Audit 28656

Corrective Action in Process Finding No. 2022-1 Statement of Condition There is a lack of appropriate controls over the billing and recording of tenant accounts receivable for tenants who did not complete their annual recertification within the required time frame and as a result were terminated from the Section 8 program and removed from the Company?s monthly HUD subsidy voucher request. Tenant accounts receivable and related revenues for these terminated tenants were understated in the rent roll subsidiary ledger, accounts receivable subsidiary ledger, and the general ledger. The rent roll does not reflect appropriate direct charges for these terminated tenants. A manual adjustment was required in the rent roll subsidiary ledger to revise and update the rent amount due from these tenants. Criteria Management?s internal control system should track tenants that are terminated from the Section 8 program to ensure each tenant?s ledger card is updated and they are appropriately billed through the rent roll subsidiary ledger and the accounts receivable subsidiary ledger and the general ledger are also updated for these adjustments. Cause Management transitioned the recertification and billing of tenants under the Section 8 program to a third-party servicer who did not have proper procedures in place regarding the manual billing process required when tenants are terminated from the Section 8 program. Effect or Potential Effect Management?s rent roll subsidiary ledger, accounts receivable subsidiary ledger and general ledger do not accurately reflect the tenant billed rent due and receivables for tenants terminated from the Section 8 program. Recommendation Management should ensure that the third-party servicer has an understanding of the system processes required when a tenant's certification is not completed timely, and they become a terminated tenant for Section 8 subsidy rent purposes. Management should review the list of terminated tenants monthly as compared to the rent roll subsidiary ledger to ensure that these tenants have the proper rent billing included on their account. Auditor Noncompliance Code S - Internal control deficiencies Reporting Views of Responsible Officials Management is working closely with the third party compliance firm to make necessary changes to the recertification processes that were in place. The following process improvements have been made: 1. The third party compliance firm was erroneously terminating tenants from the billing system at 60 days past recertification date versus the full 90 day grace period past recertification date. This has been corrected to 90 days. 2. The third party compliance firm is now generating a monthly report and sending it to Management to communicate what residents are terminating from the billing system. This was previously not being communicated. 3. Management is focused on reviewing this monthly reporting along with Rent Rolls to appropriately charge residents who terminated from the billing system. In addition, Management has made the following improvements to their internal processes: 1. Recertification reminder letters are being consistently sent to residents at 120, 90, 60, and 30 days prior to recertification date. 2. Incentives are in place to encourage site associates to complete recertification tasks timely including staff lunches. After working hour sessions are also being held. 3. Third party consultants are being utilized on some of the more extreme cases where large numbers of recertifications are overdue. 4. Site associates are going door to door and enlisting help from Resident Services teams to engage residents.

Corrective Action in Process Finding No. 2022-1 Statement of Condition There is a lack of appropriate controls over the billing and recording of tenant accounts receivable for tenants who did not complete their annual recertification within the required time frame and as a result were terminated from the Section 8 program and removed from the Company?s monthly HUD subsidy voucher request. Tenant accounts receivable and related revenues for these terminated tenants were understated in the rent roll subsidiary ledger, accounts receivable subsidiary ledger, and the general ledger. The rent roll does not reflect appropriate direct charges for these terminated tenants. A manual adjustment was required in the rent roll subsidiary ledger to revise and update the rent amount due from these tenants. Criteria Management?s internal control system should track tenants that are terminated from the Section 8 program to ensure each tenant?s ledger card is updated and they are appropriately billed through the rent roll subsidiary ledger and the accounts receivable subsidiary ledger and the general ledger are also updated for these adjustments. Cause Management transitioned the recertification and billing of tenants under the Section 8 program to a third-party servicer who did not have proper procedures in place regarding the manual billing process required when tenants are terminated from the Section 8 program. Effect or Potential Effect Management?s rent roll subsidiary ledger, accounts receivable subsidiary ledger and general ledger do not accurately reflect the tenant billed rent due and receivables for tenants terminated from the Section 8 program. Recommendation Management should ensure that the third-party servicer has an understanding of the system processes required when a tenant's certification is not completed timely, and they become a terminated tenant for Section 8 subsidy rent purposes. Management should review the list of terminated tenants monthly as compared to the rent roll subsidiary ledger to ensure that these tenants have the proper rent billing included on their account. Auditor Noncompliance Code S - Internal control deficiencies Reporting Views of Responsible Officials Management is working closely with the third party compliance firm to make necessary changes to the recertification processes that were in place. The following process improvements have been made: 1. The third party compliance firm was erroneously terminating tenants from the billing system at 60 days past recertification date versus the full 90 day grace period past recertification date. This has been corrected to 90 days. 2. The third party compliance firm is now generating a monthly report and sending it to Management to communicate what residents are terminating from the billing system. This was previously not being communicated. 3. Management is focused on reviewing this monthly reporting along with Rent Rolls to appropriately charge residents who terminated from the billing system. In addition, Management has made the following improvements to their internal processes: 1. Recertification reminder letters are being consistently sent to residents at 120, 90, 60, and 30 days prior to recertification date. 2. Incentives are in place to encourage site associates to complete recertification tasks timely including staff lunches. After working hour sessions are also being held. 3. Third party consultants are being utilized on some of the more extreme cases where large numbers of recertifications are overdue. 4. Site associates are going door to door and enlisting help from Resident Services teams to engage residents.