2023-001 Reporting – Late REAC Submission and Late OMB Data Collection Form Submission
Section 8 Housing Voucher Cluster (Section 8):
14.871 Section 8 – Housing Choice Vouchers
Material Weakness in Internal Control, Material Noncompliance
Condition: The Authority’s audited Financial Data Schedule (“FDS”) filing was not submitted within the timeframes specified by HUD. The FDS filing was due by June 30, 2024, but the financials were not issued until June 3, 2025. The Authority was also required to submit the OMB Data Collection Form to the Federal Audit Clearinghouse (“FAC”) by June 30, 2024, but was not filed timely as the audit was completed on June 3, 2025.
Criteria: The Real Estate Assessment Center ("REAC") requires an accurate and timely submission of the audited FDS information. The OMB Data Collection Form is due to be electronically filed with the FAC at the completion of a Single Audit (but no later than 9 months after fiscal year end, unless extended).
Questioned Costs: None.
Effect: The Authority did not submit the audited FDS within the timeframe required by HUD, and therefore was noncompliant with this reporting requirement as well as the requirement to submit the OMB Data Collection Form within the required time frame. Failure to properly submit timely data could lead to significant issues including penalties and delays in funding.
Cause: The audit delays and noncompliance stemmed from a combination of operational, leadership, and financial capacity challenges that significantly impacted the Authority’s ability to meet HUD’s reporting requirements.
• Leadership Instability: For several years, the Authority lacked a permanent, full-time Chief Executive Officer (CEO), resulting in inconsistent oversight of daily operations and strategic financial management. This leadership gap contributed to delays in decision-making and hindered effective communication with auditors and HUD.
• Financial Capacity Constraints: The Authority has faced persistent financial capacity challenges over the past two years. In April 2024, a new Chief Financial Officer (CFO) was hired; however, within the first two months, two Accounting Clerks resigned. All three staff members had limited experience navigating HUD systems and preparing the Financial Data Schedule (FDS), further straining the Authority’s ability to meet compliance deadlines.
• Vendor and Software Disruptions: The previous administration’s decision to terminate the longstanding partnership with BDO PHA Finance and revert from Yardi to SACS software led to significant disruptions. BDO, a key financial partner, declined to continue services under the new software. During the transition, Yardi withheld access to financial data due to unpaid invoices, which delayed audit preparation, funding draws (CFP, Operating, FSS, ROSS), and updates to HUD systems, including EPIC and FDS.
• Loss of Financial Records: In 2023, the Authority’s administrative building at 1000 Carthage Street, Sanford, NC, was vacated due to severe water damage from a leaking roof. The resulting mold and mildew rendered the building uninhabitable and destroyed critical financial records. At the time, the Authority did not utilize cloud-based storage or digital backups, which compounded the loss.
Recommendation: The Authority should ensure that they retain support for all required documentation and that it is organized and readily accessible. Storing documents electronically with frequent backups would help prevent loss of data from damage to any one location. Furthermore, the Authority should ensure that staff receives necessary training for proper document retention.
Views of Responsible Officials of the Auditee: The Authority concurs with this finding and will implement review procedures and provide ongoing training to staff.
2023-002 Procurement and Suspension and Debarment – Proper Documentation
14.872 Public Housing Capital Fund
Material Weakness in Internal Control, Material Noncompliance
Condition: The Authority did not have adequate controls over compliance with federal regulations regarding procurement. During the audit period, Authority paid amounts to a contractor for unit turnover and renovation totaling $121,125 without documenting that it had properly procured these services.
Criteria: Federal regulations (2 CFR 200.320) provide the methods of procurement to be followed when acquiring goods or services. Specifically, quotations must be obtained from an adequate number of qualified sources when procuring goods or services that exceed the micro-purchase amount and sealed bids are required when the goods or services to be procured exceed the simplified acquisition threshold of $250,000.
Questioned Costs: $121,125.
Effect: The Authority expended public housing capital fund monies for services without following proper federal procurement standards.
Cause: The Authority was unable to provide the required procurement documentation due to the following factors:
• Operational Disruptions: The relocation of the administrative office disrupted access to essential records. In addition, significant turnover in key management and procurement staff during the audit period contributed to lapses in procurement oversight and documentation.
• Performance and Compliance Issues: The Authority failed its 2022 Public Housing Assessment System (PHAS) review, resulting in a “Troubled Agency” designation and a score of 5 out of 10 for the Capital Fund Program (CFP). Despite commitments made in its October 27, 2023, response to HUD and its Troubled Recovery Plan, the Authority did not follow through on key corrective actions, including: Engaging with high-performing PHAs for peer-to-peer training; training staff on procurement practices; obtaining a list of contractors from the state; and acquiring a procurement policy from a high-performing PHA.
• Lack of Internal Controls, Training, and Budget Awareness: The Authority lacked adequate checks and balances across departments. Staff in finance, executive leadership, asset management, and other key areas did not demonstrate a basic understanding of procurement, contract management, or budgetary principles. Asset management staff frequently procured goods and services without understanding or adhering to procurement regulations, internal policies, or budget constraints. There was a general lack of awareness and accountability regarding budget planning, monitoring, and adherence, leading to overspending, misallocation of funds, and insufficient documentation of financial decisions.
• Procurement Irregularities: The Authority routinely solicited quotes only from familiar vendors, rather than conducting open and competitive sourcing. Vendors with a history of substandard performance were allowed to continue working, often requiring repeated corrective actions and causing project delays. Some vendors were restricted from working at specific developments but continued to operate at others. Certain vendors bypassed standard payment protocols by seeking direct authorization from senior leadership, undermining financial governance.
Recommendation: Authority personnel responsible for acquiring goods and services should receive additional training regarding the federal standards for procurement.
Views of Responsible Officials of the Auditee: The Authority concurs with this finding and will implement review procedures and provide ongoing training to staff.
2023-003 Special Tests and Provisions – Wage Rate Requirements
14.872 Public Housing Capital Fund
Material Weakness in Internal Control, Material Noncompliance
Condition: Only one contract funded by the Capital Fund Program was awarded during the audit period above the small purchase threshold. The contract did not contain the required wage rate clause, and the Authority was not able to provide documentation showing that the contractor had submitted the required certified payrolls.
Criteria: All laborers and mechanics employed by contractors or subcontractors to work on construction contracts in excess of $2,000 financed by federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor. Nonfederal entities shall include in their construction contracts subject to the Wage Rate Requirements a provision that the contractor or subcontractor comply with those requirements and the DOL regulations. This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance.
Questioned Costs: None.
Effect: The Authority is not in compliance with applicable HUD regulations.
Cause: The Authority did not have adequate internal controls in place to ensure compliance with federal wage rate requirements, particularly under the Davis-Bacon Act. Specific deficiencies included:
• Documentation Deficiencies: The Authority failed to maintain accurate or complete certified payroll records required for Davis-Bacon compliance. Supporting documentation, such as wage interviews, contractor certifications, and labor classifications, was either missing or incomplete. There was no formal process in place to verify or monitor contractor compliance with prevailing wage requirements.
• Lack of Staff Knowledge and Oversight: Staff lacked sufficient training on Davis-Bacon requirements and did not consistently enforce wage rate compliance during procurement and contract administration. Internal controls were not designed to detect or prevent noncompliance with federal labor standards.
Recommendation: We recommend that the Authority ensure the required wage rate clause is included in all contracts above $2,000 and that certified payrolls are being submitted and documentation retained.
Views of Responsible Officials of the Auditee: The Authority concurs with this finding and will implement review procedures and provide ongoing training to staff to ensure they are in compliance with HUD requirements.
2023-004 Activities Allowed or Unallowed – Interprogram Activity
Public and Indian Housing – CFDA Number 14.850
Other Matters, Questioned Costs
Condition: The Authority has loaned monies from the Public and Indian Housing Program to the COCC. As of September 30, 2023 these loans totaled $349,352.
Criteria: The Public Housing Operating Fund was established for the purpose of making assistance available to PHAs for the operation and management of public housing. Transfers out of the Operating Fund can only occur in very limited circumstances. This would preclude PHAs from using Operating Funds to provide temporary loans to other programs within the PHA. Inappropriate use of funds, even a temporary loan, are ineligible costs resulting in non-compliance. The AMPs, under current laws, cannot loan the COCC any funds.
Questioned Costs: $349,352.
Effect: The Authority is not in compliance with applicable HUD regulations regarding eligible use of federal funds.
Cause: The Central Office Cost Center (COCC) borrowed funds to offset operating losses, primarily due to financial mismanagement and structural weaknesses in budget planning and oversight. Contributing factors included:
• Financial Mismanagement of LIHTC Property: The Authority attempted to cover operating losses at the underperforming Matthews Garden Gilmore (MGG) development, a troubled RAD PBV LIHTC project. The development suffered from low lease-up rates, debt obligations, and poor financial planning. The agency left the utility bills and other day-to-day management services in the Authority’s name instead of transferring them to the nonprofit instrumentality, the Central Carolina Strategic Developers.
• Lack of Budget Accountability: The Authority did not operate with an accurate, balanced budget for the COCC or the MGG development. Budget assumptions failed to account for the complexities of managing RAD PBV and LIHTC properties, including layered compliance and funding restrictions.
• Insufficient Financial Capacity: The Authority lacked the financial infrastructure and expertise to manage a multifaceted PHA portfolio, including RAD, LIHTC, and traditional public housing programs. Staff turnover and limited experience further weakened financial oversight.
• Improper Salary Allocations: Salaries and day-to-day operational spending were not allocated adequately across departments and programs, contributing to COCC operating losses and noncompliance with HUD cost allocation requirements.
Recommendation: The Authority should develop a plan based on budgeting and monitoring of COCC expenses to have the ability to reimburse funds to the Public and Indian Housing Program.
Views of Responsible Officials of the Auditee: We concur with the recommendation and are formulating a plan to repay these funds.
2023-001 Reporting – Late REAC Submission and Late OMB Data Collection Form Submission
Section 8 Housing Voucher Cluster (Section 8):
14.871 Section 8 – Housing Choice Vouchers
Material Weakness in Internal Control, Material Noncompliance
Condition: The Authority’s audited Financial Data Schedule (“FDS”) filing was not submitted within the timeframes specified by HUD. The FDS filing was due by June 30, 2024, but the financials were not issued until June 3, 2025. The Authority was also required to submit the OMB Data Collection Form to the Federal Audit Clearinghouse (“FAC”) by June 30, 2024, but was not filed timely as the audit was completed on June 3, 2025.
Criteria: The Real Estate Assessment Center ("REAC") requires an accurate and timely submission of the audited FDS information. The OMB Data Collection Form is due to be electronically filed with the FAC at the completion of a Single Audit (but no later than 9 months after fiscal year end, unless extended).
Questioned Costs: None.
Effect: The Authority did not submit the audited FDS within the timeframe required by HUD, and therefore was noncompliant with this reporting requirement as well as the requirement to submit the OMB Data Collection Form within the required time frame. Failure to properly submit timely data could lead to significant issues including penalties and delays in funding.
Cause: The audit delays and noncompliance stemmed from a combination of operational, leadership, and financial capacity challenges that significantly impacted the Authority’s ability to meet HUD’s reporting requirements.
• Leadership Instability: For several years, the Authority lacked a permanent, full-time Chief Executive Officer (CEO), resulting in inconsistent oversight of daily operations and strategic financial management. This leadership gap contributed to delays in decision-making and hindered effective communication with auditors and HUD.
• Financial Capacity Constraints: The Authority has faced persistent financial capacity challenges over the past two years. In April 2024, a new Chief Financial Officer (CFO) was hired; however, within the first two months, two Accounting Clerks resigned. All three staff members had limited experience navigating HUD systems and preparing the Financial Data Schedule (FDS), further straining the Authority’s ability to meet compliance deadlines.
• Vendor and Software Disruptions: The previous administration’s decision to terminate the longstanding partnership with BDO PHA Finance and revert from Yardi to SACS software led to significant disruptions. BDO, a key financial partner, declined to continue services under the new software. During the transition, Yardi withheld access to financial data due to unpaid invoices, which delayed audit preparation, funding draws (CFP, Operating, FSS, ROSS), and updates to HUD systems, including EPIC and FDS.
• Loss of Financial Records: In 2023, the Authority’s administrative building at 1000 Carthage Street, Sanford, NC, was vacated due to severe water damage from a leaking roof. The resulting mold and mildew rendered the building uninhabitable and destroyed critical financial records. At the time, the Authority did not utilize cloud-based storage or digital backups, which compounded the loss.
Recommendation: The Authority should ensure that they retain support for all required documentation and that it is organized and readily accessible. Storing documents electronically with frequent backups would help prevent loss of data from damage to any one location. Furthermore, the Authority should ensure that staff receives necessary training for proper document retention.
Views of Responsible Officials of the Auditee: The Authority concurs with this finding and will implement review procedures and provide ongoing training to staff.
2023-002 Procurement and Suspension and Debarment – Proper Documentation
14.872 Public Housing Capital Fund
Material Weakness in Internal Control, Material Noncompliance
Condition: The Authority did not have adequate controls over compliance with federal regulations regarding procurement. During the audit period, Authority paid amounts to a contractor for unit turnover and renovation totaling $121,125 without documenting that it had properly procured these services.
Criteria: Federal regulations (2 CFR 200.320) provide the methods of procurement to be followed when acquiring goods or services. Specifically, quotations must be obtained from an adequate number of qualified sources when procuring goods or services that exceed the micro-purchase amount and sealed bids are required when the goods or services to be procured exceed the simplified acquisition threshold of $250,000.
Questioned Costs: $121,125.
Effect: The Authority expended public housing capital fund monies for services without following proper federal procurement standards.
Cause: The Authority was unable to provide the required procurement documentation due to the following factors:
• Operational Disruptions: The relocation of the administrative office disrupted access to essential records. In addition, significant turnover in key management and procurement staff during the audit period contributed to lapses in procurement oversight and documentation.
• Performance and Compliance Issues: The Authority failed its 2022 Public Housing Assessment System (PHAS) review, resulting in a “Troubled Agency” designation and a score of 5 out of 10 for the Capital Fund Program (CFP). Despite commitments made in its October 27, 2023, response to HUD and its Troubled Recovery Plan, the Authority did not follow through on key corrective actions, including: Engaging with high-performing PHAs for peer-to-peer training; training staff on procurement practices; obtaining a list of contractors from the state; and acquiring a procurement policy from a high-performing PHA.
• Lack of Internal Controls, Training, and Budget Awareness: The Authority lacked adequate checks and balances across departments. Staff in finance, executive leadership, asset management, and other key areas did not demonstrate a basic understanding of procurement, contract management, or budgetary principles. Asset management staff frequently procured goods and services without understanding or adhering to procurement regulations, internal policies, or budget constraints. There was a general lack of awareness and accountability regarding budget planning, monitoring, and adherence, leading to overspending, misallocation of funds, and insufficient documentation of financial decisions.
• Procurement Irregularities: The Authority routinely solicited quotes only from familiar vendors, rather than conducting open and competitive sourcing. Vendors with a history of substandard performance were allowed to continue working, often requiring repeated corrective actions and causing project delays. Some vendors were restricted from working at specific developments but continued to operate at others. Certain vendors bypassed standard payment protocols by seeking direct authorization from senior leadership, undermining financial governance.
Recommendation: Authority personnel responsible for acquiring goods and services should receive additional training regarding the federal standards for procurement.
Views of Responsible Officials of the Auditee: The Authority concurs with this finding and will implement review procedures and provide ongoing training to staff.
2023-003 Special Tests and Provisions – Wage Rate Requirements
14.872 Public Housing Capital Fund
Material Weakness in Internal Control, Material Noncompliance
Condition: Only one contract funded by the Capital Fund Program was awarded during the audit period above the small purchase threshold. The contract did not contain the required wage rate clause, and the Authority was not able to provide documentation showing that the contractor had submitted the required certified payrolls.
Criteria: All laborers and mechanics employed by contractors or subcontractors to work on construction contracts in excess of $2,000 financed by federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor. Nonfederal entities shall include in their construction contracts subject to the Wage Rate Requirements a provision that the contractor or subcontractor comply with those requirements and the DOL regulations. This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance.
Questioned Costs: None.
Effect: The Authority is not in compliance with applicable HUD regulations.
Cause: The Authority did not have adequate internal controls in place to ensure compliance with federal wage rate requirements, particularly under the Davis-Bacon Act. Specific deficiencies included:
• Documentation Deficiencies: The Authority failed to maintain accurate or complete certified payroll records required for Davis-Bacon compliance. Supporting documentation, such as wage interviews, contractor certifications, and labor classifications, was either missing or incomplete. There was no formal process in place to verify or monitor contractor compliance with prevailing wage requirements.
• Lack of Staff Knowledge and Oversight: Staff lacked sufficient training on Davis-Bacon requirements and did not consistently enforce wage rate compliance during procurement and contract administration. Internal controls were not designed to detect or prevent noncompliance with federal labor standards.
Recommendation: We recommend that the Authority ensure the required wage rate clause is included in all contracts above $2,000 and that certified payrolls are being submitted and documentation retained.
Views of Responsible Officials of the Auditee: The Authority concurs with this finding and will implement review procedures and provide ongoing training to staff to ensure they are in compliance with HUD requirements.
2023-004 Activities Allowed or Unallowed – Interprogram Activity
Public and Indian Housing – CFDA Number 14.850
Other Matters, Questioned Costs
Condition: The Authority has loaned monies from the Public and Indian Housing Program to the COCC. As of September 30, 2023 these loans totaled $349,352.
Criteria: The Public Housing Operating Fund was established for the purpose of making assistance available to PHAs for the operation and management of public housing. Transfers out of the Operating Fund can only occur in very limited circumstances. This would preclude PHAs from using Operating Funds to provide temporary loans to other programs within the PHA. Inappropriate use of funds, even a temporary loan, are ineligible costs resulting in non-compliance. The AMPs, under current laws, cannot loan the COCC any funds.
Questioned Costs: $349,352.
Effect: The Authority is not in compliance with applicable HUD regulations regarding eligible use of federal funds.
Cause: The Central Office Cost Center (COCC) borrowed funds to offset operating losses, primarily due to financial mismanagement and structural weaknesses in budget planning and oversight. Contributing factors included:
• Financial Mismanagement of LIHTC Property: The Authority attempted to cover operating losses at the underperforming Matthews Garden Gilmore (MGG) development, a troubled RAD PBV LIHTC project. The development suffered from low lease-up rates, debt obligations, and poor financial planning. The agency left the utility bills and other day-to-day management services in the Authority’s name instead of transferring them to the nonprofit instrumentality, the Central Carolina Strategic Developers.
• Lack of Budget Accountability: The Authority did not operate with an accurate, balanced budget for the COCC or the MGG development. Budget assumptions failed to account for the complexities of managing RAD PBV and LIHTC properties, including layered compliance and funding restrictions.
• Insufficient Financial Capacity: The Authority lacked the financial infrastructure and expertise to manage a multifaceted PHA portfolio, including RAD, LIHTC, and traditional public housing programs. Staff turnover and limited experience further weakened financial oversight.
• Improper Salary Allocations: Salaries and day-to-day operational spending were not allocated adequately across departments and programs, contributing to COCC operating losses and noncompliance with HUD cost allocation requirements.
Recommendation: The Authority should develop a plan based on budgeting and monitoring of COCC expenses to have the ability to reimburse funds to the Public and Indian Housing Program.
Views of Responsible Officials of the Auditee: We concur with the recommendation and are formulating a plan to repay these funds.