Audit 310090

2023-005 ALN 14.872 – Public Housing Capital Fund Program – Allowable Costs Condition and Criteria: In accordance with the cost principles under 2 CFR part 200, subpart E, costs must be necessary and reasonable for the performance of the Federal award, conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E, and be adequately documented. During our audit, it was determined that internal control deficiencies over compliance existed related to the Authority’s compliance with the Capital Fund Program’s allowable costs/cost principles compliance provisions. Identified control and compliance deviations included costs that were not adequately documented. Amount of Questioned Costs: $644,005 Context: The lack of supporting documentation was observed for 9 out of the 17 check disbursements tested during our audit, including check disbursements from the capital fund programs. The Authority was unable to locate supporting documentation for 9 of the 17 checks disbursements tested including check vouchers, invoices, or pay requests. Cause: The Authority’s prior management’s internal controls over the Capital Fund Program’s allowable costs/cost principles compliance provision that were in place were deficient. Staff who had the ability to make purchases and procure contracts did not adequately follow the cost principles included in 2 CFR part 200, subpart E, and therefore, the Authority did not have adequate support for check disbursements. Effect: The Authority could incur costs that are unallowable and that are not necessary or reasonable. These internal control deficiencies could result in a possibility that errors or irregularities relating to costs can exist and not be detected by the Authority’s internal controls. Auditor’s Recommendation: We recommend that the Authority’s management take the necessary steps to ensure that all disbursements are sufficiently documented and supported by adequate backup. We also recommend that the Authority implement controls to detect when check disbursements do not have adequate support in accordance with 2 CFR part 200, subpart E. Grantee Response: Management agrees with the finding and will follow the Auditor's recommendations.

2023-006 ALN 14.872 – Public Housing Capital Fund Program – Cash Management Condition and Criteria: In accordance with Chapter 7 of the CFP Guidebook, a Public Housing Agency (PHA) is to first disburse CFP funds from LOCCS to the PHA’s bank account and then pay the applicable bill(s) within 3 business days after the deposit of the funds into the PHA’s bank account. The Authority has internal control deficiencies over CFP cash management as they were drawing down CFP grant money after the Authority had incurred and paid for the corresponding expenses. Amount of Questioned Costs: N/A Context: The Authority incurred $1,325,983 of CFP expenses during the year under audit, of which $292,457 have been recorded as Accounts Receivable – Due From HUD as none of these funds have been drawn down from LOCCS. Cause: The Authority did not properly design internal controls over the CFP grant disbursement and expenditures process in order to ensure that CFP drawdowns were being requested prior to the costs incurred being paid. Effect: The Authority was not abiding by the CFP Grant Agreement or the HUD CFP Guidebook by drawing down CFP grant funds well after the Authority had incurred and paid for the corresponding expenses. By using the Capital Fund Program on a reimbursement basis, the Authority built up a large balance of Accounts Receivable – Due From HUD of $292,457. Auditor’s Recommendation: Internal control procedures should be updated and implemented to be in line with the Capital Fund Guidebook by changing the handling of CFP grant disbursements from being done on a reimbursement basis to being done in advance of making payments to vendors and contractors. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2023-007 ALN 14.872 – Public Housing Capital Funds Program – Wage Rate Requirements Condition and Criteria: The Authority, under prior management, was not able to provide necessary documentation such as the weekly certified payroll reports and employee interviews as required by the Department of Labor’s Davis-Bacon Act. The Davis-Bacon Act requires a contractor whose contract is over $2,000 to provide weekly certified payrolls to prove that they are paying prevailing wage rates. Amount of Questioned Costs: None. Context: Under prior management, as a result of the determination that the internal controls over Dave- Bacon wage rate requirements were likely to be ineffective, and due to the fact that the Authority explained that they could not locate any weekly certified payrolls or interviews for our audit, no tests of noncompliance were performed. Cause: Under prior management, no procedure existed for Capital Fund Program projects to follow up on stipulations within the contract requiring contractors to submit weekly wage reports, nor does a procedure exist whereby the Authority interviews contracted employees to ensure they are being paid fairly. Effect: Under prior management, the Authority did not have proper controls in place to ensure compliance with the Department of Labor’s Davis-Bacon Act. As a result, contractors could be underpaying works while working on Authority projects. Auditor’s Recommendation: We recommend that the Authority implement procedures to follow up on the obligations of contractors to produce weekly wage reports and compare them with prevailing wage rates. Also, make physical inspections and interview employees to ascertain that information is accurate. Grantee Response: Current management acknowledges the finding and will follow the auditor’s recommendation.

2023-005 ALN 14.872 – Public Housing Capital Fund Program – Allowable Costs Condition and Criteria: In accordance with the cost principles under 2 CFR part 200, subpart E, costs must be necessary and reasonable for the performance of the Federal award, conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E, and be adequately documented. During our audit, it was determined that internal control deficiencies over compliance existed related to the Authority’s compliance with the Capital Fund Program’s allowable costs/cost principles compliance provisions. Identified control and compliance deviations included costs that were not adequately documented. Amount of Questioned Costs: $644,005 Context: The lack of supporting documentation was observed for 9 out of the 17 check disbursements tested during our audit, including check disbursements from the capital fund programs. The Authority was unable to locate supporting documentation for 9 of the 17 checks disbursements tested including check vouchers, invoices, or pay requests. Cause: The Authority’s prior management’s internal controls over the Capital Fund Program’s allowable costs/cost principles compliance provision that were in place were deficient. Staff who had the ability to make purchases and procure contracts did not adequately follow the cost principles included in 2 CFR part 200, subpart E, and therefore, the Authority did not have adequate support for check disbursements. Effect: The Authority could incur costs that are unallowable and that are not necessary or reasonable. These internal control deficiencies could result in a possibility that errors or irregularities relating to costs can exist and not be detected by the Authority’s internal controls. Auditor’s Recommendation: We recommend that the Authority’s management take the necessary steps to ensure that all disbursements are sufficiently documented and supported by adequate backup. We also recommend that the Authority implement controls to detect when check disbursements do not have adequate support in accordance with 2 CFR part 200, subpart E. Grantee Response: Management agrees with the finding and will follow the Auditor's recommendations.

2023-006 ALN 14.872 – Public Housing Capital Fund Program – Cash Management Condition and Criteria: In accordance with Chapter 7 of the CFP Guidebook, a Public Housing Agency (PHA) is to first disburse CFP funds from LOCCS to the PHA’s bank account and then pay the applicable bill(s) within 3 business days after the deposit of the funds into the PHA’s bank account. The Authority has internal control deficiencies over CFP cash management as they were drawing down CFP grant money after the Authority had incurred and paid for the corresponding expenses. Amount of Questioned Costs: N/A Context: The Authority incurred $1,325,983 of CFP expenses during the year under audit, of which $292,457 have been recorded as Accounts Receivable – Due From HUD as none of these funds have been drawn down from LOCCS. Cause: The Authority did not properly design internal controls over the CFP grant disbursement and expenditures process in order to ensure that CFP drawdowns were being requested prior to the costs incurred being paid. Effect: The Authority was not abiding by the CFP Grant Agreement or the HUD CFP Guidebook by drawing down CFP grant funds well after the Authority had incurred and paid for the corresponding expenses. By using the Capital Fund Program on a reimbursement basis, the Authority built up a large balance of Accounts Receivable – Due From HUD of $292,457. Auditor’s Recommendation: Internal control procedures should be updated and implemented to be in line with the Capital Fund Guidebook by changing the handling of CFP grant disbursements from being done on a reimbursement basis to being done in advance of making payments to vendors and contractors. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2023-007 ALN 14.872 – Public Housing Capital Funds Program – Wage Rate Requirements Condition and Criteria: The Authority, under prior management, was not able to provide necessary documentation such as the weekly certified payroll reports and employee interviews as required by the Department of Labor’s Davis-Bacon Act. The Davis-Bacon Act requires a contractor whose contract is over $2,000 to provide weekly certified payrolls to prove that they are paying prevailing wage rates. Amount of Questioned Costs: None. Context: Under prior management, as a result of the determination that the internal controls over Dave- Bacon wage rate requirements were likely to be ineffective, and due to the fact that the Authority explained that they could not locate any weekly certified payrolls or interviews for our audit, no tests of noncompliance were performed. Cause: Under prior management, no procedure existed for Capital Fund Program projects to follow up on stipulations within the contract requiring contractors to submit weekly wage reports, nor does a procedure exist whereby the Authority interviews contracted employees to ensure they are being paid fairly. Effect: Under prior management, the Authority did not have proper controls in place to ensure compliance with the Department of Labor’s Davis-Bacon Act. As a result, contractors could be underpaying works while working on Authority projects. Auditor’s Recommendation: We recommend that the Authority implement procedures to follow up on the obligations of contractors to produce weekly wage reports and compare them with prevailing wage rates. Also, make physical inspections and interview employees to ascertain that information is accurate. Grantee Response: Current management acknowledges the finding and will follow the auditor’s recommendation.