Finding 2023-002 – Accounting Controls – Cash Management & Program Compliance
ALN 14.850 – Grant years 2022, 2023 – Noncompliance & Material Weakness
Criteria:
Regulations at 2 CFR Part 200, Uniform Administrative Requirements, outline the internal control requirements for recipients of federal grant funds. Non-Federal entities must, “Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.”
Condition & Cause:
As of the audit field date, the Authority has failed to draw down operating subsidy applicable to fiscal year 2023. The Authority felt that due to excessive amounts of cash on hand, they did not need or want to draw the appropriated funding down. However, the Authority’s Public Housing program would end the fiscal year with a significant deficit without these funds.
Effect:
Failure to draw down operating subsidy in the correct period results in a misstatement of program operations and a failure to match the appropriated revenue with expenses incurred. Further the Agency could have used these funds to further its approved mission and goals related to low income and affordable housing.
Recommendation:
We recommend that the PHA establish an appropriate cash management procedure that facilitates timely requests of appropriated subsidy. Operating Subsidy should be drawn down on a regular monthly basis.
Questioned Costs: None
Repeat Finding: No
Finding 2023-003 – Documentation of Costs and Vendor Invoices – Financial Reporting and Internal Controls
ALN 14.850 & 14.871– Noncompliance & Material Weakness
Criteria:
The Code of Federal Regulations Title 2 Part 200, The Uniform Administrative Guidance, gives requirements to non-Federal recipients of Federal grants relating to the documentation of records for grant expenditures. The financial management system of grantees must provide for the retention and access to records which relate to expenditures of program income. Costs must also meet certain criteria relating both to grant stipulations and to cost reasonableness and allowableness which are defined within the Uniform Guidance.
Condition & Cause:
Based on our discussions with management regarding purchasing, the Authority should be using purchase orders on all purchases except routine utilities and contracts. Our review of seventy-five (75) cash disbursements revealed that over $70,000 of goods and services were purchased without an applicable purchase order. Documentation to support purchases was limited to an invoice if one was provided. We also noted $4,984.05 of questioned costs, which was primarily due to the Authority only submitting a credit card statement to support credit card purchases. This often did not give any indication of what the purchase was for.
Effect:
Failure to provide proper cost support can lead to those costs being deemed ineligible and would require reimbursement from other Non-Federal sources.
Recommendation:
We recommend that the Authority amend policies and procedures to better facilitate effective purchasing controls. A clear audit trail should be maintained to ensure proper approval, as well as documentation to support the allowability and eligibility of costs.
Questioned Costs: $4,984.05
Repeat Finding: No
Was sampling statistically valid? Yes
Finding 2023-003 – Documentation of Costs and Vendor Invoices – Financial Reporting and Internal Controls
ALN 14.850 & 14.871– Noncompliance & Material Weakness
Criteria:
The Code of Federal Regulations Title 2 Part 200, The Uniform Administrative Guidance, gives requirements to non-Federal recipients of Federal grants relating to the documentation of records for grant expenditures. The financial management system of grantees must provide for the retention and access to records which relate to expenditures of program income. Costs must also meet certain criteria relating both to grant stipulations and to cost reasonableness and allowableness which are defined within the Uniform Guidance.
Condition & Cause:
Based on our discussions with management regarding purchasing, the Authority should be using purchase orders on all purchases except routine utilities and contracts. Our review of seventy-five (75) cash disbursements revealed that over $70,000 of goods and services were purchased without an applicable purchase order. Documentation to support purchases was limited to an invoice if one was provided. We also noted $4,984.05 of questioned costs, which was primarily due to the Authority only submitting a credit card statement to support credit card purchases. This often did not give any indication of what the purchase was for.
Effect:
Failure to provide proper cost support can lead to those costs being deemed ineligible and would require reimbursement from other Non-Federal sources.
Recommendation:
We recommend that the Authority amend policies and procedures to better facilitate effective purchasing controls. A clear audit trail should be maintained to ensure proper approval, as well as documentation to support the allowability and eligibility of costs.
Questioned Costs: $4,984.05
Repeat Finding: No
Was sampling statistically valid? Yes
Finding 2023-004 – Housing Choice Voucher Tenant Files – Rent Calculations
ALN 14.871 – Noncompliance & Significant Deficiency
Criteria:
Part 24 of the Code of Federal Regulations, Section 982, and the Housing Choice Voucher Guidebook give the requirements and guidance for maintaining the tenant files. HUD requires that certain information be obtained from each resident to properly support the rental calculations and prescribes acceptable methods of tenant income calculation. Additionally, the Agency’s Administrative Plan provides guidance on the requirements of the tenant files and how they must be maintained.
Condition & Cause:
We reviewed fifteen (15) Housing Choice Voucher tenant files and noted two (2) files were not in compliance, or 13.3%. Both instances pertain to the verification or calculation of annual income. In the first file noted, the Agency failed to gather proper third-party verification for a portion of income. In the second file, the Agency conducted an interim reexamination for a decrease in income but failed to remove a portion of the income from the rental charge calculation.
Effect:
Improper calculation of tenant rental charges can result in misstatement of the financial statements, improper calculation of HAP subsidy, and noncompliance with Federal provisions governing the Housing Choice Voucher program.
Recommendation:
We recommend that the Authority conduct a file audit of existing tenants to determine whether there are additional deficiencies. We also recommend that the Authority implement a quality control review to adequately monitor compliance with regulations pertaining to the maintenance of tenant files.
Questioned Costs: None
Repeat Finding: No
Was sampling statistically valid? Yes
Finding 2023-005 – Special Tests and Provisions – SEMAP reporting
ALN 14.871 – Noncompliance & Significant Deficiency
Criteria: 24 CFR Part 985.3 states that PHAs “must leave a clear audit trail that can be used to verify that the PHA’s quality control sample was drawn in an unbiased manner.”
Condition & cause:
We noted during our review of the 2023 SEMAP submission and supporting documentation that the PHA did not maintain a clear audit trail to verify specific indicators. Specifically, there was no documentation to support Indicator 5 – HQS Quality Control Inspections maintained within the support. We also noted that although support was provided for indicators 2-4, it was not apparent that the review was conducted, as the spreadsheet used was not filled out. Lastly, as stated above, we noted a 13% error rate with our review of the HCV tenant files, but the Authority received a perfect score for Indicator 3 - Determination of Adjusted Income.
Effect:
The SEMAP certification provides HUD with a system to evaluate a PHA’s Section 8 performance. Failure to provide proper supporting documentation can lead to ineffective measurements of Authority performance, as well as its ability to meet the needs of eligible families. Furthermore, misleading SEMAP certifications can disguise a troubled agency who may need HUD intervention.
Recommendation: We recommend that the PHA personnel obtain the appropriate training for SEMAP documentation and certification and appropriately document the SEMAP reports in future years. We also recommend that the PHA utilize the existing computer system to adequately document SEMAP on a regular basis.
Finding 2023-002 – Accounting Controls – Cash Management & Program Compliance
ALN 14.850 – Grant years 2022, 2023 – Noncompliance & Material Weakness
Criteria:
Regulations at 2 CFR Part 200, Uniform Administrative Requirements, outline the internal control requirements for recipients of federal grant funds. Non-Federal entities must, “Establish and maintain effective internal control over Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.”
Condition & Cause:
As of the audit field date, the Authority has failed to draw down operating subsidy applicable to fiscal year 2023. The Authority felt that due to excessive amounts of cash on hand, they did not need or want to draw the appropriated funding down. However, the Authority’s Public Housing program would end the fiscal year with a significant deficit without these funds.
Effect:
Failure to draw down operating subsidy in the correct period results in a misstatement of program operations and a failure to match the appropriated revenue with expenses incurred. Further the Agency could have used these funds to further its approved mission and goals related to low income and affordable housing.
Recommendation:
We recommend that the PHA establish an appropriate cash management procedure that facilitates timely requests of appropriated subsidy. Operating Subsidy should be drawn down on a regular monthly basis.
Questioned Costs: None
Repeat Finding: No
Finding 2023-003 – Documentation of Costs and Vendor Invoices – Financial Reporting and Internal Controls
ALN 14.850 & 14.871– Noncompliance & Material Weakness
Criteria:
The Code of Federal Regulations Title 2 Part 200, The Uniform Administrative Guidance, gives requirements to non-Federal recipients of Federal grants relating to the documentation of records for grant expenditures. The financial management system of grantees must provide for the retention and access to records which relate to expenditures of program income. Costs must also meet certain criteria relating both to grant stipulations and to cost reasonableness and allowableness which are defined within the Uniform Guidance.
Condition & Cause:
Based on our discussions with management regarding purchasing, the Authority should be using purchase orders on all purchases except routine utilities and contracts. Our review of seventy-five (75) cash disbursements revealed that over $70,000 of goods and services were purchased without an applicable purchase order. Documentation to support purchases was limited to an invoice if one was provided. We also noted $4,984.05 of questioned costs, which was primarily due to the Authority only submitting a credit card statement to support credit card purchases. This often did not give any indication of what the purchase was for.
Effect:
Failure to provide proper cost support can lead to those costs being deemed ineligible and would require reimbursement from other Non-Federal sources.
Recommendation:
We recommend that the Authority amend policies and procedures to better facilitate effective purchasing controls. A clear audit trail should be maintained to ensure proper approval, as well as documentation to support the allowability and eligibility of costs.
Questioned Costs: $4,984.05
Repeat Finding: No
Was sampling statistically valid? Yes
Finding 2023-003 – Documentation of Costs and Vendor Invoices – Financial Reporting and Internal Controls
ALN 14.850 & 14.871– Noncompliance & Material Weakness
Criteria:
The Code of Federal Regulations Title 2 Part 200, The Uniform Administrative Guidance, gives requirements to non-Federal recipients of Federal grants relating to the documentation of records for grant expenditures. The financial management system of grantees must provide for the retention and access to records which relate to expenditures of program income. Costs must also meet certain criteria relating both to grant stipulations and to cost reasonableness and allowableness which are defined within the Uniform Guidance.
Condition & Cause:
Based on our discussions with management regarding purchasing, the Authority should be using purchase orders on all purchases except routine utilities and contracts. Our review of seventy-five (75) cash disbursements revealed that over $70,000 of goods and services were purchased without an applicable purchase order. Documentation to support purchases was limited to an invoice if one was provided. We also noted $4,984.05 of questioned costs, which was primarily due to the Authority only submitting a credit card statement to support credit card purchases. This often did not give any indication of what the purchase was for.
Effect:
Failure to provide proper cost support can lead to those costs being deemed ineligible and would require reimbursement from other Non-Federal sources.
Recommendation:
We recommend that the Authority amend policies and procedures to better facilitate effective purchasing controls. A clear audit trail should be maintained to ensure proper approval, as well as documentation to support the allowability and eligibility of costs.
Questioned Costs: $4,984.05
Repeat Finding: No
Was sampling statistically valid? Yes
Finding 2023-004 – Housing Choice Voucher Tenant Files – Rent Calculations
ALN 14.871 – Noncompliance & Significant Deficiency
Criteria:
Part 24 of the Code of Federal Regulations, Section 982, and the Housing Choice Voucher Guidebook give the requirements and guidance for maintaining the tenant files. HUD requires that certain information be obtained from each resident to properly support the rental calculations and prescribes acceptable methods of tenant income calculation. Additionally, the Agency’s Administrative Plan provides guidance on the requirements of the tenant files and how they must be maintained.
Condition & Cause:
We reviewed fifteen (15) Housing Choice Voucher tenant files and noted two (2) files were not in compliance, or 13.3%. Both instances pertain to the verification or calculation of annual income. In the first file noted, the Agency failed to gather proper third-party verification for a portion of income. In the second file, the Agency conducted an interim reexamination for a decrease in income but failed to remove a portion of the income from the rental charge calculation.
Effect:
Improper calculation of tenant rental charges can result in misstatement of the financial statements, improper calculation of HAP subsidy, and noncompliance with Federal provisions governing the Housing Choice Voucher program.
Recommendation:
We recommend that the Authority conduct a file audit of existing tenants to determine whether there are additional deficiencies. We also recommend that the Authority implement a quality control review to adequately monitor compliance with regulations pertaining to the maintenance of tenant files.
Questioned Costs: None
Repeat Finding: No
Was sampling statistically valid? Yes
Finding 2023-005 – Special Tests and Provisions – SEMAP reporting
ALN 14.871 – Noncompliance & Significant Deficiency
Criteria: 24 CFR Part 985.3 states that PHAs “must leave a clear audit trail that can be used to verify that the PHA’s quality control sample was drawn in an unbiased manner.”
Condition & cause:
We noted during our review of the 2023 SEMAP submission and supporting documentation that the PHA did not maintain a clear audit trail to verify specific indicators. Specifically, there was no documentation to support Indicator 5 – HQS Quality Control Inspections maintained within the support. We also noted that although support was provided for indicators 2-4, it was not apparent that the review was conducted, as the spreadsheet used was not filled out. Lastly, as stated above, we noted a 13% error rate with our review of the HCV tenant files, but the Authority received a perfect score for Indicator 3 - Determination of Adjusted Income.
Effect:
The SEMAP certification provides HUD with a system to evaluate a PHA’s Section 8 performance. Failure to provide proper supporting documentation can lead to ineffective measurements of Authority performance, as well as its ability to meet the needs of eligible families. Furthermore, misleading SEMAP certifications can disguise a troubled agency who may need HUD intervention.
Recommendation: We recommend that the PHA personnel obtain the appropriate training for SEMAP documentation and certification and appropriately document the SEMAP reports in future years. We also recommend that the PHA utilize the existing computer system to adequately document SEMAP on a regular basis.