBG grant funds. Condition The City could not provide a HUD‐approved RROF for one project funded with Program Year 2020 monies. Cause The Community Assistance Office experienced turnover and vacancies in key positions responsible for reporting during fiscal year 2021. Training was needed for program employees to fully understand reporting responsibilities for the City. In some cases information was not retained and required recreation. Effect The City was not in compliance with 24 CFR §58.22. Context HUD approval of the RROF for the Piute Splashpad project in fiscal year 2019‐20 was not retained. The City was, therefore, required to remit to HUD the $255,750 expended on the project. The funds were returned in June and July 2023. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The City should dedicate time and resources to the Community Assistance Office to ensure that key compliance documents are maintained for the program. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐003 Repeat Finding: No Program Name/Assistance Listing Title: CDBG‐Entitlement Grants Cluster Assistance Listing Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Federal Award Number: B‐21‐MC‐04‐0503 Pass‐Through Agency: N/A Questioned Costs: $0 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Program Income Criteria 24 CFR §570.504 requires the City to accurately record the receipt and expenditure of program income as part of financial transactions of the CDBG program. Condition Program income on the PR26 – CDBG Financial Summary Report for Program Year 2021 was not reported. Cause The Community Assistance Office experienced turnover and vacancies in key positions responsible for reporting during fiscal year 2021. Training was needed for program employees to fully understand reporting responsibilities for the City. In some cases information was not retained and required recreation. Effect The City was not in compliance with 24 CFR §570.504. The City had to revise the PR26 for Program Year 2021. Context The City did not report program income of $310,165 received during fiscal year 2021‐22 on the PR26 – CDBG Financial Summary Report. The program income was properly reported in the City’s financial records. The City revised the PR26 report for Program Year 2022 in October 2023 to correct the errors. Recommendation The Community Assistance Office should continue to review reports for accuracy and completeness prior to submission. The City should dedicate sufficient time and resources to ensure compliance. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐004 Repeat Finding: No Program Name/Assistance Listing Title: Housing Voucher Cluster Assistance Listing Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Federal Award Number: AZ032VO Pass‐Through Agency: N/A Questioned Costs: $0 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Reporting Criteria 24 CFR §908 requires public housing agencies to electronically submit the HUD‐50058 form each time the agency completes a program admission, examination, or other change in the family unit. The information submitted should agree to a program participants file. Condition Information reported on the HUD‐50058 forms was not always consistent with the program participant’s file. Cause Every time there is an action to a housing choice voucher participant, the 50058 is updated in the Scottsdale Housing Choice Voucher software system by staff, and these updates are submitted on a monthly basis through the Real Estate Assessment Center. Cause is through human error. Effect The City was not in compliance with 24 CFR §908. Context Errors were noted on eight of 40 HUD‐50058 forms reviewed. The errors included:  Two forms listed incorrect birth dates for family members.  One form listed an incorrect social security number listed for a family member.  One form listed an incorrect family member name.  One form listed the previous HQS inspection incorrectly.  One form listed an incorrect birth date for a family member and listed an incorrect date of admission to the program.  One form listed an incorrect date for admission to the program.  One form reviewed did not have a social security card on file. The sample was not intended to be, and was not, a statistically valid sample. Page 16 City of Scottsdale, Arizona Schedule of Findings and Questioned Costs Year Ended June 30, 2023 Findings and Questioned Costs Related to Federal Awards Finding Number: 2023‐004 Recommendation The Community Assistance Office should increase review procedures to ensure that each HUD‐50058 form is reviewed prior to submission for accuracy. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐005 Repeat Finding: No Program Name/Assistance Listing Title: Housing Voucher Cluster Assistance Listing Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Federal Award Number: AZ032VO Pass‐Through Agency: N/A Questioned Costs: $0 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Special Tests and Provisions Criteria 24 CFR §982.405 requires a public housing agency to inspect units leased to determine if they meet Housing Quality Standards (HQS). If a unit fails an inspection, it must be repaired within 30 days if not a life‐threatening condition. Condition Not all units that failed HQS inspections were repaired within the required 30‐day window. Cause The Community Assistance Office, experienced turnover in the occupancy specialist position responsible for the inspections and while the position was in recruitment interim staff completed the inspections resulting in lack of documentation in the paper file regarding the extension for the installation of the microwave. Effect The City was not in compliance with 24 CFR §982.405. Context For one of six HQS failed inspections reviewed, the non‐life‐threatening repairs were not made within the 30‐day window. An extension was granted but was not documented in the participant’s file. Ultimately, the inspection was passed 40 days after the original failure with no HAP payments required to be abated. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The City should update policies and procedures within the Community Assistance Office to ensure that any extensions for repairs related failed HQS inspections are adequately documented in participant files. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐006 Repeat Finding: No Program Name/Assistance Listing Title: Housing Voucher Cluster Assistance Listing Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Federal Award Number: AZ032VO Pass‐Through Agency: N/A Questioned Costs: $0 Type of Finding: Significant Deficiency Compliance Requirement: Special Tests and Provisions Criteria 24 CFR §982.158 requires public housing agencies to maintain complete and accurate accounts including the balances of HAP and administrative fee equity. Condition The City’s internal controls were not functioning to ensure equity balances were properly stated throughout the fiscal year. Cause The Community Assistance Office experienced turnover and vacancies in key positions responsible for reporting during fiscal year 2020‐21. Training was needed for program employees to fully understand reporting responsibilities for the City. In some cases information was not retained and required recreation. Effect The City’s HAP and administrative equity balances were not always properly stated. Context The City was not regularly reconciling HAP and administrative equity balances throughout the current and prior fiscal years. Record reviews were required back to fiscal year 2020‐21 and reconciled moving forward through the end of fiscal year 2022‐23 to ensure the program equity records were complete and accurate. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The City should dedicate time and resources to allow individuals to resolve discrepancies in reporting within the Community Assistance Office. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐001 Repeat Finding: No Program Name/Assistance Listing Title: CBDG‐Entitlement Grants Cluster Assistance Listing Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Federal Award Numbers: B‐20‐MC‐04‐0503, B‐21‐MC‐04‐0503, B‐22‐MC‐04‐0503, and B‐20‐MW‐04‐0503 Pass‐Through Agency: N/A Questioned Costs: $0 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Reporting Criteria Under 2 CFR §200.303, the City is required to establish and maintain effective internal controls over Federal awards that provide reasonable assurance that the City is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. CDBG program regulations require the City to file financial reports throughout the year. First, the City is required to file accurate PR26‐CDBG Financial Summary and the PR26‐CDBG‐CV Financial Summary Reports within 90 days after fiscal year end. Second, the City is also required to file PR29 – CDBG Cash on Hand and PR29 – CDBG‐CV Cash On Hand Reports by the end of the month subsequent to each quarter end. 2 CFR Part 170 requires the City to submit subaward information through the FFATA Subaward Reporting System (FSRS) in compliance with the Federal Funding Accountability and Transparency Act by the end of the month subsequent to the award. Condition Reporting obligations were not completed timely or accurately. Cause The Community Assistance Office experienced turnover and vacancies in key positions responsible for reporting during fiscal year 2020‐21. Training was needed for program employees to fully understand reporting responsibilities for the City. In some cases information was not retained and required recreation. Effect The City was not fully in compliance with reporting requirements. Context We noted the following items when reviewing reports submitted for the CDBG program.  The PR26 reports for the 2020 and 2021 program years contained inaccuracies in the beginning unexpended CDBG funds, program income, or expenditure activity for each year. The City corrected these inaccuracies to properly present information on the PR26 report for program year 2023.  The City did not submit PR29 reports for both the CDBG and CDBG‐CV programs quarterly. The last PR29 report submitted was for the quarter ended December 31, 2021 before the City completed all delinquent reporting in October 2023.  The City was submitting the FFATA reporting annually rather than by the end of the month subsequent to an award. Recommendation The City should dedicate time and resources to allow individuals to resolve discrepancies in reporting within the Community Assistance Office. Views Of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐001 Repeat Finding: No Program Name/Assistance Listing Title: CBDG‐Entitlement Grants Cluster Assistance Listing Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Federal Award Numbers: B‐20‐MC‐04‐0503, B‐21‐MC‐04‐0503, B‐22‐MC‐04‐0503, and B‐20‐MW‐04‐0503 Pass‐Through Agency: N/A Questioned Costs: $0 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Reporting Criteria Under 2 CFR §200.303, the City is required to establish and maintain effective internal controls over Federal awards that provide reasonable assurance that the City is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. CDBG program regulations require the City to file financial reports throughout the year. First, the City is required to file accurate PR26‐CDBG Financial Summary and the PR26‐CDBG‐CV Financial Summary Reports within 90 days after fiscal year end. Second, the City is also required to file PR29 – CDBG Cash on Hand and PR29 – CDBG‐CV Cash On Hand Reports by the end of the month subsequent to each quarter end. 2 CFR Part 170 requires the City to submit subaward information through the FFATA Subaward Reporting System (FSRS) in compliance with the Federal Funding Accountability and Transparency Act by the end of the month subsequent to the award. Condition Reporting obligations were not completed timely or accurately. Cause The Community Assistance Office experienced turnover and vacancies in key positions responsible for reporting during fiscal year 2020‐21. Training was needed for program employees to fully understand reporting responsibilities for the City. In some cases information was not retained and required recreation. Effect The City was not fully in compliance with reporting requirements. Context We noted the following items when reviewing reports submitted for the CDBG program.  The PR26 reports for the 2020 and 2021 program years contained inaccuracies in the beginning unexpended CDBG funds, program income, or expenditure activity for each year. The City corrected these inaccuracies to properly present information on the PR26 report for program year 2023.  The City did not submit PR29 reports for both the CDBG and CDBG‐CV programs quarterly. The last PR29 report submitted was for the quarter ended December 31, 2021 before the City completed all delinquent reporting in October 2023.  The City was submitting the FFATA reporting annually rather than by the end of the month subsequent to an award. Recommendation The City should dedicate time and resources to allow individuals to resolve discrepancies in reporting within the Community Assistance Office. Views Of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐002 Repeat Finding: No Program Name/Assistance Listing Title: CDBG‐Entitlement Grants Cluster Assistance Listing Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Federal Award Number: B‐20‐MC‐04‐0503 Pass‐Through Agency: N/A Questioned Costs: $255,750 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Special Tests and Provisions Criteria 24 CFR §58.22 requires Housing and Urban Development (HUD) to approve a request for release of funds (RROF) before the City can obligate or expend CDBG grant funds. Condition The City could not provide a HUD‐approved RROF for one project funded with Program Year 2020 monies. Cause The Community Assistance Office experienced turnover and vacancies in key positions responsible for reporting during fiscal year 2021. Training was needed for program employees to fully understand reporting responsibilities for the City. In some cases information was not retained and required recreation. Effect The City was not in compliance with 24 CFR §58.22. Context HUD approval of the RROF for the Piute Splashpad project in fiscal year 2019‐20 was not retained. The City was, therefore, required to remit to HUD the $255,750 expended on the project. The funds were returned in June and July 2023. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The City should dedicate time and resources to the Community Assistance Office to ensure that key compliance documents are maintained for the program. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐003 Repeat Finding: No Program Name/Assistance Listing Title: CDBG‐Entitlement Grants Cluster Assistance Listing Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Federal Award Number: B‐21‐MC‐04‐0503 Pass‐Through Agency: N/A Questioned Costs: $0 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Program Income Criteria 24 CFR §570.504 requires the City to accurately record the receipt and expenditure of program income as part of financial transactions of the CDBG program. Condition Program income on the PR26 – CDBG Financial Summary Report for Program Year 2021 was not reported. Cause The Community Assistance Office experienced turnover and vacancies in key positions responsible for reporting during fiscal year 2021. Training was needed for program employees to fully understand reporting responsibilities for the City. In some cases information was not retained and required recreation. Effect The City was not in compliance with 24 CFR §570.504. The City had to revise the PR26 for Program Year 2021. Context The City did not report program income of $310,165 received during fiscal year 2021‐22 on the PR26 – CDBG Financial Summary Report. The program income was properly reported in the City’s financial records. The City revised the PR26 report for Program Year 2022 in October 2023 to correct the errors. Recommendation The Community Assistance Office should continue to review reports for accuracy and completeness prior to submission. The City should dedicate sufficient time and resources to ensure compliance. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐004 Repeat Finding: No Program Name/Assistance Listing Title: Housing Voucher Cluster Assistance Listing Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Federal Award Number: AZ032VO Pass‐Through Agency: N/A Questioned Costs: $0 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Reporting Criteria 24 CFR §908 requires public housing agencies to electronically submit the HUD‐50058 form each time the agency completes a program admission, examination, or other change in the family unit. The information submitted should agree to a program participants file. Condition Information reported on the HUD‐50058 forms was not always consistent with the program participant’s file. Cause Every time there is an action to a housing choice voucher participant, the 50058 is updated in the Scottsdale Housing Choice Voucher software system by staff, and these updates are submitted on a monthly basis through the Real Estate Assessment Center. Cause is through human error. Effect The City was not in compliance with 24 CFR §908. Context Errors were noted on eight of 40 HUD‐50058 forms reviewed. The errors included:  Two forms listed incorrect birth dates for family members.  One form listed an incorrect social security number listed for a family member.  One form listed an incorrect family member name.  One form listed the previous HQS inspection incorrectly.  One form listed an incorrect birth date for a family member and listed an incorrect date of admission to the program.  One form listed an incorrect date for admission to the program.  One form reviewed did not have a social security card on file. The sample was not intended to be, and was not, a statistically valid sample. Page 16 City of Scottsdale, Arizona Schedule of Findings and Questioned Costs Year Ended June 30, 2023 Findings and Questioned Costs Related to Federal Awards Finding Number: 2023‐004 Recommendation The Community Assistance Office should increase review procedures to ensure that each HUD‐50058 form is reviewed prior to submission for accuracy. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐005 Repeat Finding: No Program Name/Assistance Listing Title: Housing Voucher Cluster Assistance Listing Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Federal Award Number: AZ032VO Pass‐Through Agency: N/A Questioned Costs: $0 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Special Tests and Provisions Criteria 24 CFR §982.405 requires a public housing agency to inspect units leased to determine if they meet Housing Quality Standards (HQS). If a unit fails an inspection, it must be repaired within 30 days if not a life‐threatening condition. Condition Not all units that failed HQS inspections were repaired within the required 30‐day window. Cause The Community Assistance Office, experienced turnover in the occupancy specialist position responsible for the inspections and while the position was in recruitment interim staff completed the inspections resulting in lack of documentation in the paper file regarding the extension for the installation of the microwave. Effect The City was not in compliance with 24 CFR §982.405. Context For one of six HQS failed inspections reviewed, the non‐life‐threatening repairs were not made within the 30‐day window. An extension was granted but was not documented in the participant’s file. Ultimately, the inspection was passed 40 days after the original failure with no HAP payments required to be abated. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The City should update policies and procedures within the Community Assistance Office to ensure that any extensions for repairs related failed HQS inspections are adequately documented in participant files. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐006 Repeat Finding: No Program Name/Assistance Listing Title: Housing Voucher Cluster Assistance Listing Number: 14.871 Federal Agency: U.S. Department of Housing and Urban Development Federal Award Number: AZ032VO Pass‐Through Agency: N/A Questioned Costs: $0 Type of Finding: Significant Deficiency Compliance Requirement: Special Tests and Provisions Criteria 24 CFR §982.158 requires public housing agencies to maintain complete and accurate accounts including the balances of HAP and administrative fee equity. Condition The City’s internal controls were not functioning to ensure equity balances were properly stated throughout the fiscal year. Cause The Community Assistance Office experienced turnover and vacancies in key positions responsible for reporting during fiscal year 2020‐21. Training was needed for program employees to fully understand reporting responsibilities for the City. In some cases information was not retained and required recreation. Effect The City’s HAP and administrative equity balances were not always properly stated. Context The City was not regularly reconciling HAP and administrative equity balances throughout the current and prior fiscal years. Record reviews were required back to fiscal year 2020‐21 and reconciled moving forward through the end of fiscal year 2022‐23 to ensure the program equity records were complete and accurate. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The City should dedicate time and resources to allow individuals to resolve discrepancies in reporting within the Community Assistance Office. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2023‐001 Repeat Finding: No Program Name/Assistance Listing Title: CBDG‐Entitlement Grants Cluster Assistance Listing Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Federal Award Numbers: B‐20‐MC‐04‐0503, B‐21‐MC‐04‐0503, B‐22‐MC‐04‐0503, and B‐20‐MW‐04‐0503 Pass‐Through Agency: N/A Questioned Costs: $0 Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Reporting Criteria Under 2 CFR §200.303, the City is required to establish and maintain effective internal controls over Federal awards that provide reasonable assurance that the City is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. CDBG program regulations require the City to file financial reports throughout the year. First, the City is required to file accurate PR26‐CDBG Financial Summary and the PR26‐CDBG‐CV Financial Summary Reports within 90 days after fiscal year end. Second, the City is also required to file PR29 – CDBG Cash on Hand and PR29 – CDBG‐CV Cash On Hand Reports by the end of the month subsequent to each quarter end. 2 CFR Part 170 requires the City to submit subaward information through the FFATA Subaward Reporting System (FSRS) in compliance with the Federal Funding Accountability and Transparency Act by the end of the month subsequent to the award. Condition Reporting obligations were not completed timely or accurately. Cause The Community Assistance Office experienced turnover and vacancies in key positions responsible for reporting during fiscal year 2020‐21. Training was needed for program employees to fully understand reporting responsibilities for the City. In some cases information was not retained and required recreation. Effect The City was not fully in compliance with reporting requirements. Context We noted the following items when reviewing reports submitted for the CDBG program.  The PR26 reports for the 2020 and 2021 program years contained inaccuracies in the beginning unexpended CDBG funds, program income, or expenditure activity for each year. The City corrected these inaccuracies to properly present information on the PR26 report for program year 2023.  The City did not submit PR29 reports for both the CDBG and CDBG‐CV programs quarterly. The last PR29 report submitted was for the quarter ended December 31, 2021 before the City completed all delinquent reporting in October 2023.  The City was submitting the FFATA reporting annually rather than by the end of the month subsequent to an award. Recommendation The City should dedicate time and resources to allow individuals to resolve discrepancies in reporting within the Community Assistance Office. Views Of Responsible Officials See Corrective Action Plan.