Audit 318568

Federal Agency: U.S. Department of the Treasury Federal Program Name: Homeowner’s Assistance Fund Assistance Listing Number: 21.026 Federal Award Identification Number and Year: HAF0019 – 2023 Pass-Through Agency: State of New Jersey Pass-Through Number(s): 21-6000928 Award Period: January 1, 2023 – December 31, 2023 Type of Finding: • Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: The HAF Guidance documents the full eligibility considerations for HAF participants to extend financial assistance to vulnerable populations without imposing undue documentation burdens. HAF participants must require all applications for assistance to include an attestation from the applicant homeowner that all information included is correct and complete. In addition, HAF participants are expected to have policies and procedures to determine homeowner eligibility in the following criteria: Financial Hardship: HAF participants may rely on homeowners' attestations that they experienced financial hardship after January 21, 2020 (including a hardship that began before January 21, 2020, but continued after that date). The attestation must describe the nature of the financial hardship (for example, job loss, reduction in income, or increased costs due to healthcare or the need to care for a family member). Criteria or specific requirement (Continued): Income: HAF participants may take one of two approaches to income verification: (1) the homeowner may provide a written attestation as to household income together with supporting documentation such as paystubs, W2s or other wage statements, IRS Form 1099s, tax filings, depository institution statements demonstrating regular income, or an attestation from an employer; or (2) the homeowner may provide a written attestation as to household income and the HAF participant may use a reasonable fact-specific proxy for household income, such as reliance on data regarding average incomes in the household’s geographic area. To be eligible for HAF assistance, the homeowner must have income equal to or less than 150 percent of the area median income or 100 percent of the median income for the United States, whichever is greater. Condition: During testing of 40 eligibility files, the Agency did not have adequate internal controls in place to ensure all documents were obtained as part of the Agency’s review of applications in determining the eligibility of program participants. Questioned costs: None Context: 40 Files were selected from a population of over 250 participants. Exceptions noted in 2 out of 40 instances. - 2 cases in which the IRS form 4506-C was not provided as required by the Agency’s policy. Cause: Controls were not implemented to ensure all documents were obtained and reviewed during the application and acceptance process of a participant’s eligibility to obtain homeowner’s assistance funding. Effect: Potentially participants that are not eligible could receive federal monies. This could impact the Agency receiving monies for similar types of programs in the future. Repeat Finding: Yes, repeat finding of finding number 2022-001. Recommendation: The Agency should evaluate the steps they take to ensure that any required documentation not gathered from the program participant is followed-up on and obtained, prior to finalizing an application and providing housing assistance. Any changes in this methodology should be documented in the program policies and procedures and communicated to all employees who engage in the application process. Views of responsible officials: There is no disagreement with the audit finding.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Section 8 Project-Based Cluster Assistance Listing Number: 14.182 Federal Award Identification Number and Year: Multiple, 2023 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Period: January 1, 2023 – December 31, 2023 Type of Finding: • Significant Deficiency in Internal Control Over Compliance, Other Matters Criteria or specific requirement: The owner shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in an interest-bearing account. All earnings including interest on the reserve must be added to the reserve. All disbursements from the reserve must be as approved or directed by HUD or the state agency for 24 CFR Part 883 projects, as applicable. An amount as required by HUD or the state agency for 24 CFR Part 883 projects, as applicable, shall be deposited monthly in the reserve fund in accordance with the Regulatory Agreement or HAP contract (24 CFR sections 880.601, 880.602, 881.601 and 883.701. Condition: During testing, the Agency did not have adequate internal controls designed to ensure that the replacement reserve requirements for each project were reviewed and adhered to. Questioned costs: None Context: 25 files were selected from a population of over 250 developments for which the Agency is responsible for the replacements reserve deposits and withdrawals. Exceptions noted in 6 out of 25 instances. - 2 cases in which the project deposited less than the required amount - 1 case in which the 2023 budget was provided by the project but was never reviewed by the Agency and the escrow memo was not provided. - 3 cases in which the 2023 budget was never received by the Agency and the escrow memo was not provided. Cause: Controls were not implemented to ensure that the replacement reserve requirements for each project was reviewed and adhered to. Effect: The Agency is not in compliance with replacement reserve requirements. Recommendation: We recommend that the Agency implements controls to ensure that they are receiving and reviewing the budget for each project. We also recommend that the authority implements controls to ensure that the projects are making their required monthly deposits.

Federal Agency: U.S. Department of the Treasury Federal Program Name: Homeowner’s Assistance Fund Assistance Listing Number: 21.026 Federal Award Identification Number and Year: HAF0019 – 2023 Pass-Through Agency: State of New Jersey Pass-Through Number(s): 21-6000928 Award Period: January 1, 2023 – December 31, 2023 Type of Finding: • Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: The HAF Guidance documents the full eligibility considerations for HAF participants to extend financial assistance to vulnerable populations without imposing undue documentation burdens. HAF participants must require all applications for assistance to include an attestation from the applicant homeowner that all information included is correct and complete. In addition, HAF participants are expected to have policies and procedures to determine homeowner eligibility in the following criteria: Financial Hardship: HAF participants may rely on homeowners' attestations that they experienced financial hardship after January 21, 2020 (including a hardship that began before January 21, 2020, but continued after that date). The attestation must describe the nature of the financial hardship (for example, job loss, reduction in income, or increased costs due to healthcare or the need to care for a family member). Criteria or specific requirement (Continued): Income: HAF participants may take one of two approaches to income verification: (1) the homeowner may provide a written attestation as to household income together with supporting documentation such as paystubs, W2s or other wage statements, IRS Form 1099s, tax filings, depository institution statements demonstrating regular income, or an attestation from an employer; or (2) the homeowner may provide a written attestation as to household income and the HAF participant may use a reasonable fact-specific proxy for household income, such as reliance on data regarding average incomes in the household’s geographic area. To be eligible for HAF assistance, the homeowner must have income equal to or less than 150 percent of the area median income or 100 percent of the median income for the United States, whichever is greater. Condition: During testing of 40 eligibility files, the Agency did not have adequate internal controls in place to ensure all documents were obtained as part of the Agency’s review of applications in determining the eligibility of program participants. Questioned costs: None Context: 40 Files were selected from a population of over 250 participants. Exceptions noted in 2 out of 40 instances. - 2 cases in which the IRS form 4506-C was not provided as required by the Agency’s policy. Cause: Controls were not implemented to ensure all documents were obtained and reviewed during the application and acceptance process of a participant’s eligibility to obtain homeowner’s assistance funding. Effect: Potentially participants that are not eligible could receive federal monies. This could impact the Agency receiving monies for similar types of programs in the future. Repeat Finding: Yes, repeat finding of finding number 2022-001. Recommendation: The Agency should evaluate the steps they take to ensure that any required documentation not gathered from the program participant is followed-up on and obtained, prior to finalizing an application and providing housing assistance. Any changes in this methodology should be documented in the program policies and procedures and communicated to all employees who engage in the application process. Views of responsible officials: There is no disagreement with the audit finding.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Section 8 Project-Based Cluster Assistance Listing Number: 14.182 Federal Award Identification Number and Year: Multiple, 2023 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Period: January 1, 2023 – December 31, 2023 Type of Finding: • Significant Deficiency in Internal Control Over Compliance, Other Matters Criteria or specific requirement: The owner shall establish and maintain a replacement reserve to aid in funding extraordinary maintenance and repair and replacement of capital items. The replacement reserve funds must be deposited in an interest-bearing account. All earnings including interest on the reserve must be added to the reserve. All disbursements from the reserve must be as approved or directed by HUD or the state agency for 24 CFR Part 883 projects, as applicable. An amount as required by HUD or the state agency for 24 CFR Part 883 projects, as applicable, shall be deposited monthly in the reserve fund in accordance with the Regulatory Agreement or HAP contract (24 CFR sections 880.601, 880.602, 881.601 and 883.701. Condition: During testing, the Agency did not have adequate internal controls designed to ensure that the replacement reserve requirements for each project were reviewed and adhered to. Questioned costs: None Context: 25 files were selected from a population of over 250 developments for which the Agency is responsible for the replacements reserve deposits and withdrawals. Exceptions noted in 6 out of 25 instances. - 2 cases in which the project deposited less than the required amount - 1 case in which the 2023 budget was provided by the project but was never reviewed by the Agency and the escrow memo was not provided. - 3 cases in which the 2023 budget was never received by the Agency and the escrow memo was not provided. Cause: Controls were not implemented to ensure that the replacement reserve requirements for each project was reviewed and adhered to. Effect: The Agency is not in compliance with replacement reserve requirements. Recommendation: We recommend that the Agency implements controls to ensure that they are receiving and reviewing the budget for each project. We also recommend that the authority implements controls to ensure that the projects are making their required monthly deposits.