Finding 2024-001 – Capital Fund Program Accounting – Cash Management & Program Compliance
ALN 14.872 – Grant years 2018, 2019, 2021, 2022 – Noncompliance & Material Weakness
Criteria:
Appropriate cash management policies and procedures should facilitate the timely request and reimbursement of allowable HUD grant expenses. Per the Capital Fund Guidebook, “once funds are disbursed, i.e. transferred from LOCCS to the PHA’s bank account, the PHA must pay the applicable bill(s) within 3 business days after the deposit of the funds into the PHA’s bank account. PHAs cannot expend nonfederal funds first to pay the applicable bills and then use Capital Funds to reimburse themselves.”
Condition & Cause:
During the fiscal year 2023 audit, we established an allowance to offset HUD receivables whose collection was deemed uncertain. During the 2024 audit, we found that HUD did not allow the PHA to draw these funds. Additionally, the PHA failed to obligate the funds for 501-21 and 501-22 by the obligation deadlines. The authorization for these two grants totaled $1,474,707, which was forfeited due to this oversight. Lastly, due to the Housing Authority’s unwillingness to utilize the capital fund grants, it is expending operating funds for modernization purposes. We noted purchases of $441,902 in elevator repairs and $186,950 in water heaters that was paid from operating funds.
Effect:
Failure to request reimbursements for incurred grant costs in a timely fashion led to HUD disallowing the drawdown of those grants, which required using funds from other sources to cover the capital fund program costs. Failure to obligate grant costs by the obligation deadline led to the forfeiture of those grants. Ineligible modernization costs in the Public Housing program.
Recommendation:
We recommend that the PHA establish an appropriate cash management procedure that facilitates timely requests and reimbursements of grant costs as incurred. We also recommend that the applicable PHA staff undergo Capital Fund training to ensure grant requirements are met prior to their deadlines.
Questioned Costs: None
Repeat Finding: Yes
Finding 2024-002 – Documentation of Costs and Vendor Invoices – Financial Reporting and Internal Controls
ALN 14.850 & 14.871– Noncompliance & Material Weakness
Criteria:
The Code of Federal Regulations Title 2 Part 200, The Uniform Administrative Guidance, gives requirements to non-Federal recipients of Federal grants relating to the documentation of records for grant expenditures. The financial management system of grantees must provide for the retention and access to records which relate to expenditures of program income. Costs must also meet certain criteria relating both to grant stipulations and to cost reasonableness and allowableness which are defined within the Uniform Guidance.
Condition & Cause:
Based on our discussions with management regarding purchasing, the Authority should be using purchase orders on all purchases except routine utilities and contracts. Our review of seventy-five (75) cash disbursements revealed that over $70,000 of goods and services were purchased without an applicable purchase order. Documentation to support purchases was limited to an invoice if one was provided.
Effect:
Failure to provide proper cost support can lead to those costs being deemed ineligible and would require reimbursement from other Non-Federal sources.
Recommendation:
We recommend that the Authority amend policies and procedures to better facilitate effective purchasing controls. A clear audit trail should be maintained to ensure proper approval, as well as documentation to support the allowability and eligibility of costs.
Questioned Costs: None
Repeat Finding: Yes
Was sampling statistically valid? Yes
Finding 2024-002 – Documentation of Costs and Vendor Invoices – Financial Reporting and Internal Controls
ALN 14.850 & 14.871– Noncompliance & Material Weakness
Criteria:
The Code of Federal Regulations Title 2 Part 200, The Uniform Administrative Guidance, gives requirements to non-Federal recipients of Federal grants relating to the documentation of records for grant expenditures. The financial management system of grantees must provide for the retention and access to records which relate to expenditures of program income. Costs must also meet certain criteria relating both to grant stipulations and to cost reasonableness and allowableness which are defined within the Uniform Guidance.
Condition & Cause:
Based on our discussions with management regarding purchasing, the Authority should be using purchase orders on all purchases except routine utilities and contracts. Our review of seventy-five (75) cash disbursements revealed that over $70,000 of goods and services were purchased without an applicable purchase order. Documentation to support purchases was limited to an invoice if one was provided.
Effect:
Failure to provide proper cost support can lead to those costs being deemed ineligible and would require reimbursement from other Non-Federal sources.
Recommendation:
We recommend that the Authority amend policies and procedures to better facilitate effective purchasing controls. A clear audit trail should be maintained to ensure proper approval, as well as documentation to support the allowability and eligibility of costs.
Questioned Costs: None
Repeat Finding: Yes
Was sampling statistically valid? Yes
Finding 2024-003 – Special Tests and Provisions – SEMAP reporting
ALN 14.871 – Noncompliance & Significant Deficiency
Criteria: 24 CFR Part 985.3 states that PHAs “must leave a clear audit trail that can be used to verify that the PHA’s quality control sample was drawn in an unbiased manner.”
Condition & cause:
We noted during our review of the 2024 SEMAP submission and supporting documentation that the PHA did not maintain a clear audit trail to support the self-certification. Upon inquiry, we found that the Authority was not maintaining any documentation for SEMAP.
Effect:
The SEMAP certification provides HUD with a system to evaluate a PHA’s Section 8 performance. Failure to provide proper supporting documentation can lead to ineffective measurements of Authority performance, as well as its ability to meet the needs of eligible families. Furthermore, misleading SEMAP certifications can disguise a troubled agency who may need HUD intervention.
Recommendation: We recommend that the PHA personnel obtain the appropriate training for SEMAP documentation and certification and appropriately document the SEMAP reports in future years. We also recommend that the PHA utilize the existing computer system to adequately document SEMAP on a regular basis.
Questioned Costs: None
Repeat Finding: Yes
Was sampling statistically valid? Yes
Finding 2024-004 – Special Tests and Provisions – Public Housing Inspections
ALN 14.850 – Noncompliance & Significant Deficiency
Criteria: 24 CFR §5.707 states that PHAs “are required to annually self-inspect their properties, including all units, to ensure the units are maintained in accordance with the standards in §5.703.”
Condition & cause:
In our review of twenty (20) Public Housing tenant files, we found that the PHA was unable to produce documentation of an annual inspection being conducted for eight tenants. This amounts to 40% of the sample.
Effect:
Delayed unit inspections increase the risk of unsafe or unsanitary living conditions. These issues can lead to noncompliance with regulations as well as heightened scrutiny from oversight bodies.
Recommendation: We recommend that the PHA schedule annual inspections to occur in conjunction with the annual recertifications. Alternatively, the PHA could schedule all annual inspections to occur at one time.
Questioned Costs: None
Repeat Finding: No
Was sampling statistically valid? Yes
Finding 2024-005 – Special Tests and Provisions – Public Housing Waiting List
ALN 14.850 – Noncompliance & Significant Deficiency
Criteria: 24 CFR Part 960.206(e)(2) states that “the method for selecting applicants must leave a clear audit trail that can be used to verify that each applicant has been selected in accordance with the method specified in the PHA plan.”
Condition & cause:
During our review of the Public Housing waiting lists, we found that the PHA was unable to provide documentation for any of the requested applicants. Upon further inquiry, it was determined that the lists had either been misplaced or destroyed.
Effect:
Failure to maintain documentation of proper wait list selections can lead to improper housing of applicants, as well as an increased risk of Fair Housing accusations.
Recommendation: We recommend that the PHA review its policies and procedures surrounding the selections of applicants to ensure compliance with federal, state and local regulations. The PHA should then develop a documentation system that ensures a clear trail can be provided on the movement of applicants while on the waiting list. Finally, they should ensure that documentation is available for review when requested.
Questioned Costs: None
Repeat Finding: No
Was sampling statistically valid? Yes
Finding 2024-001 – Capital Fund Program Accounting – Cash Management & Program Compliance
ALN 14.872 – Grant years 2018, 2019, 2021, 2022 – Noncompliance & Material Weakness
Criteria:
Appropriate cash management policies and procedures should facilitate the timely request and reimbursement of allowable HUD grant expenses. Per the Capital Fund Guidebook, “once funds are disbursed, i.e. transferred from LOCCS to the PHA’s bank account, the PHA must pay the applicable bill(s) within 3 business days after the deposit of the funds into the PHA’s bank account. PHAs cannot expend nonfederal funds first to pay the applicable bills and then use Capital Funds to reimburse themselves.”
Condition & Cause:
During the fiscal year 2023 audit, we established an allowance to offset HUD receivables whose collection was deemed uncertain. During the 2024 audit, we found that HUD did not allow the PHA to draw these funds. Additionally, the PHA failed to obligate the funds for 501-21 and 501-22 by the obligation deadlines. The authorization for these two grants totaled $1,474,707, which was forfeited due to this oversight. Lastly, due to the Housing Authority’s unwillingness to utilize the capital fund grants, it is expending operating funds for modernization purposes. We noted purchases of $441,902 in elevator repairs and $186,950 in water heaters that was paid from operating funds.
Effect:
Failure to request reimbursements for incurred grant costs in a timely fashion led to HUD disallowing the drawdown of those grants, which required using funds from other sources to cover the capital fund program costs. Failure to obligate grant costs by the obligation deadline led to the forfeiture of those grants. Ineligible modernization costs in the Public Housing program.
Recommendation:
We recommend that the PHA establish an appropriate cash management procedure that facilitates timely requests and reimbursements of grant costs as incurred. We also recommend that the applicable PHA staff undergo Capital Fund training to ensure grant requirements are met prior to their deadlines.
Questioned Costs: None
Repeat Finding: Yes
Finding 2024-002 – Documentation of Costs and Vendor Invoices – Financial Reporting and Internal Controls
ALN 14.850 & 14.871– Noncompliance & Material Weakness
Criteria:
The Code of Federal Regulations Title 2 Part 200, The Uniform Administrative Guidance, gives requirements to non-Federal recipients of Federal grants relating to the documentation of records for grant expenditures. The financial management system of grantees must provide for the retention and access to records which relate to expenditures of program income. Costs must also meet certain criteria relating both to grant stipulations and to cost reasonableness and allowableness which are defined within the Uniform Guidance.
Condition & Cause:
Based on our discussions with management regarding purchasing, the Authority should be using purchase orders on all purchases except routine utilities and contracts. Our review of seventy-five (75) cash disbursements revealed that over $70,000 of goods and services were purchased without an applicable purchase order. Documentation to support purchases was limited to an invoice if one was provided.
Effect:
Failure to provide proper cost support can lead to those costs being deemed ineligible and would require reimbursement from other Non-Federal sources.
Recommendation:
We recommend that the Authority amend policies and procedures to better facilitate effective purchasing controls. A clear audit trail should be maintained to ensure proper approval, as well as documentation to support the allowability and eligibility of costs.
Questioned Costs: None
Repeat Finding: Yes
Was sampling statistically valid? Yes
Finding 2024-002 – Documentation of Costs and Vendor Invoices – Financial Reporting and Internal Controls
ALN 14.850 & 14.871– Noncompliance & Material Weakness
Criteria:
The Code of Federal Regulations Title 2 Part 200, The Uniform Administrative Guidance, gives requirements to non-Federal recipients of Federal grants relating to the documentation of records for grant expenditures. The financial management system of grantees must provide for the retention and access to records which relate to expenditures of program income. Costs must also meet certain criteria relating both to grant stipulations and to cost reasonableness and allowableness which are defined within the Uniform Guidance.
Condition & Cause:
Based on our discussions with management regarding purchasing, the Authority should be using purchase orders on all purchases except routine utilities and contracts. Our review of seventy-five (75) cash disbursements revealed that over $70,000 of goods and services were purchased without an applicable purchase order. Documentation to support purchases was limited to an invoice if one was provided.
Effect:
Failure to provide proper cost support can lead to those costs being deemed ineligible and would require reimbursement from other Non-Federal sources.
Recommendation:
We recommend that the Authority amend policies and procedures to better facilitate effective purchasing controls. A clear audit trail should be maintained to ensure proper approval, as well as documentation to support the allowability and eligibility of costs.
Questioned Costs: None
Repeat Finding: Yes
Was sampling statistically valid? Yes
Finding 2024-003 – Special Tests and Provisions – SEMAP reporting
ALN 14.871 – Noncompliance & Significant Deficiency
Criteria: 24 CFR Part 985.3 states that PHAs “must leave a clear audit trail that can be used to verify that the PHA’s quality control sample was drawn in an unbiased manner.”
Condition & cause:
We noted during our review of the 2024 SEMAP submission and supporting documentation that the PHA did not maintain a clear audit trail to support the self-certification. Upon inquiry, we found that the Authority was not maintaining any documentation for SEMAP.
Effect:
The SEMAP certification provides HUD with a system to evaluate a PHA’s Section 8 performance. Failure to provide proper supporting documentation can lead to ineffective measurements of Authority performance, as well as its ability to meet the needs of eligible families. Furthermore, misleading SEMAP certifications can disguise a troubled agency who may need HUD intervention.
Recommendation: We recommend that the PHA personnel obtain the appropriate training for SEMAP documentation and certification and appropriately document the SEMAP reports in future years. We also recommend that the PHA utilize the existing computer system to adequately document SEMAP on a regular basis.
Questioned Costs: None
Repeat Finding: Yes
Was sampling statistically valid? Yes
Finding 2024-004 – Special Tests and Provisions – Public Housing Inspections
ALN 14.850 – Noncompliance & Significant Deficiency
Criteria: 24 CFR §5.707 states that PHAs “are required to annually self-inspect their properties, including all units, to ensure the units are maintained in accordance with the standards in §5.703.”
Condition & cause:
In our review of twenty (20) Public Housing tenant files, we found that the PHA was unable to produce documentation of an annual inspection being conducted for eight tenants. This amounts to 40% of the sample.
Effect:
Delayed unit inspections increase the risk of unsafe or unsanitary living conditions. These issues can lead to noncompliance with regulations as well as heightened scrutiny from oversight bodies.
Recommendation: We recommend that the PHA schedule annual inspections to occur in conjunction with the annual recertifications. Alternatively, the PHA could schedule all annual inspections to occur at one time.
Questioned Costs: None
Repeat Finding: No
Was sampling statistically valid? Yes
Finding 2024-005 – Special Tests and Provisions – Public Housing Waiting List
ALN 14.850 – Noncompliance & Significant Deficiency
Criteria: 24 CFR Part 960.206(e)(2) states that “the method for selecting applicants must leave a clear audit trail that can be used to verify that each applicant has been selected in accordance with the method specified in the PHA plan.”
Condition & cause:
During our review of the Public Housing waiting lists, we found that the PHA was unable to provide documentation for any of the requested applicants. Upon further inquiry, it was determined that the lists had either been misplaced or destroyed.
Effect:
Failure to maintain documentation of proper wait list selections can lead to improper housing of applicants, as well as an increased risk of Fair Housing accusations.
Recommendation: We recommend that the PHA review its policies and procedures surrounding the selections of applicants to ensure compliance with federal, state and local regulations. The PHA should then develop a documentation system that ensures a clear trail can be provided on the movement of applicants while on the waiting list. Finally, they should ensure that documentation is available for review when requested.
Questioned Costs: None
Repeat Finding: No
Was sampling statistically valid? Yes