Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850
2023-001-Inadequate Accounting and Documentation-Allowable Costs/Principles
Criteria and Specific Requirement
(a)-Travel expenses should be correctly classified.
(b)-Direct payments (ACH- no check) should be properly authorized and supported.
(c)-Credits on the Low Rent rental register should be adequately documented. In addition, the rental registers should be reviewed each month before closeout.
(d)-Federal regulations require that certain financial data required by REAC be supported and documented
(e)-Various CFPs and other grants should be properly classified and accounted for
(f)-Sufficient information should be submitted to the outside employed fee accountant to allow the latter to complete a year-end documentary checklist that all points considered by the fee accountant have been adequately addressed
Condition Found
(a)-We noted $4,334 of travel costs that were improperly classified in either Maintenance Expense-Materials or Other Administrative Expenses-Other. The above amounts were reclassified by audit adjustment to travel costs.
(b)-The adopted policy is for direct payments (ACH- without check) to be accompanied by an authorized check request. As a result of early exceptions we noted, we reviewed approximately 100% of the noted direct payments. Only a minority of the direct payments that we reviewed were accompanied by such an authorized written request. In addition, we do not know the documentation or explanation that was viewed by the authorized person, when the requests that we were able to review was signed.
Approximately $55,051 of total payments were made by direct payments. $34,334 and $20,717 were charged to the HCV Fund and the General (Low Rent) Funds, respectively. $49,974 of the total was not supported by adequate documentation. This was $31,586 and $18,388 charged to the HCV and General (Low Rent) Funds, respectively. Much of the unsupported direct payments were travel costs. The total travel costs after reclassifications noted above were $21,336. Of the total travel costs, only $2,723 was paid by check. All tested check amounts contained adequate support. $18,613 of travel costs were paid by direct payments.
(c)-We selected three credits at random on the Low Rent rental register that totaled $4,361 that was spread over three months. We requested documented explanations from management for these credits. However, we did not receive any.
In addition, we noted in our review of month- to- month Low Rent rental revenue charged, that there was a large variance that may have not been initially detected by management. The average dwelling rent charged for 10 months was $5,800. However, the rent charged for January and February 2023 were $10,855 and $1,570, respectively.
We received the accounting information without adjustment or comment on this. Management states that they subsequently found the errors. However, the January variance should have been noted by management before the February rent register was run.
(d)-The unaudited financial statements were conditionally approved by REAC. One of the conditions was that PORTs reported on the VMS was $6,009. However, the amount reported on Financial Data Scheule (FDS) Line 97350 is zero. While this difference is immaterial to the financial statements, REAC expects these numbers to agree. To date, management has been unable to reconcile these numbers.
(e)-In the current year, Accounting coded a $38,573 advance to a ROSS grant. However, the detailed ELOCCS indicates this is instead was an advance on the CFP 2020 program.
In addition, a $46,710 advance was incorrectly classified to the 2021 CFP. Instead, it should have been credited to the 2019 CFP program.
(f)-The fee accountant only partially completed their year- end unaudited checklist, that is prepared by a supervising accountant that reviews the year-end unaudited statements prepared by other members of the fee accounting firm. The fee accountant requested but did not receive the necessary information from management.
Cause
Unknown. Effect
Federal regulations were not complied with. In addition, the accounting information is not as accurate as it should be.
Recommendation to prevent future occurrences
Management should ensure that the above inadequacies are corrected. Internal controls over all of these areas should be improved.
View of Responsible Official
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850
2023-002-Inadequate Administration of Facets of Programs-Allowable Costs/Principles
Criteria and specific requirement
(a)-Both the Low Rent and Housing Choice Voucher Plans participate in the Family Self-Sufficiency (FSS) programs. Various tenants participate in the program. Various HUD-approved goals for personal improvement are established. Authority personnel help the participants set the objectives and time frames for accomplishing the goals. Authority personnel counsel the participants and track their progress. If the goals are timely met, the escrowed funds are disbursed to the participant. If the goals are not timely met, the escrowed amount is forfeited by the authority.
(b)-Funds are earned by participants who meet goals established similarly to the FSS program noted above in the Family Self Sufficiency Program. This program was established years ago from excess Admin fees of the HCV program, at a time when this was still permitted. The funds are referred to as Homeownership Set Aside funds.
(c)-As noted in Note 11, Retirement System, the authority participates in a Simplified Pension Plan (SEP). $17,722 was contributed to the Plan during the audit year. We requested a copy of the Master Plan, but we have not received it. Also, we requested a breakdown of how the $17,722 was calculated, and to which participant(s) this money had been credited to. We have not received that.
Condition Found
(a) and (b)-It appears the enrollment, progress of participants to meet the established goals, and potential earning and disbursement of FSS and Set Aside funds have been inadequately monitored for at least the last two years.(c)-Without both of these requested items noted above, we are unable to determine if the SEP contribution terms were adequately complied with.
Cause
It appears that the authority has not retained adequate personnel to oversee the FSS and Set Aside tracking. We do not know why we have not received the SEP information.
Effect
The federal regulations for FSS and Set Aside tracking has not been complied with. In addition, it is possible the terms of ERISA (Employers Retirement Income Security Act) may have not been complied with, in some respects.
Recommendation to prevent future occurrences
Personnel should be trained in the FSS and Homeownership programs. They should adequately track and administer the program. The SEP provisions should be complied with in all material respects.
View of Responsible Officials
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA #14.871, Low Rent Program CDFA#14.850
2023-003-Tenant file deficiencies and SEMAP errors noted-Eligibility and Special Tests
Criteria and Specific Requirement
(a)-SEMAP should be timely filed and properly documented
(b)-Tenants who moved in during the audit year should be found on the waiting list. In addition, the waiting lists should contain explanations of why the applicants listed before (above) the admitted tested tenant was not admitted instead of the applicant who was.
(c)-HAP payments should be the same amount of expenditure as listed on the last 50058 before the HAP payment is disbursed
(d)-Reasonable rent comparisons should be made for all Move Ins(e)-Income Enterprise Verifications (EIV) should be documented for all tenants when their annual re-examination is done
(f)-All 1099’s issued to landlords should be available for third party review.
Condition Found
(a)-SEMAP was not filed before the regulatory deadline. Since the deadline was missed, the SEMAP could not be submitted.
We requested the worksheets used to document SEMAP. management brought in the files that they claim were used to review for SEMAP. the other thing available were twenty inspection forms that management claims were HQ’s. We were unable to determine whether the HQ’s covered both failed and passed initial inspections.
Again, no worksheets were available to document the results of the tests. in the last two audit periods, we gave examples and explanations to management of an adequate way to document SEMAP. We recommended a couple of webcasts to attend on SEMAP.
Management claims they viewed the webcasts.
(b)-We reviewed twenty-five HCV files. Nine were current year move ins. sixteen were annual re-exams. Of the nine move ins tested, we could not locate three on the waiting lists (we asked management three weeks before we reviewed the files to tab the waiting list for the tested move ins). In addition, of one of the six that we did locate on the waiting list, we could not find an explanation of why the applicants listed before (above) were not admitted.
We reviewed two move-ins for low rent, a non-major program. We located the applicants on the waiting list. however, there was no explanation why the applicants listed before (above) were not admitted.
(c)-Of the twenty -five HCV files tested, the September 2023 HAP payment did not agree to the last available 50058 filed before September for two tenants. We asked if there were possibly interim 50058s that did not make it to the file, but we did not receive any. two were immaterial differences-one being $9 per month, the other $3 per month.
(d)-Of the nine move-ins tested, we could not locate a reasonable rent survey for two.
(e)-Of the sixteen re-exams we reviewed, we could not find an EIV for the re-exam of one tenant.(f)-We were unable to agree the names of several landlords to 1099’s issued in their name or to a DBA (doing business as).
Cause
Unknown
Effect
Controls over the admittance process, calculation of HAP payments, and other facets of eligibility and occupancy are not as strong as they should be.
Recommendation to prevent future occurrences
The above inadequacies should be corrected. Suggested improved procedures and internal controls have been discussed with management in prior audits.
View of responsible official
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850
2023-004-Significantly large interfund account needs to be reduced-Allowable Costs/Principles
Criteria and specific requirement
In small and medium-sized PHAs, there is a required allocation of expenses between programs. It is often not practical to maintain separate bank accounts and pay each program’s expenses out of its individual bank account.
As a result, usually there are interfund payables and receivables between the accounts/programs. Ideally, the interfund amounts should be kept to a minimal amount, if not paid in full at the start of every month.
The danger is that the larger the interfund amount is and/or grows, the more difficult it may be to pay off the interfund payable amount. The practical effect is if this happens, one fund is paying the expenses of another fund on a permanent basis. This results in a “transfer” between the Housing Choice Voucher and Low Rent programs, which federal regulations do not allow.Condition Found
At September 30, 2023, the Low Rent Program owes the Housing Choice Voucher Program $71,428.
Context
The significant interfund balance has existed for several years. We note that it was substantially reduced in the audit year, from $165,833 to $71,428.
Cause
Apparent oversight.
Effect
The possibility exists that the fund that owes the funds might be unable to repay the balance.
Recommendation to prevent future occurrences
The interfund balance should be paid off as soon as possible.
View or Responsible Official
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850
2023-001-Inadequate Accounting and Documentation-Allowable Costs/Principles
Criteria and Specific Requirement
(a)-Travel expenses should be correctly classified.
(b)-Direct payments (ACH- no check) should be properly authorized and supported.
(c)-Credits on the Low Rent rental register should be adequately documented. In addition, the rental registers should be reviewed each month before closeout.
(d)-Federal regulations require that certain financial data required by REAC be supported and documented
(e)-Various CFPs and other grants should be properly classified and accounted for
(f)-Sufficient information should be submitted to the outside employed fee accountant to allow the latter to complete a year-end documentary checklist that all points considered by the fee accountant have been adequately addressed
Condition Found
(a)-We noted $4,334 of travel costs that were improperly classified in either Maintenance Expense-Materials or Other Administrative Expenses-Other. The above amounts were reclassified by audit adjustment to travel costs.
(b)-The adopted policy is for direct payments (ACH- without check) to be accompanied by an authorized check request. As a result of early exceptions we noted, we reviewed approximately 100% of the noted direct payments. Only a minority of the direct payments that we reviewed were accompanied by such an authorized written request. In addition, we do not know the documentation or explanation that was viewed by the authorized person, when the requests that we were able to review was signed.
Approximately $55,051 of total payments were made by direct payments. $34,334 and $20,717 were charged to the HCV Fund and the General (Low Rent) Funds, respectively. $49,974 of the total was not supported by adequate documentation. This was $31,586 and $18,388 charged to the HCV and General (Low Rent) Funds, respectively. Much of the unsupported direct payments were travel costs. The total travel costs after reclassifications noted above were $21,336. Of the total travel costs, only $2,723 was paid by check. All tested check amounts contained adequate support. $18,613 of travel costs were paid by direct payments.
(c)-We selected three credits at random on the Low Rent rental register that totaled $4,361 that was spread over three months. We requested documented explanations from management for these credits. However, we did not receive any.
In addition, we noted in our review of month- to- month Low Rent rental revenue charged, that there was a large variance that may have not been initially detected by management. The average dwelling rent charged for 10 months was $5,800. However, the rent charged for January and February 2023 were $10,855 and $1,570, respectively.
We received the accounting information without adjustment or comment on this. Management states that they subsequently found the errors. However, the January variance should have been noted by management before the February rent register was run.
(d)-The unaudited financial statements were conditionally approved by REAC. One of the conditions was that PORTs reported on the VMS was $6,009. However, the amount reported on Financial Data Scheule (FDS) Line 97350 is zero. While this difference is immaterial to the financial statements, REAC expects these numbers to agree. To date, management has been unable to reconcile these numbers.
(e)-In the current year, Accounting coded a $38,573 advance to a ROSS grant. However, the detailed ELOCCS indicates this is instead was an advance on the CFP 2020 program.
In addition, a $46,710 advance was incorrectly classified to the 2021 CFP. Instead, it should have been credited to the 2019 CFP program.
(f)-The fee accountant only partially completed their year- end unaudited checklist, that is prepared by a supervising accountant that reviews the year-end unaudited statements prepared by other members of the fee accounting firm. The fee accountant requested but did not receive the necessary information from management.
Cause
Unknown. Effect
Federal regulations were not complied with. In addition, the accounting information is not as accurate as it should be.
Recommendation to prevent future occurrences
Management should ensure that the above inadequacies are corrected. Internal controls over all of these areas should be improved.
View of Responsible Official
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850
2023-002-Inadequate Administration of Facets of Programs-Allowable Costs/Principles
Criteria and specific requirement
(a)-Both the Low Rent and Housing Choice Voucher Plans participate in the Family Self-Sufficiency (FSS) programs. Various tenants participate in the program. Various HUD-approved goals for personal improvement are established. Authority personnel help the participants set the objectives and time frames for accomplishing the goals. Authority personnel counsel the participants and track their progress. If the goals are timely met, the escrowed funds are disbursed to the participant. If the goals are not timely met, the escrowed amount is forfeited by the authority.
(b)-Funds are earned by participants who meet goals established similarly to the FSS program noted above in the Family Self Sufficiency Program. This program was established years ago from excess Admin fees of the HCV program, at a time when this was still permitted. The funds are referred to as Homeownership Set Aside funds.
(c)-As noted in Note 11, Retirement System, the authority participates in a Simplified Pension Plan (SEP). $17,722 was contributed to the Plan during the audit year. We requested a copy of the Master Plan, but we have not received it. Also, we requested a breakdown of how the $17,722 was calculated, and to which participant(s) this money had been credited to. We have not received that.
Condition Found
(a) and (b)-It appears the enrollment, progress of participants to meet the established goals, and potential earning and disbursement of FSS and Set Aside funds have been inadequately monitored for at least the last two years.(c)-Without both of these requested items noted above, we are unable to determine if the SEP contribution terms were adequately complied with.
Cause
It appears that the authority has not retained adequate personnel to oversee the FSS and Set Aside tracking. We do not know why we have not received the SEP information.
Effect
The federal regulations for FSS and Set Aside tracking has not been complied with. In addition, it is possible the terms of ERISA (Employers Retirement Income Security Act) may have not been complied with, in some respects.
Recommendation to prevent future occurrences
Personnel should be trained in the FSS and Homeownership programs. They should adequately track and administer the program. The SEP provisions should be complied with in all material respects.
View of Responsible Officials
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA #14.871, Low Rent Program CDFA#14.850
2023-003-Tenant file deficiencies and SEMAP errors noted-Eligibility and Special Tests
Criteria and Specific Requirement
(a)-SEMAP should be timely filed and properly documented
(b)-Tenants who moved in during the audit year should be found on the waiting list. In addition, the waiting lists should contain explanations of why the applicants listed before (above) the admitted tested tenant was not admitted instead of the applicant who was.
(c)-HAP payments should be the same amount of expenditure as listed on the last 50058 before the HAP payment is disbursed
(d)-Reasonable rent comparisons should be made for all Move Ins(e)-Income Enterprise Verifications (EIV) should be documented for all tenants when their annual re-examination is done
(f)-All 1099’s issued to landlords should be available for third party review.
Condition Found
(a)-SEMAP was not filed before the regulatory deadline. Since the deadline was missed, the SEMAP could not be submitted.
We requested the worksheets used to document SEMAP. management brought in the files that they claim were used to review for SEMAP. the other thing available were twenty inspection forms that management claims were HQ’s. We were unable to determine whether the HQ’s covered both failed and passed initial inspections.
Again, no worksheets were available to document the results of the tests. in the last two audit periods, we gave examples and explanations to management of an adequate way to document SEMAP. We recommended a couple of webcasts to attend on SEMAP.
Management claims they viewed the webcasts.
(b)-We reviewed twenty-five HCV files. Nine were current year move ins. sixteen were annual re-exams. Of the nine move ins tested, we could not locate three on the waiting lists (we asked management three weeks before we reviewed the files to tab the waiting list for the tested move ins). In addition, of one of the six that we did locate on the waiting list, we could not find an explanation of why the applicants listed before (above) were not admitted.
We reviewed two move-ins for low rent, a non-major program. We located the applicants on the waiting list. however, there was no explanation why the applicants listed before (above) were not admitted.
(c)-Of the twenty -five HCV files tested, the September 2023 HAP payment did not agree to the last available 50058 filed before September for two tenants. We asked if there were possibly interim 50058s that did not make it to the file, but we did not receive any. two were immaterial differences-one being $9 per month, the other $3 per month.
(d)-Of the nine move-ins tested, we could not locate a reasonable rent survey for two.
(e)-Of the sixteen re-exams we reviewed, we could not find an EIV for the re-exam of one tenant.(f)-We were unable to agree the names of several landlords to 1099’s issued in their name or to a DBA (doing business as).
Cause
Unknown
Effect
Controls over the admittance process, calculation of HAP payments, and other facets of eligibility and occupancy are not as strong as they should be.
Recommendation to prevent future occurrences
The above inadequacies should be corrected. Suggested improved procedures and internal controls have been discussed with management in prior audits.
View of responsible official
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850
2023-004-Significantly large interfund account needs to be reduced-Allowable Costs/Principles
Criteria and specific requirement
In small and medium-sized PHAs, there is a required allocation of expenses between programs. It is often not practical to maintain separate bank accounts and pay each program’s expenses out of its individual bank account.
As a result, usually there are interfund payables and receivables between the accounts/programs. Ideally, the interfund amounts should be kept to a minimal amount, if not paid in full at the start of every month.
The danger is that the larger the interfund amount is and/or grows, the more difficult it may be to pay off the interfund payable amount. The practical effect is if this happens, one fund is paying the expenses of another fund on a permanent basis. This results in a “transfer” between the Housing Choice Voucher and Low Rent programs, which federal regulations do not allow.Condition Found
At September 30, 2023, the Low Rent Program owes the Housing Choice Voucher Program $71,428.
Context
The significant interfund balance has existed for several years. We note that it was substantially reduced in the audit year, from $165,833 to $71,428.
Cause
Apparent oversight.
Effect
The possibility exists that the fund that owes the funds might be unable to repay the balance.
Recommendation to prevent future occurrences
The interfund balance should be paid off as soon as possible.
View or Responsible Official
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850
2023-001-Inadequate Accounting and Documentation-Allowable Costs/Principles
Criteria and Specific Requirement
(a)-Travel expenses should be correctly classified.
(b)-Direct payments (ACH- no check) should be properly authorized and supported.
(c)-Credits on the Low Rent rental register should be adequately documented. In addition, the rental registers should be reviewed each month before closeout.
(d)-Federal regulations require that certain financial data required by REAC be supported and documented
(e)-Various CFPs and other grants should be properly classified and accounted for
(f)-Sufficient information should be submitted to the outside employed fee accountant to allow the latter to complete a year-end documentary checklist that all points considered by the fee accountant have been adequately addressed
Condition Found
(a)-We noted $4,334 of travel costs that were improperly classified in either Maintenance Expense-Materials or Other Administrative Expenses-Other. The above amounts were reclassified by audit adjustment to travel costs.
(b)-The adopted policy is for direct payments (ACH- without check) to be accompanied by an authorized check request. As a result of early exceptions we noted, we reviewed approximately 100% of the noted direct payments. Only a minority of the direct payments that we reviewed were accompanied by such an authorized written request. In addition, we do not know the documentation or explanation that was viewed by the authorized person, when the requests that we were able to review was signed.
Approximately $55,051 of total payments were made by direct payments. $34,334 and $20,717 were charged to the HCV Fund and the General (Low Rent) Funds, respectively. $49,974 of the total was not supported by adequate documentation. This was $31,586 and $18,388 charged to the HCV and General (Low Rent) Funds, respectively. Much of the unsupported direct payments were travel costs. The total travel costs after reclassifications noted above were $21,336. Of the total travel costs, only $2,723 was paid by check. All tested check amounts contained adequate support. $18,613 of travel costs were paid by direct payments.
(c)-We selected three credits at random on the Low Rent rental register that totaled $4,361 that was spread over three months. We requested documented explanations from management for these credits. However, we did not receive any.
In addition, we noted in our review of month- to- month Low Rent rental revenue charged, that there was a large variance that may have not been initially detected by management. The average dwelling rent charged for 10 months was $5,800. However, the rent charged for January and February 2023 were $10,855 and $1,570, respectively.
We received the accounting information without adjustment or comment on this. Management states that they subsequently found the errors. However, the January variance should have been noted by management before the February rent register was run.
(d)-The unaudited financial statements were conditionally approved by REAC. One of the conditions was that PORTs reported on the VMS was $6,009. However, the amount reported on Financial Data Scheule (FDS) Line 97350 is zero. While this difference is immaterial to the financial statements, REAC expects these numbers to agree. To date, management has been unable to reconcile these numbers.
(e)-In the current year, Accounting coded a $38,573 advance to a ROSS grant. However, the detailed ELOCCS indicates this is instead was an advance on the CFP 2020 program.
In addition, a $46,710 advance was incorrectly classified to the 2021 CFP. Instead, it should have been credited to the 2019 CFP program.
(f)-The fee accountant only partially completed their year- end unaudited checklist, that is prepared by a supervising accountant that reviews the year-end unaudited statements prepared by other members of the fee accounting firm. The fee accountant requested but did not receive the necessary information from management.
Cause
Unknown. Effect
Federal regulations were not complied with. In addition, the accounting information is not as accurate as it should be.
Recommendation to prevent future occurrences
Management should ensure that the above inadequacies are corrected. Internal controls over all of these areas should be improved.
View of Responsible Official
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850
2023-002-Inadequate Administration of Facets of Programs-Allowable Costs/Principles
Criteria and specific requirement
(a)-Both the Low Rent and Housing Choice Voucher Plans participate in the Family Self-Sufficiency (FSS) programs. Various tenants participate in the program. Various HUD-approved goals for personal improvement are established. Authority personnel help the participants set the objectives and time frames for accomplishing the goals. Authority personnel counsel the participants and track their progress. If the goals are timely met, the escrowed funds are disbursed to the participant. If the goals are not timely met, the escrowed amount is forfeited by the authority.
(b)-Funds are earned by participants who meet goals established similarly to the FSS program noted above in the Family Self Sufficiency Program. This program was established years ago from excess Admin fees of the HCV program, at a time when this was still permitted. The funds are referred to as Homeownership Set Aside funds.
(c)-As noted in Note 11, Retirement System, the authority participates in a Simplified Pension Plan (SEP). $17,722 was contributed to the Plan during the audit year. We requested a copy of the Master Plan, but we have not received it. Also, we requested a breakdown of how the $17,722 was calculated, and to which participant(s) this money had been credited to. We have not received that.
Condition Found
(a) and (b)-It appears the enrollment, progress of participants to meet the established goals, and potential earning and disbursement of FSS and Set Aside funds have been inadequately monitored for at least the last two years.(c)-Without both of these requested items noted above, we are unable to determine if the SEP contribution terms were adequately complied with.
Cause
It appears that the authority has not retained adequate personnel to oversee the FSS and Set Aside tracking. We do not know why we have not received the SEP information.
Effect
The federal regulations for FSS and Set Aside tracking has not been complied with. In addition, it is possible the terms of ERISA (Employers Retirement Income Security Act) may have not been complied with, in some respects.
Recommendation to prevent future occurrences
Personnel should be trained in the FSS and Homeownership programs. They should adequately track and administer the program. The SEP provisions should be complied with in all material respects.
View of Responsible Officials
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA #14.871, Low Rent Program CDFA#14.850
2023-003-Tenant file deficiencies and SEMAP errors noted-Eligibility and Special Tests
Criteria and Specific Requirement
(a)-SEMAP should be timely filed and properly documented
(b)-Tenants who moved in during the audit year should be found on the waiting list. In addition, the waiting lists should contain explanations of why the applicants listed before (above) the admitted tested tenant was not admitted instead of the applicant who was.
(c)-HAP payments should be the same amount of expenditure as listed on the last 50058 before the HAP payment is disbursed
(d)-Reasonable rent comparisons should be made for all Move Ins(e)-Income Enterprise Verifications (EIV) should be documented for all tenants when their annual re-examination is done
(f)-All 1099’s issued to landlords should be available for third party review.
Condition Found
(a)-SEMAP was not filed before the regulatory deadline. Since the deadline was missed, the SEMAP could not be submitted.
We requested the worksheets used to document SEMAP. management brought in the files that they claim were used to review for SEMAP. the other thing available were twenty inspection forms that management claims were HQ’s. We were unable to determine whether the HQ’s covered both failed and passed initial inspections.
Again, no worksheets were available to document the results of the tests. in the last two audit periods, we gave examples and explanations to management of an adequate way to document SEMAP. We recommended a couple of webcasts to attend on SEMAP.
Management claims they viewed the webcasts.
(b)-We reviewed twenty-five HCV files. Nine were current year move ins. sixteen were annual re-exams. Of the nine move ins tested, we could not locate three on the waiting lists (we asked management three weeks before we reviewed the files to tab the waiting list for the tested move ins). In addition, of one of the six that we did locate on the waiting list, we could not find an explanation of why the applicants listed before (above) were not admitted.
We reviewed two move-ins for low rent, a non-major program. We located the applicants on the waiting list. however, there was no explanation why the applicants listed before (above) were not admitted.
(c)-Of the twenty -five HCV files tested, the September 2023 HAP payment did not agree to the last available 50058 filed before September for two tenants. We asked if there were possibly interim 50058s that did not make it to the file, but we did not receive any. two were immaterial differences-one being $9 per month, the other $3 per month.
(d)-Of the nine move-ins tested, we could not locate a reasonable rent survey for two.
(e)-Of the sixteen re-exams we reviewed, we could not find an EIV for the re-exam of one tenant.(f)-We were unable to agree the names of several landlords to 1099’s issued in their name or to a DBA (doing business as).
Cause
Unknown
Effect
Controls over the admittance process, calculation of HAP payments, and other facets of eligibility and occupancy are not as strong as they should be.
Recommendation to prevent future occurrences
The above inadequacies should be corrected. Suggested improved procedures and internal controls have been discussed with management in prior audits.
View of responsible official
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850
2023-004-Significantly large interfund account needs to be reduced-Allowable Costs/Principles
Criteria and specific requirement
In small and medium-sized PHAs, there is a required allocation of expenses between programs. It is often not practical to maintain separate bank accounts and pay each program’s expenses out of its individual bank account.
As a result, usually there are interfund payables and receivables between the accounts/programs. Ideally, the interfund amounts should be kept to a minimal amount, if not paid in full at the start of every month.
The danger is that the larger the interfund amount is and/or grows, the more difficult it may be to pay off the interfund payable amount. The practical effect is if this happens, one fund is paying the expenses of another fund on a permanent basis. This results in a “transfer” between the Housing Choice Voucher and Low Rent programs, which federal regulations do not allow.Condition Found
At September 30, 2023, the Low Rent Program owes the Housing Choice Voucher Program $71,428.
Context
The significant interfund balance has existed for several years. We note that it was substantially reduced in the audit year, from $165,833 to $71,428.
Cause
Apparent oversight.
Effect
The possibility exists that the fund that owes the funds might be unable to repay the balance.
Recommendation to prevent future occurrences
The interfund balance should be paid off as soon as possible.
View or Responsible Official
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850
2023-001-Inadequate Accounting and Documentation-Allowable Costs/Principles
Criteria and Specific Requirement
(a)-Travel expenses should be correctly classified.
(b)-Direct payments (ACH- no check) should be properly authorized and supported.
(c)-Credits on the Low Rent rental register should be adequately documented. In addition, the rental registers should be reviewed each month before closeout.
(d)-Federal regulations require that certain financial data required by REAC be supported and documented
(e)-Various CFPs and other grants should be properly classified and accounted for
(f)-Sufficient information should be submitted to the outside employed fee accountant to allow the latter to complete a year-end documentary checklist that all points considered by the fee accountant have been adequately addressed
Condition Found
(a)-We noted $4,334 of travel costs that were improperly classified in either Maintenance Expense-Materials or Other Administrative Expenses-Other. The above amounts were reclassified by audit adjustment to travel costs.
(b)-The adopted policy is for direct payments (ACH- without check) to be accompanied by an authorized check request. As a result of early exceptions we noted, we reviewed approximately 100% of the noted direct payments. Only a minority of the direct payments that we reviewed were accompanied by such an authorized written request. In addition, we do not know the documentation or explanation that was viewed by the authorized person, when the requests that we were able to review was signed.
Approximately $55,051 of total payments were made by direct payments. $34,334 and $20,717 were charged to the HCV Fund and the General (Low Rent) Funds, respectively. $49,974 of the total was not supported by adequate documentation. This was $31,586 and $18,388 charged to the HCV and General (Low Rent) Funds, respectively. Much of the unsupported direct payments were travel costs. The total travel costs after reclassifications noted above were $21,336. Of the total travel costs, only $2,723 was paid by check. All tested check amounts contained adequate support. $18,613 of travel costs were paid by direct payments.
(c)-We selected three credits at random on the Low Rent rental register that totaled $4,361 that was spread over three months. We requested documented explanations from management for these credits. However, we did not receive any.
In addition, we noted in our review of month- to- month Low Rent rental revenue charged, that there was a large variance that may have not been initially detected by management. The average dwelling rent charged for 10 months was $5,800. However, the rent charged for January and February 2023 were $10,855 and $1,570, respectively.
We received the accounting information without adjustment or comment on this. Management states that they subsequently found the errors. However, the January variance should have been noted by management before the February rent register was run.
(d)-The unaudited financial statements were conditionally approved by REAC. One of the conditions was that PORTs reported on the VMS was $6,009. However, the amount reported on Financial Data Scheule (FDS) Line 97350 is zero. While this difference is immaterial to the financial statements, REAC expects these numbers to agree. To date, management has been unable to reconcile these numbers.
(e)-In the current year, Accounting coded a $38,573 advance to a ROSS grant. However, the detailed ELOCCS indicates this is instead was an advance on the CFP 2020 program.
In addition, a $46,710 advance was incorrectly classified to the 2021 CFP. Instead, it should have been credited to the 2019 CFP program.
(f)-The fee accountant only partially completed their year- end unaudited checklist, that is prepared by a supervising accountant that reviews the year-end unaudited statements prepared by other members of the fee accounting firm. The fee accountant requested but did not receive the necessary information from management.
Cause
Unknown. Effect
Federal regulations were not complied with. In addition, the accounting information is not as accurate as it should be.
Recommendation to prevent future occurrences
Management should ensure that the above inadequacies are corrected. Internal controls over all of these areas should be improved.
View of Responsible Official
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850
2023-002-Inadequate Administration of Facets of Programs-Allowable Costs/Principles
Criteria and specific requirement
(a)-Both the Low Rent and Housing Choice Voucher Plans participate in the Family Self-Sufficiency (FSS) programs. Various tenants participate in the program. Various HUD-approved goals for personal improvement are established. Authority personnel help the participants set the objectives and time frames for accomplishing the goals. Authority personnel counsel the participants and track their progress. If the goals are timely met, the escrowed funds are disbursed to the participant. If the goals are not timely met, the escrowed amount is forfeited by the authority.
(b)-Funds are earned by participants who meet goals established similarly to the FSS program noted above in the Family Self Sufficiency Program. This program was established years ago from excess Admin fees of the HCV program, at a time when this was still permitted. The funds are referred to as Homeownership Set Aside funds.
(c)-As noted in Note 11, Retirement System, the authority participates in a Simplified Pension Plan (SEP). $17,722 was contributed to the Plan during the audit year. We requested a copy of the Master Plan, but we have not received it. Also, we requested a breakdown of how the $17,722 was calculated, and to which participant(s) this money had been credited to. We have not received that.
Condition Found
(a) and (b)-It appears the enrollment, progress of participants to meet the established goals, and potential earning and disbursement of FSS and Set Aside funds have been inadequately monitored for at least the last two years.(c)-Without both of these requested items noted above, we are unable to determine if the SEP contribution terms were adequately complied with.
Cause
It appears that the authority has not retained adequate personnel to oversee the FSS and Set Aside tracking. We do not know why we have not received the SEP information.
Effect
The federal regulations for FSS and Set Aside tracking has not been complied with. In addition, it is possible the terms of ERISA (Employers Retirement Income Security Act) may have not been complied with, in some respects.
Recommendation to prevent future occurrences
Personnel should be trained in the FSS and Homeownership programs. They should adequately track and administer the program. The SEP provisions should be complied with in all material respects.
View of Responsible Officials
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA #14.871, Low Rent Program CDFA#14.850
2023-003-Tenant file deficiencies and SEMAP errors noted-Eligibility and Special Tests
Criteria and Specific Requirement
(a)-SEMAP should be timely filed and properly documented
(b)-Tenants who moved in during the audit year should be found on the waiting list. In addition, the waiting lists should contain explanations of why the applicants listed before (above) the admitted tested tenant was not admitted instead of the applicant who was.
(c)-HAP payments should be the same amount of expenditure as listed on the last 50058 before the HAP payment is disbursed
(d)-Reasonable rent comparisons should be made for all Move Ins(e)-Income Enterprise Verifications (EIV) should be documented for all tenants when their annual re-examination is done
(f)-All 1099’s issued to landlords should be available for third party review.
Condition Found
(a)-SEMAP was not filed before the regulatory deadline. Since the deadline was missed, the SEMAP could not be submitted.
We requested the worksheets used to document SEMAP. management brought in the files that they claim were used to review for SEMAP. the other thing available were twenty inspection forms that management claims were HQ’s. We were unable to determine whether the HQ’s covered both failed and passed initial inspections.
Again, no worksheets were available to document the results of the tests. in the last two audit periods, we gave examples and explanations to management of an adequate way to document SEMAP. We recommended a couple of webcasts to attend on SEMAP.
Management claims they viewed the webcasts.
(b)-We reviewed twenty-five HCV files. Nine were current year move ins. sixteen were annual re-exams. Of the nine move ins tested, we could not locate three on the waiting lists (we asked management three weeks before we reviewed the files to tab the waiting list for the tested move ins). In addition, of one of the six that we did locate on the waiting list, we could not find an explanation of why the applicants listed before (above) were not admitted.
We reviewed two move-ins for low rent, a non-major program. We located the applicants on the waiting list. however, there was no explanation why the applicants listed before (above) were not admitted.
(c)-Of the twenty -five HCV files tested, the September 2023 HAP payment did not agree to the last available 50058 filed before September for two tenants. We asked if there were possibly interim 50058s that did not make it to the file, but we did not receive any. two were immaterial differences-one being $9 per month, the other $3 per month.
(d)-Of the nine move-ins tested, we could not locate a reasonable rent survey for two.
(e)-Of the sixteen re-exams we reviewed, we could not find an EIV for the re-exam of one tenant.(f)-We were unable to agree the names of several landlords to 1099’s issued in their name or to a DBA (doing business as).
Cause
Unknown
Effect
Controls over the admittance process, calculation of HAP payments, and other facets of eligibility and occupancy are not as strong as they should be.
Recommendation to prevent future occurrences
The above inadequacies should be corrected. Suggested improved procedures and internal controls have been discussed with management in prior audits.
View of responsible official
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.
Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850
2023-004-Significantly large interfund account needs to be reduced-Allowable Costs/Principles
Criteria and specific requirement
In small and medium-sized PHAs, there is a required allocation of expenses between programs. It is often not practical to maintain separate bank accounts and pay each program’s expenses out of its individual bank account.
As a result, usually there are interfund payables and receivables between the accounts/programs. Ideally, the interfund amounts should be kept to a minimal amount, if not paid in full at the start of every month.
The danger is that the larger the interfund amount is and/or grows, the more difficult it may be to pay off the interfund payable amount. The practical effect is if this happens, one fund is paying the expenses of another fund on a permanent basis. This results in a “transfer” between the Housing Choice Voucher and Low Rent programs, which federal regulations do not allow.Condition Found
At September 30, 2023, the Low Rent Program owes the Housing Choice Voucher Program $71,428.
Context
The significant interfund balance has existed for several years. We note that it was substantially reduced in the audit year, from $165,833 to $71,428.
Cause
Apparent oversight.
Effect
The possibility exists that the fund that owes the funds might be unable to repay the balance.
Recommendation to prevent future occurrences
The interfund balance should be paid off as soon as possible.
View or Responsible Official
We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.