Audit 360091

2024-005 ALN 14.872 – Public Housing Capital Fund Program – Allowable Costs Condition and Criteria: In accordance with the cost principles under 2 CFR part 200, subpart E, costs must be necessary and reasonable for the performance of the Federal award, conform to any limitations 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 compliance with the Capital Fund Program’s allowable costs/cost principles compliance provisions. Identified control and compliance deviations included costs that were not adequately documented. Amount of Questioned Costs: $121,917 Context: Lack of supporting documentation, insufficient number of signatures, improper coding, or unallowable costs were observed for 17 out of the 40 check disbursements tested during our audit, including check disbursements from the public housing and capital fund programs. Cause: The Authority’s prior management’s internal controls over the Public Housing Operating Fund and Capital Fund Program’s allowable costs/cost principles 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 principles included in 2 CFR part 200, subpart E, and therefore, the Authority did not have adequate support for check disbursements as the current management was unable to locate and provide sufficient documentation that should have been maintained by the prior management. 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 costs can exist and not be detected by the Authority’s internal controls. Auditor’s Recommendation: We recommend that the Authority’s management perform the necessary steps to ensure that all disbursements are sufficiently documented and supported by adequate backup. We recommend the Authority implement controls to detect when check disbursements do not have adequate support in accordance with 2 CFR part 200, subpart E. Grantee Response: Management agrees with the finding and will follow the Auditor's recommendations.

2024-006 ALN 14.872 – Public Housing Capital Fund Program – Cash Management Condition and Criteria: In accordance with Chapter 7 of the CFP Guidebook, a Public Housing Agency (PHA) is to first disburse CFP funds from LOCCS to the PHA’s bank account and then pay the applicable bill(s) within 3 business days after the deposit of the funds into the PHA’s bank account. The Authority has internal control deficiencies over CFP cash management as they were drawing down CFP grant money after the Authority had incurred and paid for the corresponding expenses. Amount of Questioned Costs: N/A Context: The Authority incurred CFP expenses of $633,002 during the year that have been recorded as Accounts Receivable – Due From HUD as none of these funds have been drawn down from LOCCS. Cause: The Authority did not properly design internal controls over the CFP grant disbursement and expenditures process in order to ensure that CFP drawdowns were being requested prior to the costs incurred being paid. Effect: The Authority was not abiding by the CFP Grant Agreement or the HUD CFP Guidebook by drawing down CFP grant funds well after the Authority had incurred and paid for the corresponding expenses. By using the Capital Fund Program on a reimbursement basis, the Authority built up a large balance of Accounts Receivable – Due From HUD of $633,002. Auditor’s Recommendation: Internal control procedures should be updated and implemented to be in line with the Capital Fund Guidebook by changing the handling of CFP grant disbursements from being done on a reimbursement basis to being done in advance of making payments to vendors and contractors. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-008 ALN 14.872 – Public Housing Capital Fund Program – Reporting Condition and Criteria: Per HUD regulations and the CFP Grant Agreement, PHAs are required to prepare and update Form HUD-50075.1 for each open CFP grant. Updates must be made as funds are obligated and expended, and the report must be submitted in EPIC timely to reflect the status of each open grant. This ensures that HUD has adequate visibility into the use and progress of capital funds. During our testing of compliance with the Capital Fund Program (CFP) reporting requirements, we noted that the Authority did not timely prepare or submit HUD Form 50075.1 (Performance and Evaluation Report) for grant number CFP 501-22 as required. The report was not submitted in accordance with HUD’s prescribed timeline, which requires ongoing updates and timely submissions in the EPIC system as funds are obligated and expended. Amount of Questioned Costs: None. Context: The HUD Form 50075.1 (Performance and Evaluation Report) for grant number CFP 501-22 was not prepared in a timely manner. Cause: The untimely submission appears to be the result of oversight and a lack of monitoring controls to ensure timely preparation and reporting in EPIC for all active CFP grants. This was the result of prior management's record keeping. Effect: Failure to timely prepare and submit the required HUD 50075.1 report limits HUD’s ability to assess grant progress and could potentially result in administrative action, including grant deobligation or delays in future funding. It also represents noncompliance with HUD reporting requirements. Auditor’s Recommendation: We recommend that the Authority implement stronger internal controls and monitoring procedures to ensure all required HUD reports, including Form 50075.1, are prepared and submitted timely. Staff should receive training on CFP reporting timelines and EPIC system requirements to ensure compliance moving forward. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-009 ALN 14.850 – Public Housing Operating Fund – Special Tests and Provisions – Depository Agreements Condition and Criteria: Per HUD regulations and the Annual Contributions Contract (ACC), PHAs must execute and maintain a fully executed HUD Form 51999 with each depository in which federal funds are held. This agreement outlines the responsibilities of the financial institution and ensures that federal funds are protected in accordance with HUD requirements. During our testing of special tests and provisions related to depository agreements for the Public Housing program, the Authority was unable to provide documentation of an executed HUD Form 51999 – General Depository Agreement – for its financial institutions during the audit period. This form is required to be on file to ensure compliance with HUD regulations governing the custody and handling of federal funds. Amount of Questioned Costs: None. Context: The HUD Form 51999 – General Depository Agreement that was in place during the audit period was unable to be provided. Cause: The absence of an executed agreement appears to be due to a lapse in internal control and recordkeeping procedures related to required HUD documentation. This was the result of prior management's record keeping and current management being unable to locate documentation that was maintained by the prior management. Effect: Without a properly executed HUD Form 51999, there is an increased risk that federal funds are not adequately protected or handled in accordance with HUD regulations. It also represents noncompliance with special tests and provisions requirements under the PH program. Auditor’s Recommendation: We recommend that the Authority strengthen its internal controls to ensure all required HUD depository agreements are fully executed and maintained on file for all institutions holding program funds. A periodic compliance review should be conducted to confirm all depository agreements are current and properly executed Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-010 ALN 14.850 – Public Housing Operating Fund – Special Tests and Provisions – Declaration of Trust Condition and Criteria: HUD regulations require that PHAs execute and record a Declaration of Trust (HUD Form 52190) against all real property acquired, developed, or modernized with Public Housing funds. The Declaration of Trust must remain in effect for the duration of the affordability/use restriction period. The requirement ensures that HUD’s legal interest in the property is protected. During our testing of special tests and provisions related to real property restrictions under the Public Housing program, we noted that the Authority could not provide evidence of an executed and recorded Declaration of Trust using HUD Form 52190 for its public housing properties. The Declaration of Trust is a required instrument used to secure HUD’s interest in properties funded under the Annual Contributions Contract (ACC). Amount of Questioned Costs: None. Context: The Declaration of Trust (HUD Form 52190) that was in place during the audit period was unable to be provided. Cause: The deficiency appears to stem from a lack of oversight in maintaining and verifying that Declaration of Trusts was properly executed and recorded for all applicable properties. This was the result of prior management's record keeping and current management being unable to locate documentation that was maintained by the prior management. Effect: Failure to execute and maintain a valid Declaration of Trust places the Authority at risk of noncompliance with HUD regulations and weakens the enforceability of HUD’s interest in the public housing property. This could affect the Authority’s eligibility for future funding or subject it to other administrative action. Auditor’s Recommendation: We recommend that the Authority establish controls to ensure a Declaration of Trust is properly executed and recorded for all covered properties and that records are maintained in a centralized, accessible location. Management should also periodically review property compliance records to ensure all required legal instruments remain current and valid. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-005 ALN 14.872 – Public Housing Capital Fund Program – Allowable Costs Condition and Criteria: In accordance with the cost principles under 2 CFR part 200, subpart E, costs must be necessary and reasonable for the performance of the Federal award, conform to any limitations 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 compliance with the Capital Fund Program’s allowable costs/cost principles compliance provisions. Identified control and compliance deviations included costs that were not adequately documented. Amount of Questioned Costs: $121,917 Context: Lack of supporting documentation, insufficient number of signatures, improper coding, or unallowable costs were observed for 17 out of the 40 check disbursements tested during our audit, including check disbursements from the public housing and capital fund programs. Cause: The Authority’s prior management’s internal controls over the Public Housing Operating Fund and Capital Fund Program’s allowable costs/cost principles 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 principles included in 2 CFR part 200, subpart E, and therefore, the Authority did not have adequate support for check disbursements as the current management was unable to locate and provide sufficient documentation that should have been maintained by the prior management. 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 costs can exist and not be detected by the Authority’s internal controls. Auditor’s Recommendation: We recommend that the Authority’s management perform the necessary steps to ensure that all disbursements are sufficiently documented and supported by adequate backup. We recommend the Authority implement controls to detect when check disbursements do not have adequate support in accordance with 2 CFR part 200, subpart E. Grantee Response: Management agrees with the finding and will follow the Auditor's recommendations.

2024-006 ALN 14.872 – Public Housing Capital Fund Program – Cash Management Condition and Criteria: In accordance with Chapter 7 of the CFP Guidebook, a Public Housing Agency (PHA) is to first disburse CFP funds from LOCCS to the PHA’s bank account and then pay the applicable bill(s) within 3 business days after the deposit of the funds into the PHA’s bank account. The Authority has internal control deficiencies over CFP cash management as they were drawing down CFP grant money after the Authority had incurred and paid for the corresponding expenses. Amount of Questioned Costs: N/A Context: The Authority incurred CFP expenses of $633,002 during the year that have been recorded as Accounts Receivable – Due From HUD as none of these funds have been drawn down from LOCCS. Cause: The Authority did not properly design internal controls over the CFP grant disbursement and expenditures process in order to ensure that CFP drawdowns were being requested prior to the costs incurred being paid. Effect: The Authority was not abiding by the CFP Grant Agreement or the HUD CFP Guidebook by drawing down CFP grant funds well after the Authority had incurred and paid for the corresponding expenses. By using the Capital Fund Program on a reimbursement basis, the Authority built up a large balance of Accounts Receivable – Due From HUD of $633,002. Auditor’s Recommendation: Internal control procedures should be updated and implemented to be in line with the Capital Fund Guidebook by changing the handling of CFP grant disbursements from being done on a reimbursement basis to being done in advance of making payments to vendors and contractors. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-008 ALN 14.872 – Public Housing Capital Fund Program – Reporting Condition and Criteria: Per HUD regulations and the CFP Grant Agreement, PHAs are required to prepare and update Form HUD-50075.1 for each open CFP grant. Updates must be made as funds are obligated and expended, and the report must be submitted in EPIC timely to reflect the status of each open grant. This ensures that HUD has adequate visibility into the use and progress of capital funds. During our testing of compliance with the Capital Fund Program (CFP) reporting requirements, we noted that the Authority did not timely prepare or submit HUD Form 50075.1 (Performance and Evaluation Report) for grant number CFP 501-22 as required. The report was not submitted in accordance with HUD’s prescribed timeline, which requires ongoing updates and timely submissions in the EPIC system as funds are obligated and expended. Amount of Questioned Costs: None. Context: The HUD Form 50075.1 (Performance and Evaluation Report) for grant number CFP 501-22 was not prepared in a timely manner. Cause: The untimely submission appears to be the result of oversight and a lack of monitoring controls to ensure timely preparation and reporting in EPIC for all active CFP grants. This was the result of prior management's record keeping. Effect: Failure to timely prepare and submit the required HUD 50075.1 report limits HUD’s ability to assess grant progress and could potentially result in administrative action, including grant deobligation or delays in future funding. It also represents noncompliance with HUD reporting requirements. Auditor’s Recommendation: We recommend that the Authority implement stronger internal controls and monitoring procedures to ensure all required HUD reports, including Form 50075.1, are prepared and submitted timely. Staff should receive training on CFP reporting timelines and EPIC system requirements to ensure compliance moving forward. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-009 ALN 14.850 – Public Housing Operating Fund – Special Tests and Provisions – Depository Agreements Condition and Criteria: Per HUD regulations and the Annual Contributions Contract (ACC), PHAs must execute and maintain a fully executed HUD Form 51999 with each depository in which federal funds are held. This agreement outlines the responsibilities of the financial institution and ensures that federal funds are protected in accordance with HUD requirements. During our testing of special tests and provisions related to depository agreements for the Public Housing program, the Authority was unable to provide documentation of an executed HUD Form 51999 – General Depository Agreement – for its financial institutions during the audit period. This form is required to be on file to ensure compliance with HUD regulations governing the custody and handling of federal funds. Amount of Questioned Costs: None. Context: The HUD Form 51999 – General Depository Agreement that was in place during the audit period was unable to be provided. Cause: The absence of an executed agreement appears to be due to a lapse in internal control and recordkeeping procedures related to required HUD documentation. This was the result of prior management's record keeping and current management being unable to locate documentation that was maintained by the prior management. Effect: Without a properly executed HUD Form 51999, there is an increased risk that federal funds are not adequately protected or handled in accordance with HUD regulations. It also represents noncompliance with special tests and provisions requirements under the PH program. Auditor’s Recommendation: We recommend that the Authority strengthen its internal controls to ensure all required HUD depository agreements are fully executed and maintained on file for all institutions holding program funds. A periodic compliance review should be conducted to confirm all depository agreements are current and properly executed Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.

2024-010 ALN 14.850 – Public Housing Operating Fund – Special Tests and Provisions – Declaration of Trust Condition and Criteria: HUD regulations require that PHAs execute and record a Declaration of Trust (HUD Form 52190) against all real property acquired, developed, or modernized with Public Housing funds. The Declaration of Trust must remain in effect for the duration of the affordability/use restriction period. The requirement ensures that HUD’s legal interest in the property is protected. During our testing of special tests and provisions related to real property restrictions under the Public Housing program, we noted that the Authority could not provide evidence of an executed and recorded Declaration of Trust using HUD Form 52190 for its public housing properties. The Declaration of Trust is a required instrument used to secure HUD’s interest in properties funded under the Annual Contributions Contract (ACC). Amount of Questioned Costs: None. Context: The Declaration of Trust (HUD Form 52190) that was in place during the audit period was unable to be provided. Cause: The deficiency appears to stem from a lack of oversight in maintaining and verifying that Declaration of Trusts was properly executed and recorded for all applicable properties. This was the result of prior management's record keeping and current management being unable to locate documentation that was maintained by the prior management. Effect: Failure to execute and maintain a valid Declaration of Trust places the Authority at risk of noncompliance with HUD regulations and weakens the enforceability of HUD’s interest in the public housing property. This could affect the Authority’s eligibility for future funding or subject it to other administrative action. Auditor’s Recommendation: We recommend that the Authority establish controls to ensure a Declaration of Trust is properly executed and recorded for all covered properties and that records are maintained in a centralized, accessible location. Management should also periodically review property compliance records to ensure all required legal instruments remain current and valid. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.