Finding 2024-002: Internal Control Structure
Housing Choice Voucher, 14.871
Material Weakness – Eligibility, Reporting and Special Tests and Provisions
Repeat Finding 2023-002
Criteria: The Authority is responsible for establishing an effective internal control process to ensure the Authority complies with the requirements governing the Housing Choice Voucher program.
Condition: The Authority has limited employees which makes it difficult for the Authority to have controls beyond the Executive Director's knowledge. As a result, we noted the following deficiencies related to the internal control components which are considered a material weakness:
• Control Activities — The Authority only had the one staff so the Authority has no controls over compliance beyond the Executive Director's knowledge.
• Information and Communication — Communication involves providing an understanding of individual roles and responsibilities pertaining to internal control over financial reporting The Authority had not formally documented the procedures as a reference point for employees to perform their duties. Further, internal control procedures should be documented so that the controls in place can be monitored.
Cause: The Authority has limited resources and one staff.
Effect or Potential Effect: The control deficiencies are deficiencies that result in more than a reasonable possibility that material noncompliance with program requirements could occur and not be prevented or detected
Recommendation: As noted above, the Authority has limited resources and additional controls are not financially feasible in the hiring of additional staff. In addition, the Board of Commissioners is considered a governing Board and the Board performing management or day-to-day activities is not recommended based on our previous experience and is not intended to be a solution to this situation. The Authority is a small entity and the lack of segregation of duties is common among entities with minimal employees and should be recognized as such. However, it is not our intent to establish internal controls as the Authority's Board should make the final determination in the cost versus benefit.
View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding but can not reasonably adopt internal control procedures to correct the material weakness.
Finding 2024-003: HUD Depository Agreement
Housing Choice Voucher Program – 14.871
Material Weakness/Noncompliance – Special Tests and Provisions
Repeat Finding 2023-003
Criteria: The Authority is required to enter into depository agreements with its financial institutions in the form required by HUD. The agreements serve as safeguards for federal funds and provide third-party rights to HUD.
Condition: In the prior years, the Authority opened up new bank accounts and did not obtain the required depository agreement. This was reported as a finding in the prior year. The Authority’s current bank has indicated it will not sign the depository agreement and the Authority did not move the funds to a bank that would.
Cause: The Authority did not take appropriate action to correct the prior year finding.
Effect or Potential Effect: The Authority was in noncompliance with HUD’s requirement to have proper depository agreements.
Recommendation: The Authority must move its funds to a bank that will sign the HUD depository agreement.
View of the Responsible Officials of the Auditee: The auditee’s management agrees with the finding.
Finding 2024-004: HQS Quality Control Inspections
Housing Choice Voucher, 14.871
Material Weakness/Noncompliance – Special Tests and Provisions
Repeat Finding 2023-004
Criteria: 24 CFR §982.405 states the PHA must conduct supervisory qualify control HQS inspections.
Condition: The Authority did not conduct and document any quality control inspections during the year.
Cause: The Executive Director was new and was not aware of how the quality control inspections were to be done.
Effect or Potential Effect: The Authority did not comply with the requirements of 24 CFR §982.405.
Recommendation: The Authority should review the requirements of 24 CFR §982.405 and establish a system of where HQS inspections have a quality control sampling during each fiscal year.
View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.
Finding 2024-005: Utility Allowances
Housing Choice Voucher, 14.871
Material Weakness/Noncompliance – Special Tests and Provisions
Repeat Finding 2023-005
Criteria: The Authority must maintain an up-to-date utility allowance schedule. The Authority must review utility rate data for each utility category each year and must adjust its utility allowance schedule if there has been a rate change of 10 percent or more for a utility category or fuel type since the last time the utility allowance schedule was revised (24 CFR section 982.517).
Condition: The Authority had not updated utility rates since the April 1, 2021 effective date schedules.
Cause: It was a finding in the prior year that the Authority did not update the utility allowances. The Authority contacted a company to perform the analysis but the Authority felt it was too expensive and then failed to calculate the rates itself.
Effect or Potential Effect: The Authority did not comply with the requirements of 24 CFR §982.405.
Recommendation: The Authority should review the requirements of 24 CFR §982.405 and establish a system of where the utility allowance is reviewed and documented during each fiscal year.
View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.
Finding 2024-002: Internal Control Structure
Housing Choice Voucher, 14.871
Material Weakness – Eligibility, Reporting and Special Tests and Provisions
Repeat Finding 2023-002
Criteria: The Authority is responsible for establishing an effective internal control process to ensure the Authority complies with the requirements governing the Housing Choice Voucher program.
Condition: The Authority has limited employees which makes it difficult for the Authority to have controls beyond the Executive Director's knowledge. As a result, we noted the following deficiencies related to the internal control components which are considered a material weakness:
• Control Activities — The Authority only had the one staff so the Authority has no controls over compliance beyond the Executive Director's knowledge.
• Information and Communication — Communication involves providing an understanding of individual roles and responsibilities pertaining to internal control over financial reporting The Authority had not formally documented the procedures as a reference point for employees to perform their duties. Further, internal control procedures should be documented so that the controls in place can be monitored.
Cause: The Authority has limited resources and one staff.
Effect or Potential Effect: The control deficiencies are deficiencies that result in more than a reasonable possibility that material noncompliance with program requirements could occur and not be prevented or detected
Recommendation: As noted above, the Authority has limited resources and additional controls are not financially feasible in the hiring of additional staff. In addition, the Board of Commissioners is considered a governing Board and the Board performing management or day-to-day activities is not recommended based on our previous experience and is not intended to be a solution to this situation. The Authority is a small entity and the lack of segregation of duties is common among entities with minimal employees and should be recognized as such. However, it is not our intent to establish internal controls as the Authority's Board should make the final determination in the cost versus benefit.
View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding but can not reasonably adopt internal control procedures to correct the material weakness.
Finding 2024-003: HUD Depository Agreement
Housing Choice Voucher Program – 14.871
Material Weakness/Noncompliance – Special Tests and Provisions
Repeat Finding 2023-003
Criteria: The Authority is required to enter into depository agreements with its financial institutions in the form required by HUD. The agreements serve as safeguards for federal funds and provide third-party rights to HUD.
Condition: In the prior years, the Authority opened up new bank accounts and did not obtain the required depository agreement. This was reported as a finding in the prior year. The Authority’s current bank has indicated it will not sign the depository agreement and the Authority did not move the funds to a bank that would.
Cause: The Authority did not take appropriate action to correct the prior year finding.
Effect or Potential Effect: The Authority was in noncompliance with HUD’s requirement to have proper depository agreements.
Recommendation: The Authority must move its funds to a bank that will sign the HUD depository agreement.
View of the Responsible Officials of the Auditee: The auditee’s management agrees with the finding.
Finding 2024-004: HQS Quality Control Inspections
Housing Choice Voucher, 14.871
Material Weakness/Noncompliance – Special Tests and Provisions
Repeat Finding 2023-004
Criteria: 24 CFR §982.405 states the PHA must conduct supervisory qualify control HQS inspections.
Condition: The Authority did not conduct and document any quality control inspections during the year.
Cause: The Executive Director was new and was not aware of how the quality control inspections were to be done.
Effect or Potential Effect: The Authority did not comply with the requirements of 24 CFR §982.405.
Recommendation: The Authority should review the requirements of 24 CFR §982.405 and establish a system of where HQS inspections have a quality control sampling during each fiscal year.
View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.
Finding 2024-005: Utility Allowances
Housing Choice Voucher, 14.871
Material Weakness/Noncompliance – Special Tests and Provisions
Repeat Finding 2023-005
Criteria: The Authority must maintain an up-to-date utility allowance schedule. The Authority must review utility rate data for each utility category each year and must adjust its utility allowance schedule if there has been a rate change of 10 percent or more for a utility category or fuel type since the last time the utility allowance schedule was revised (24 CFR section 982.517).
Condition: The Authority had not updated utility rates since the April 1, 2021 effective date schedules.
Cause: It was a finding in the prior year that the Authority did not update the utility allowances. The Authority contacted a company to perform the analysis but the Authority felt it was too expensive and then failed to calculate the rates itself.
Effect or Potential Effect: The Authority did not comply with the requirements of 24 CFR §982.405.
Recommendation: The Authority should review the requirements of 24 CFR §982.405 and establish a system of where the utility allowance is reviewed and documented during each fiscal year.
View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.