Audit 351142

2024-001 ALN 14.850 – Public Housing Operating Fund – Eligibility Condition and Criteria: In accordance with HUD eligibility compliance requirement, Uniform Guidance Single Audit compliance requires that for tenant eligibility, tenant files include certain information and documentation that is both accurate and complete such as to obtain and document third-party verification of annual income and other factors that affect the determination of adjusted income or income-based rent, and then properly calculate the rent payment using this documentation. Per 24 CFR sections 5.230, 5.609, & 982.516, tenants are required to provide necessary information, documentation, and releases for the Authority to verify income eligibility. During our audit, it was determined that internal control deficiencies over compliance existed over the Authority’s Public Housing Operating Fund program eligibility determination process. The Authority's staff had inadequate internal controls over the Authority’s Public Housing Operating Fund tenant eligibility process which has led to incomplete and inaccurate eligibility documentation. Of the eleven tenant files tested for eligibility compliance, seven of these files did not have current EIV (Enterprise Income Verification) documentation, or a signed Declaration of 214 Status. Three of the seven tenant files tested lacked supporting documentation for income and eligibility determination. Amount of Questioned Costs: None Context: The Authority's staff had inadequate internal controls over the Authority’s Public Housing Operating Fund tenant eligibility process which has led to incomplete and inaccurate eligibility documentation. Of the eleven tenant files tested for eligibility compliance, seven of these files did not have current EIV (Enterprise Income Verification) documentation, or a signed Declaration of 214 Status. Three of the seven tenant files tested lacked supporting documentation for income and eligibility determination. Cause: The Authority did not have proper quality control procedures in place over monitoring required documentation in tenant files. The Authority lacked a clear understanding of HUD Public Housing Operating Fund eligibility requirements relating to the EIV system and HUD documentation requirements. Effect or Potential Effect: The Authority is not in compliance with HUD requirements over documentation in tenant files. Auditor’s Recommendation: In general, we recommend that the Authority review documentation requirements regarding tenant files. The Authority should also begin performing quality control procedures including internal audits of tenant files to ensure that these files are accurate and complete. We also recommend that Authority staff obtain training through related training seminars and classes and to monitor HUD news and notices for any new guidance or changed to the public housing industry. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-002 ALN 14.850 – Public Housing Operating Fund – Allowable Costs – Bonus/Incentive Payments Condition and Criteria: Amounts reported as bonus/incentive disbursements were not included in the payroll system; therefore, they were not subjected to related federal, state, and local withholding taxes. Internal controls should be in place that require approvals for additions, deletions, and any periodic changes to payroll related amounts. Correct employee payroll information ensures that the proper amount of withholdings are submitted in accordance with IRS regulations. Amount of Questioned Costs: None Context: Amounts reported as bonus/incentive disbursements were not included in the payroll system; therefore, they were not subjected to related federal, state, and local withholding taxes. Cause: The Authority’s internal controls lacked proper oversight to ensure policies and procedures over employee bonuses/incentives and payroll withholding amounts and/or payroll adjustments were being followed. As a result, incorrect amounts could be submitted to taxing agencies. Effect or Potential Effect: Fines and/or penalties may be imposed by taxing agencies if inaccurate amounts are withheld and submitted. Auditor’s Recommendation: Procedures should be implemented requiring Board of Commissioners approval for changes made to employee wages and the related withholding amounts to ensure amounts remitted to taxing agencies are correct. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-004 ALN 14.850 – Public Housing Operating Fund – Allowable Costs - Disbursements Condition and Criteria: In accordance with the cost principles under 2 CFR part 200, subpart E, cost must be necessary and reasonable for the performance of the Federal award, conform to any limitation or exclusions set forth in 2 CFR part 200, subpart E, and be adequately documented. During our audit, it was determined that internal control deficiencies over compliance existed related to the Authority’s Public Housing Operating Fund Program's allowable cost/cost principal’s compliance provisions. Identified control and compliance deviations included costs that were not adequately documented. During our audit, a lack of supporting documentation was observed for 9 out of the 23 check disbursements tested, including disbursements from the Public Housing Operating Fund Program. Further, it was observed in 5 out of the 23 check disbursements tested that the Authority was unable to locate copies of physical checks to ensure correct signatories are being used to endorse disbursements. Amount of Questioned Costs: None Context: During our audit, a lack of supporting documentation was observed for 9 out of the 23 check disbursements tested, including disbursements from the Public Housing Operating Fund Program. Further, it was observed in 5 out of the 23 check disbursements tested that the Authority was unable to locate copies of physical checks to ensure correct signatories are being used to endorse disbursements. Cause: The Authority's prior management's internal controls over the Public Housing Operating Fund Program's allowable costs/cost principal compliance provision that were in place were deficient. Staff who had the ability to make purchases and procure contracts did not adequately follow the cost principals included in 2 CFR part 200, subpart E, and therefore, the Authority did not have adequate support for check disbursements. Effect or Potential Effect: The Authority could incur costs that are unallowable and that are not necessary or reasonable. These internal control deficiencies could result in a possibility that errors or irregularities relating to cost can exist and not be detected by the Authority's internal controls. Auditor’s Recommendation: We recommend that the Authority's management take the necessary steps to ensure that all disbursements are sufficiently documented and supported by adequate backup. We also recommend that the Authority implement internal controls to detects when check disbursements do not have adequate support in accordance with 2 CFR part 200, subpart E. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-005 ALN 14.850 – Public Housing Operating Fund – Special Test - Waiting List Condition and Criteria: For compliance requirements related to selection from the waiting list, Public Housing Operating Fund Program applicants must be selected from the Authority’s waiting list in accordance with the Authority’s applicant selection policies documented in the ACOP and in accordance with federal regulations. Per 24 CFR section 960.202, applicants must be admitted for participation into the Low Rent Program in accordance with HUD regulations and other requirements, including the Authority’s policies stated in the ACOP and the PHA Plan, and that the Authority’s admission policy must state the system of admission preferences the Authority uses in determining the applicant selection order from the waiting list, including preferences such as any residency or other local preferences. . The Authority did not provide sufficient waiting list documentation for the current audit period evidencing whether new tenant move-ins were being admitted in the proper selection order per federal regulations and the tenant selection policies included in the Authority's Admission and Continued Occupancy Policy (“the ACOP”). Amount of Questioned Costs: None Context: The Authority did not provide sufficient waiting list documentation for the current audit period evidencing whether new tenant move-ins were being admitted in the proper selection order per federal regulations and the tenant selection policies included in the Authority's Admission and Continued Occupancy Policy (“the ACOP”). Cause: The Authority failed to maintain an adequate set of internal controls over the waiting list selection process. The Authority failed to maintain documentation of a waitlist. Effect or Potential Effect: Without maintaining a proper waitlist, it is possible that tenants are not being selected in the correct order in accordance with the Authority's Board-approved ACOP. Auditor’s Recommendation: The Authority should have a more effective set of monitoring controls in place to verify that evidence supporting all selected applicants from the waiting list are being documented and retained by the Authority. The Authority should ensure the employees responsible for the waiting list now have the necessary training and understanding of the waiting list process as well as the relevant policies for selecting from the waiting list that are documented in detail in the Board-approved ACOP. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-006 ALN 14.850 – Public Housing Operating Fund – Special Test - Depository Agreements Condition and Criteria: In accordance with the Annual Contributions Contract (ACC) and supporting HUD regulations like 24 CFR, part 990, Public Housing Authorities are required to maintain depository agreements (HUD-51999) with financial institutions that hold their funds. During our audit, it was determined that the Authority was unable to locate depository agreements with the two financial institutions that hold their funds. Amount of Questioned Costs: None Context: The Authority was unable to locate depository agreements with the two financial institutions that hold their funds. Cause: Due to recent personnel changes, the Authority's current management was unable to successfully locate Form HUD-51999 with the financial institutions that hold their funds. Effect or Potential Effect: Depository agreements include provisions ensuring that the deposited funds are secured or collateralized. The lack of depository agreements could result in improper collateralization of HUD funds. Auditor’s Recommendation: We recommend that the Authority's management take the necessary steps to obtain depository agreements from the two financial institutions that hold their funds. We also recommend that the Authority implement internal controls to detect when required HUD documentation is not present. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-001 ALN 14.850 – Public Housing Operating Fund – Eligibility Condition and Criteria: In accordance with HUD eligibility compliance requirement, Uniform Guidance Single Audit compliance requires that for tenant eligibility, tenant files include certain information and documentation that is both accurate and complete such as to obtain and document third-party verification of annual income and other factors that affect the determination of adjusted income or income-based rent, and then properly calculate the rent payment using this documentation. Per 24 CFR sections 5.230, 5.609, & 982.516, tenants are required to provide necessary information, documentation, and releases for the Authority to verify income eligibility. During our audit, it was determined that internal control deficiencies over compliance existed over the Authority’s Public Housing Operating Fund program eligibility determination process. The Authority's staff had inadequate internal controls over the Authority’s Public Housing Operating Fund tenant eligibility process which has led to incomplete and inaccurate eligibility documentation. Of the eleven tenant files tested for eligibility compliance, seven of these files did not have current EIV (Enterprise Income Verification) documentation, or a signed Declaration of 214 Status. Three of the seven tenant files tested lacked supporting documentation for income and eligibility determination. Amount of Questioned Costs: None Context: The Authority's staff had inadequate internal controls over the Authority’s Public Housing Operating Fund tenant eligibility process which has led to incomplete and inaccurate eligibility documentation. Of the eleven tenant files tested for eligibility compliance, seven of these files did not have current EIV (Enterprise Income Verification) documentation, or a signed Declaration of 214 Status. Three of the seven tenant files tested lacked supporting documentation for income and eligibility determination. Cause: The Authority did not have proper quality control procedures in place over monitoring required documentation in tenant files. The Authority lacked a clear understanding of HUD Public Housing Operating Fund eligibility requirements relating to the EIV system and HUD documentation requirements. Effect or Potential Effect: The Authority is not in compliance with HUD requirements over documentation in tenant files. Auditor’s Recommendation: In general, we recommend that the Authority review documentation requirements regarding tenant files. The Authority should also begin performing quality control procedures including internal audits of tenant files to ensure that these files are accurate and complete. We also recommend that Authority staff obtain training through related training seminars and classes and to monitor HUD news and notices for any new guidance or changed to the public housing industry. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-002 ALN 14.850 – Public Housing Operating Fund – Allowable Costs – Bonus/Incentive Payments Condition and Criteria: Amounts reported as bonus/incentive disbursements were not included in the payroll system; therefore, they were not subjected to related federal, state, and local withholding taxes. Internal controls should be in place that require approvals for additions, deletions, and any periodic changes to payroll related amounts. Correct employee payroll information ensures that the proper amount of withholdings are submitted in accordance with IRS regulations. Amount of Questioned Costs: None Context: Amounts reported as bonus/incentive disbursements were not included in the payroll system; therefore, they were not subjected to related federal, state, and local withholding taxes. Cause: The Authority’s internal controls lacked proper oversight to ensure policies and procedures over employee bonuses/incentives and payroll withholding amounts and/or payroll adjustments were being followed. As a result, incorrect amounts could be submitted to taxing agencies. Effect or Potential Effect: Fines and/or penalties may be imposed by taxing agencies if inaccurate amounts are withheld and submitted. Auditor’s Recommendation: Procedures should be implemented requiring Board of Commissioners approval for changes made to employee wages and the related withholding amounts to ensure amounts remitted to taxing agencies are correct. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-004 ALN 14.850 – Public Housing Operating Fund – Allowable Costs - Disbursements Condition and Criteria: In accordance with the cost principles under 2 CFR part 200, subpart E, cost must be necessary and reasonable for the performance of the Federal award, conform to any limitation or exclusions set forth in 2 CFR part 200, subpart E, and be adequately documented. During our audit, it was determined that internal control deficiencies over compliance existed related to the Authority’s Public Housing Operating Fund Program's allowable cost/cost principal’s compliance provisions. Identified control and compliance deviations included costs that were not adequately documented. During our audit, a lack of supporting documentation was observed for 9 out of the 23 check disbursements tested, including disbursements from the Public Housing Operating Fund Program. Further, it was observed in 5 out of the 23 check disbursements tested that the Authority was unable to locate copies of physical checks to ensure correct signatories are being used to endorse disbursements. Amount of Questioned Costs: None Context: During our audit, a lack of supporting documentation was observed for 9 out of the 23 check disbursements tested, including disbursements from the Public Housing Operating Fund Program. Further, it was observed in 5 out of the 23 check disbursements tested that the Authority was unable to locate copies of physical checks to ensure correct signatories are being used to endorse disbursements. Cause: The Authority's prior management's internal controls over the Public Housing Operating Fund Program's allowable costs/cost principal compliance provision that were in place were deficient. Staff who had the ability to make purchases and procure contracts did not adequately follow the cost principals included in 2 CFR part 200, subpart E, and therefore, the Authority did not have adequate support for check disbursements. Effect or Potential Effect: The Authority could incur costs that are unallowable and that are not necessary or reasonable. These internal control deficiencies could result in a possibility that errors or irregularities relating to cost can exist and not be detected by the Authority's internal controls. Auditor’s Recommendation: We recommend that the Authority's management take the necessary steps to ensure that all disbursements are sufficiently documented and supported by adequate backup. We also recommend that the Authority implement internal controls to detects when check disbursements do not have adequate support in accordance with 2 CFR part 200, subpart E. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-005 ALN 14.850 – Public Housing Operating Fund – Special Test - Waiting List Condition and Criteria: For compliance requirements related to selection from the waiting list, Public Housing Operating Fund Program applicants must be selected from the Authority’s waiting list in accordance with the Authority’s applicant selection policies documented in the ACOP and in accordance with federal regulations. Per 24 CFR section 960.202, applicants must be admitted for participation into the Low Rent Program in accordance with HUD regulations and other requirements, including the Authority’s policies stated in the ACOP and the PHA Plan, and that the Authority’s admission policy must state the system of admission preferences the Authority uses in determining the applicant selection order from the waiting list, including preferences such as any residency or other local preferences. . The Authority did not provide sufficient waiting list documentation for the current audit period evidencing whether new tenant move-ins were being admitted in the proper selection order per federal regulations and the tenant selection policies included in the Authority's Admission and Continued Occupancy Policy (“the ACOP”). Amount of Questioned Costs: None Context: The Authority did not provide sufficient waiting list documentation for the current audit period evidencing whether new tenant move-ins were being admitted in the proper selection order per federal regulations and the tenant selection policies included in the Authority's Admission and Continued Occupancy Policy (“the ACOP”). Cause: The Authority failed to maintain an adequate set of internal controls over the waiting list selection process. The Authority failed to maintain documentation of a waitlist. Effect or Potential Effect: Without maintaining a proper waitlist, it is possible that tenants are not being selected in the correct order in accordance with the Authority's Board-approved ACOP. Auditor’s Recommendation: The Authority should have a more effective set of monitoring controls in place to verify that evidence supporting all selected applicants from the waiting list are being documented and retained by the Authority. The Authority should ensure the employees responsible for the waiting list now have the necessary training and understanding of the waiting list process as well as the relevant policies for selecting from the waiting list that are documented in detail in the Board-approved ACOP. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-006 ALN 14.850 – Public Housing Operating Fund – Special Test - Depository Agreements Condition and Criteria: In accordance with the Annual Contributions Contract (ACC) and supporting HUD regulations like 24 CFR, part 990, Public Housing Authorities are required to maintain depository agreements (HUD-51999) with financial institutions that hold their funds. During our audit, it was determined that the Authority was unable to locate depository agreements with the two financial institutions that hold their funds. Amount of Questioned Costs: None Context: The Authority was unable to locate depository agreements with the two financial institutions that hold their funds. Cause: Due to recent personnel changes, the Authority's current management was unable to successfully locate Form HUD-51999 with the financial institutions that hold their funds. Effect or Potential Effect: Depository agreements include provisions ensuring that the deposited funds are secured or collateralized. The lack of depository agreements could result in improper collateralization of HUD funds. Auditor’s Recommendation: We recommend that the Authority's management take the necessary steps to obtain depository agreements from the two financial institutions that hold their funds. We also recommend that the Authority implement internal controls to detect when required HUD documentation is not present. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.