Finding 2024-002: Internal Control Structure
Capital Funds – 14.872
Material Weakness – Activities Allowed and Unallowed, Cash Management, Period of Performance and Special Tests and Provisions
Criteria: The Authority is responsible for establishing an effective internal control process to ensure the Authority complies with the requirements governing the Capital Funds 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 that handles the Capital Fund program 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.
We further noted the Authority does not have a system to track cumulative obligations to support the total obligations reported in the ELOCCS system.
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. We do however recommend the Authority establish a system to support the obligations figure it reports in ELOCCS.
View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.
Finding 2024-003: Prevailing Wage Rates
Capital Funds – 14.872
Material Weakness/Noncompliance – Special Tests and Provisions
Criteria: Projects funded with Capital Funds that are developed and/or modernized in accordance with 24 CFR Part 905, Subpart F, including projects that contain only public housing units and mixed-finance projects are subject to the Wage Rate Requirements (42 USC 1437j(a) and (b); 24 CFR section 905.308).
Condition: They Authority had Capital Fund grant expenditures during the fiscal year related to four different contractors. For two of those, the Authority did not require prevailing wage rates and therefore did not monitor for them. The other two had the clauses in the contract but the Authority was unable to provide any documentation to support the clause was monitored.
Cause: The Authority did not have procedures in place to determine when prevailing wages rates were required and further did not monitor to ensure they were complied with when they did require them.
Effect or Potential Effect: The Authority did not comply with the prevailing wage rate requirements.
Recommendation: The Authority should review the prevailing wage rate requirements so it can determine when they apply for future projects. The Authority should establish a documented monitoring system to show it complied with the prevailing wage rate requirements.
View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.
Finding 2024-004: Environmental Review
Capital Funds – 14.872
Material Weakness/Noncompliance – Special Tests and Provisions
Criteria: An environmental review must be completed for any project or activities before a PHA may acquire, rehabilitate, convert, lease, repair, or construct property, or commit HUD or local funds at an assisted or to-be-assisted site. Environmental review procedures for PHAs are given in PIH Notice 2016-22 HA, “Environmental Review Requirements for Public Housing Agencies.” The environmental reviews are not tied to specific grants but apply to all the operating and capital activities of the PHA for a five-year period. The Notice cites the governing regulations at 24 CFR parts 50 and 58 and describes the methods of review and types of determinations. All of these methods and types culminate in a final approval document signed by a HUD Approving Official. To be in compliance a PHA must have such an approval document with an approval date that is not over five years old.
Condition: The last environmental review the Authority was able to provide was done in 2015 and was beyond the requirement of having an environmental review that is not more than five years old.
Cause: The Authority did not have a system in place to ensure it had a current environmental review.
Effect or Potential Effect: The Authority did not comply with the environmental review requirements.
Recommendation: The Authority should establish a system to be proactive in ensuring it has a current environmental study covering future projects funded by capital fund grants.
View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.
Finding 2024-002: Internal Control Structure
Capital Funds – 14.872
Material Weakness – Activities Allowed and Unallowed, Cash Management, Period of Performance and Special Tests and Provisions
Criteria: The Authority is responsible for establishing an effective internal control process to ensure the Authority complies with the requirements governing the Capital Funds 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 that handles the Capital Fund program 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.
We further noted the Authority does not have a system to track cumulative obligations to support the total obligations reported in the ELOCCS system.
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. We do however recommend the Authority establish a system to support the obligations figure it reports in ELOCCS.
View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.
Finding 2024-003: Prevailing Wage Rates
Capital Funds – 14.872
Material Weakness/Noncompliance – Special Tests and Provisions
Criteria: Projects funded with Capital Funds that are developed and/or modernized in accordance with 24 CFR Part 905, Subpart F, including projects that contain only public housing units and mixed-finance projects are subject to the Wage Rate Requirements (42 USC 1437j(a) and (b); 24 CFR section 905.308).
Condition: They Authority had Capital Fund grant expenditures during the fiscal year related to four different contractors. For two of those, the Authority did not require prevailing wage rates and therefore did not monitor for them. The other two had the clauses in the contract but the Authority was unable to provide any documentation to support the clause was monitored.
Cause: The Authority did not have procedures in place to determine when prevailing wages rates were required and further did not monitor to ensure they were complied with when they did require them.
Effect or Potential Effect: The Authority did not comply with the prevailing wage rate requirements.
Recommendation: The Authority should review the prevailing wage rate requirements so it can determine when they apply for future projects. The Authority should establish a documented monitoring system to show it complied with the prevailing wage rate requirements.
View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.
Finding 2024-004: Environmental Review
Capital Funds – 14.872
Material Weakness/Noncompliance – Special Tests and Provisions
Criteria: An environmental review must be completed for any project or activities before a PHA may acquire, rehabilitate, convert, lease, repair, or construct property, or commit HUD or local funds at an assisted or to-be-assisted site. Environmental review procedures for PHAs are given in PIH Notice 2016-22 HA, “Environmental Review Requirements for Public Housing Agencies.” The environmental reviews are not tied to specific grants but apply to all the operating and capital activities of the PHA for a five-year period. The Notice cites the governing regulations at 24 CFR parts 50 and 58 and describes the methods of review and types of determinations. All of these methods and types culminate in a final approval document signed by a HUD Approving Official. To be in compliance a PHA must have such an approval document with an approval date that is not over five years old.
Condition: The last environmental review the Authority was able to provide was done in 2015 and was beyond the requirement of having an environmental review that is not more than five years old.
Cause: The Authority did not have a system in place to ensure it had a current environmental review.
Effect or Potential Effect: The Authority did not comply with the environmental review requirements.
Recommendation: The Authority should establish a system to be proactive in ensuring it has a current environmental study covering future projects funded by capital fund grants.
View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.