Audit 295655

Finding 2023-001 – HUD QAD Financial Management Review Section 8 Housing Choice Voucher Program – CFDA No. 14.871; Grant Period July 1, 2022 through June 30, 2023 Criteria Title 24, Subtitle B, Chapter IX, Part 982 ‘Section 8 Tenant-Based Assistance: Housing Choice Voucher Program’ and Part 984 ‘Section 8 and Public Housing Family Self Sufficiency Program’ of the Code of Federal Regulations (CFR’s); and Public and Indian Housing (PIH) Notice 2016-08 provide requirements and guidance for which the Section 8 Housing Choice Voucher Program and HUD’s Family Self Sufficiency (FSS) Program are to be administered and operated under. Condition, Cause and Perspective HUD’s Quality Assurance Division (QAD) performed an on-site Financial Management Review of the Section 8 Housing Choice Voucher Program for the period of July of 2017 through February of 2023. The Review Report issued on September 18, 2023 contained the following Findings: Review Finding 2023-01: The FSS Program escrow bank account does not reconcile with the general ledger or the FSS tenant ledger. Corrective Action 2023-01a: The Authority must reconcile the FSS escrow balances between the general ledger, bank account statements, and the FSS program files. Review Finding 2023-02: FSS records need improvement. The Authority is not recording and reporting FSS Program transactions properly. Corrective Action 2023-02a: The Authority must conduct an FSS file review from 2013 to present. The file review should include but not be limited to the correct recording and reporting of all FSS tenant escrow accounts in the financial and program records, as well as making sure all escrow accounts are funded in the bank account. The Authority will report all corrections in the financial records to the QAD. Corrective Action 2023-02b: The Authority will review all submitted HUD Form 50058 information for the FSS program. All incorrect submissions must be identified and rectified. Review Finding 2023-03: The Authority is not properly recording and reporting stale checks and not properly treating unclaimed property. Corrective Action 2023-3a: The Authority will develop an accounting policy, compliant with applicable State Law for remitting stale dated checks to the Arkansas Division of Unclaimed Property. Corrective Action 2023-3b: The Authority will go back to July 1, 2017, identify all stale dated checks so these funds can be remitted to the State’s Division of Unclaimed Property. This must also be accompanied with the appropriate corrections to the financial records. Corrective Action 2023-3c: The Authority will report all corrections to the QAD, along with sufficient documentation to validate the corrections that have been made and funds that have been remitted as appropriate. As of the date of this Report, the Authority has reviewed financial records in accord with the QAD’s Corrective Action and has identified $52,592 of stale checks which are payable to the State’s Division of Unclaimed Property. Because these stale checks were initially recorded into ‘fraud recovery’ income when they were voided back into cash, which increased restricted net position an unrestricted net position by $26,296 each, adjustments of $26,296 have been applied to reduce both restricted net position and unrestricted net position. The liability and reductions to net position have been incorporated into and reflected in these audited financial statements accompanying this Report. Review Finding 2023-04: The Authority did not properly manage the CARES Act administrative funds. As of the date of this Report, this Finding 2023-04 has been closed by the QAD. Questioned Costs None noted. Effect Noncompliance with certain requirements of the Program. Recommendation With respect to QAD’s Findings 2023-01 and 2023-02, we recommend that the Authority execute the QAD’s recommended Corrected Actions. Regarding QAD’s Finding 2023-003, we recommend that the Authority implement and execute its revised accounting policy applicable to stale dated checks moving forward. Reply With respect to QAD’s Findings 2023-01 and 2023-02, the Authority will execute the QAD’s recommended Corrected Actions (itemized above). Regarding QAD’s Finding 2023-003, the Authority will implement and execute its revised accounting policy applicable to stale dated checks moving forward. The Authority’s Executive Director, Belinda Snow, has assumed the responsibility of executing these recommendations and Corrective Actions, and anticipates closure of QAD’s Findings 2023-01 through 2023-03 by December 31, 2024.

Finding 2023-001 – HUD QAD Financial Management Review Section 8 Housing Choice Voucher Program – CFDA No. 14.871; Grant Period July 1, 2022 through June 30, 2023 Criteria Title 24, Subtitle B, Chapter IX, Part 982 ‘Section 8 Tenant-Based Assistance: Housing Choice Voucher Program’ and Part 984 ‘Section 8 and Public Housing Family Self Sufficiency Program’ of the Code of Federal Regulations (CFR’s); and Public and Indian Housing (PIH) Notice 2016-08 provide requirements and guidance for which the Section 8 Housing Choice Voucher Program and HUD’s Family Self Sufficiency (FSS) Program are to be administered and operated under. Condition, Cause and Perspective HUD’s Quality Assurance Division (QAD) performed an on-site Financial Management Review of the Section 8 Housing Choice Voucher Program for the period of July of 2017 through February of 2023. The Review Report issued on September 18, 2023 contained the following Findings: Review Finding 2023-01: The FSS Program escrow bank account does not reconcile with the general ledger or the FSS tenant ledger. Corrective Action 2023-01a: The Authority must reconcile the FSS escrow balances between the general ledger, bank account statements, and the FSS program files. Review Finding 2023-02: FSS records need improvement. The Authority is not recording and reporting FSS Program transactions properly. Corrective Action 2023-02a: The Authority must conduct an FSS file review from 2013 to present. The file review should include but not be limited to the correct recording and reporting of all FSS tenant escrow accounts in the financial and program records, as well as making sure all escrow accounts are funded in the bank account. The Authority will report all corrections in the financial records to the QAD. Corrective Action 2023-02b: The Authority will review all submitted HUD Form 50058 information for the FSS program. All incorrect submissions must be identified and rectified. Review Finding 2023-03: The Authority is not properly recording and reporting stale checks and not properly treating unclaimed property. Corrective Action 2023-3a: The Authority will develop an accounting policy, compliant with applicable State Law for remitting stale dated checks to the Arkansas Division of Unclaimed Property. Corrective Action 2023-3b: The Authority will go back to July 1, 2017, identify all stale dated checks so these funds can be remitted to the State’s Division of Unclaimed Property. This must also be accompanied with the appropriate corrections to the financial records. Corrective Action 2023-3c: The Authority will report all corrections to the QAD, along with sufficient documentation to validate the corrections that have been made and funds that have been remitted as appropriate. As of the date of this Report, the Authority has reviewed financial records in accord with the QAD’s Corrective Action and has identified $52,592 of stale checks which are payable to the State’s Division of Unclaimed Property. Because these stale checks were initially recorded into ‘fraud recovery’ income when they were voided back into cash, which increased restricted net position an unrestricted net position by $26,296 each, adjustments of $26,296 have been applied to reduce both restricted net position and unrestricted net position. The liability and reductions to net position have been incorporated into and reflected in these audited financial statements accompanying this Report. Review Finding 2023-04: The Authority did not properly manage the CARES Act administrative funds. As of the date of this Report, this Finding 2023-04 has been closed by the QAD. Questioned Costs None noted. Effect Noncompliance with certain requirements of the Program. Recommendation With respect to QAD’s Findings 2023-01 and 2023-02, we recommend that the Authority execute the QAD’s recommended Corrected Actions. Regarding QAD’s Finding 2023-003, we recommend that the Authority implement and execute its revised accounting policy applicable to stale dated checks moving forward. Reply With respect to QAD’s Findings 2023-01 and 2023-02, the Authority will execute the QAD’s recommended Corrected Actions (itemized above). Regarding QAD’s Finding 2023-003, the Authority will implement and execute its revised accounting policy applicable to stale dated checks moving forward. The Authority’s Executive Director, Belinda Snow, has assumed the responsibility of executing these recommendations and Corrective Actions, and anticipates closure of QAD’s Findings 2023-01 through 2023-03 by December 31, 2024.