Audit 306118

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization performed rent comparisons to the HUD fair market rent rates using the rates in place for 2021 when determining if the 2022 rent was in excess of the allowable rent. Criteria: Per 24 CFR Section 578.51(g), where grants are used to pay rent for individual housing units, the rent paid must be reasonable in relation to rents charged for comparable units taking into consideration relevant features. In add the portion of rents paid with the grant funds may not exceed HUD-determined fair market rents for the current year. Context: Of the 10 cases selected for testing using leasing funds, 4 tenant’s rents paid exceeded the published fair market rent allowed for 2022. Of the 10 cases selected for testing using rental assistance funds, 2 tenant’s rents paid exceeded the published fair market rates. Cause: The Organization did not update their records and calculation worksheets for the change in the FMV from 2021 to 2022. There was a decrease in the published rates for 2022 which affected the calculation of the allowable rents. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Special Tests and Provisions U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: For 2022, the Organization used rent calculation worksheets which had not been updated for the published utility rates for the area, or calculated based on HUD’s Utility Allowance Handbook. Criteria: Per 24 CFR Section 578.77, the share of rent allowed to be charged to the tenant takes into consideration household income, size of the family and a credit for utilities included in the lease. Context: 20 cases from a total population of 40 were selected for testing. The utility rates were out of date on all files tested. Cause: The Organization did not update their records and calculation worksheets for the change in the published utility rates or self- calculate the rates based on the Utility Allowance Handbook. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program with respect to Special Test Requirements for Reasonable Rental Rates. The calculation of the correct tenant’s portion impacts the balance paid by the Organization and subsequently charged to the HUD grants. Recommendation: We recommend that written procedures addressing internal controls with respect to tracking changes in program requirements be implemented and that procedures to update any worksheets for the effect of those requirements be performed and verified to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.

Compliance and Significant Deficiency in Internal Control over compliance with Allowable Costs U.S. Department of Housing and Urban Development Direct Program Program Name: Continuum of Care AL#: 14.267 Condition: In several instances, personnel activity reports (PAR) did not sufficiently document the activity of the individual working in the COC program. Dates noted on the PAR did not agree to the pay period on the time sheets, although they were signed by the preparer and the supervisor as being correct. Criteria: Per 24 CFR Section 200.340 requires that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally-assisted and all other activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-Federal entity (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Additionally, HUD specifically requires the detail contained in a Personnel Activity Report (PAR) Context: Our review of the payroll time sheets and related PAR’s found that in multiple instances the time period of the time sheets and the PAR reports did not match. Excel files are being used as templates and are written over each week, however dating is not changed. The reports are submitted and signed by the preparer and review as being true and correct. The dating issue was not an isolated instance. Cause: The Organization uses an excel document to prepare time sheets and PAR. The individual preparing the document is not updating the dates as the template is being completed. The reviewer appears to be verifying hours and departments worked in but is not verifying the dating and the totals shown in the PAR as compared to the time sheet. Effect: The Organization is not in compliance with the requirements of the Continuum of Care program. Recommendation: We recommend that written procedures addressing internal controls with respect to time sheet and PAR preparation requirements including proper documentation of the services provided and approval be implemented to ensure that the Organization is in compliance at all times. View of Responsible Officials: Mental Health Association in Orange County Inc.’s (MHA) management concurs with this finding. The Organization is in the process of implementing procedures to ensure that compliance is maintained in the future. Please refer to the corrective action plan on pages 13 - 14.