Criteria: A properly designed internal control structure relies greatly on a proper segregation of duties between several individuals. The duties related to initiating, authorizing, recording, processing and reporting financial data would be segregated so there is less likelihood that a misstatement of the entity’s financial statements would occur. In addition, the controls over the significant areas should be documented in order to determine that the controls are functioning.
Condition: Because of the complete turnover in staff, there has been certain significant internal controls that have not been documented or performed to ensure there is a proper segregation of duties in the internal control process. These items are summarized as follows:
• Cash – during our audit of controls over significant processes we noted the bank reconciliations and review of the bank statements were not being completed internally by the Agency’s staff but was only being completed by the fee accountant. It is the responsibility of the Agency to review these documents to ensure unusual or unintended transactions are identified by the Agency
• Monthly Deposits and Rent Registers – During our audit of this process we noted the deposit breakdowns and rental register controls are not being documented, we were not able to determine if the controls are functioning as of September 30, 2024.
• Payroll Tax Reports – During our audit we noted the Authority had withheld federal payroll taxes on wages and made the appropriate deposits but was not able to provide us copies of the IRS Form 941 reports for the quarters ending December 31, 2023 and March 31, 2024. The Authority hired a vendor to completed these reports but did not maintain a hard-copy of the report and the vendor was unable to re-generate the form. It is imperative that the Agency maintain hard-copies of all payroll reports and not to rely on any vendor for this information.
Cause: The Agency has not properly implemented and documented the internal controls as designed.
Effect or Potential Effect: The lack of controls over the categories above could result in questioned costs and misstatements in the financial statements in the future.
Recommendation: The Agency needs to review and re-evaluate its internal control procedures over the significant areas of its internal control structure and make sure the controls are well documented to ensure the controls are identifiable and traceable during the audit process.
View of Responsible Official: Management agrees with the Finding.
Criteria: As required by the 2014 Appropriations Act, paragraph (2)(b)(i) Section 3(a) of the United States Housing Act of 1937, as amended by Section 201, establishes new parameters that PHAs must use when determining the flat rent amounts. Specifically, flat rents must now be set at no less than 80 percent of the applicable Fair Market Rent (FMR) and adjusted annually.
In addition, most recently HUD issued Notice: PIH 2021-27 which clarifies HUD’s interpretation of the statutory amendment to flat rents and procedures to obtain specific exemptions.
Condition: During our audit we noted the Authority did not adjust the flat rents during 2024 which resulted in twelve tenants not paying the appropriate amount of rent and resulted in a projected loss of income for the Authority of $3,542 for the year ended September 30, 2024.
Cause: The Authority did not adjust the flat rents annually as required or obtain an appropriate exemption to reflect current market conditions.
Effect or Potential Effect: Because the flat rents were not adjusted correctly, this resulted in an estimated loss of rental income of $3,542 and affected twelve tenants.
Recommendation: We recommend the Authority review the flat rents and adopt according to the flat rent regulations on an annual basis. The Authority should review HUD Notice PIH 2021-27 for the updated procedures on flat rents and exemptions and to implement accordingly.
View of Responsible Official: Management agrees with the Finding.
Criteria – The Agency is required to follow OMB Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards contained in 2CFR Chapter I and Chapter II. One of the general criteria contained in §200.403, costs must be “necessary and reasonable for the performance of the Federal Award and be allocable thereto under these principles”.
Condition – The Agency has a contract to purchase bulk cable services and is required to pass these costs to the tenants who are the users of the service. During our audit we noted the Agency did not have the fees charged to the tenants high enough to cover the cost incurred for the service. The amount of costs not recovered was $4,503 for the year ended September 30, 2024.
Cause – This finding was repeated from the prior year. The Agency did not increase the amount charged to tenants during the year ended September 30, 2024.
Effect or Potential Effect - The cost of the cable service does not meet the “necessary and reasonable” criteria and resulted in questioned costs of $4,503. Subsequent the fiscal year end, the Agency has increased the fees charged.
Recommendation - We recommend in the future that the Agency consider the basic criteria of being “necessary and reasonable” before incurring costs in a Federal Award program. The costs of the cable services need to be paid fully by the tenants and should be monitored by management to ensure the Public Housing Program does not incur any of these costs.
View of Responsible Official: Management agrees with the Finding.
Criteria: According to 24 CFR §5.801of Uniform financial reporting standards established by HUD, requires the Authority to submit financial information through the HUD REAC system no later than 60 days after the end of the fiscal year of the reporting period.
Condition: The Authority did not submit the Unaudited Submission to REAC until February 12, 2025 which was required by November 30, 2024.
Cause: Management did not get the financial information to the fee accountant in a timely manner in order for the REAC submission to be completed within the required deadlines.
Effect or Potential Effect: The Authority is in noncompliance with external reporting requirements of HUD.
Recommendation: In the future the Authority needs to get the information needed to submit the electronic submission to REAC and to allow the audit to be completed and submitted within the time requirements.
View of Responsible Official: Management agrees with the Finding.
Criteria – The Agency has an established Procurement Policy which sets forth threshold and documentation requirements for management to follow to ensure that the Agency is in compliance with local as well as federal requirements. The Agency must follow the procurement standards established at 2 CFR sections 200.318 through 200.26.
In addition, as part of the internal controls over federal award programs, the Agency shall maintain records in sufficient detail to document procedures were followed to ensure contracts are awarded respective to local and federal requirements.
Condition - During our audit of Public Housing transactions, we noted instances where the procurement process was not adequately documented to ensure compliance with local and federal requirements. These items are summarized as follows:
• Procurement Policy – During our audit, we noted the Agency has not updated its policy for several years. The policy not only should comply with local requirements but also the compliance requirements contained in 2 CFR sections 200.318 through 200.326. The current policy applies to regulations at 24 CFR 85.36 and not the current language requirements.
• Procurement Approval – The Agency’s current policy requires any procurement in excess of $2,000 but not exceeding $100,000, no less than three price quotations shall be obtained where practical. The names, addresses and/or telephone numbers of the offerors and person contacted, and the date and amount of each quotation shall be recorded and maintained as public record. During our audit we noted the Agency entered into a contract for flooring and expended $43,073 but had no documentation to support that bids were obtained other than the vendor that was awarded the contract. Bids should have been obtained and documented as noted above.
• Wage Rates – Projects funded with Public Housing Funds are required to comply with Wage Rate Requirements contained in Par 4, 20-001 which requires all labors and mechanics employed by contractors or subcontractor 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. During our audit we noted the flooring contract as noted in the previous bullet point was not monitored for the prevailing wage requirement.
Cause – The Agency’s internal controls are not adequate over the documentation of procurement procedures.
Effect or Potential Effect - The Agency’s internal controls over procurement documentation is not adequate and the procurement policy is not updated to reflect the Federal requirements contained in 2 CFR sections 200.318 through 200.326.
Recommendation - We recommend the Agency make a concentrated effort to maintain the procurement files in a manner sufficient to ensure proper procurement procedures were followed. This documentation should include the significant history of each procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection and the basis for the contract price. In addition, when required the Wage Rate compliance procedures should be documented.
View of Responsible Official: Management agrees with the Finding.
Criteria: A properly designed internal control structure relies greatly on a proper segregation of duties between several individuals. The duties related to initiating, authorizing, recording, processing and reporting financial data would be segregated so there is less likelihood that a misstatement of the entity’s financial statements would occur. In addition, the controls over the significant areas should be documented in order to determine that the controls are functioning.
Condition: Because of the complete turnover in staff, there has been certain significant internal controls that have not been documented or performed to ensure there is a proper segregation of duties in the internal control process. These items are summarized as follows:
• Cash – during our audit of controls over significant processes we noted the bank reconciliations and review of the bank statements were not being completed internally by the Agency’s staff but was only being completed by the fee accountant. It is the responsibility of the Agency to review these documents to ensure unusual or unintended transactions are identified by the Agency
• Monthly Deposits and Rent Registers – During our audit of this process we noted the deposit breakdowns and rental register controls are not being documented, we were not able to determine if the controls are functioning as of September 30, 2024.
• Payroll Tax Reports – During our audit we noted the Authority had withheld federal payroll taxes on wages and made the appropriate deposits but was not able to provide us copies of the IRS Form 941 reports for the quarters ending December 31, 2023 and March 31, 2024. The Authority hired a vendor to completed these reports but did not maintain a hard-copy of the report and the vendor was unable to re-generate the form. It is imperative that the Agency maintain hard-copies of all payroll reports and not to rely on any vendor for this information.
Cause: The Agency has not properly implemented and documented the internal controls as designed.
Effect or Potential Effect: The lack of controls over the categories above could result in questioned costs and misstatements in the financial statements in the future.
Recommendation: The Agency needs to review and re-evaluate its internal control procedures over the significant areas of its internal control structure and make sure the controls are well documented to ensure the controls are identifiable and traceable during the audit process.
View of Responsible Official: Management agrees with the Finding.
Criteria: As required by the 2014 Appropriations Act, paragraph (2)(b)(i) Section 3(a) of the United States Housing Act of 1937, as amended by Section 201, establishes new parameters that PHAs must use when determining the flat rent amounts. Specifically, flat rents must now be set at no less than 80 percent of the applicable Fair Market Rent (FMR) and adjusted annually.
In addition, most recently HUD issued Notice: PIH 2021-27 which clarifies HUD’s interpretation of the statutory amendment to flat rents and procedures to obtain specific exemptions.
Condition: During our audit we noted the Authority did not adjust the flat rents during 2024 which resulted in twelve tenants not paying the appropriate amount of rent and resulted in a projected loss of income for the Authority of $3,542 for the year ended September 30, 2024.
Cause: The Authority did not adjust the flat rents annually as required or obtain an appropriate exemption to reflect current market conditions.
Effect or Potential Effect: Because the flat rents were not adjusted correctly, this resulted in an estimated loss of rental income of $3,542 and affected twelve tenants.
Recommendation: We recommend the Authority review the flat rents and adopt according to the flat rent regulations on an annual basis. The Authority should review HUD Notice PIH 2021-27 for the updated procedures on flat rents and exemptions and to implement accordingly.
View of Responsible Official: Management agrees with the Finding.
Criteria – The Agency is required to follow OMB Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards contained in 2CFR Chapter I and Chapter II. One of the general criteria contained in §200.403, costs must be “necessary and reasonable for the performance of the Federal Award and be allocable thereto under these principles”.
Condition – The Agency has a contract to purchase bulk cable services and is required to pass these costs to the tenants who are the users of the service. During our audit we noted the Agency did not have the fees charged to the tenants high enough to cover the cost incurred for the service. The amount of costs not recovered was $4,503 for the year ended September 30, 2024.
Cause – This finding was repeated from the prior year. The Agency did not increase the amount charged to tenants during the year ended September 30, 2024.
Effect or Potential Effect - The cost of the cable service does not meet the “necessary and reasonable” criteria and resulted in questioned costs of $4,503. Subsequent the fiscal year end, the Agency has increased the fees charged.
Recommendation - We recommend in the future that the Agency consider the basic criteria of being “necessary and reasonable” before incurring costs in a Federal Award program. The costs of the cable services need to be paid fully by the tenants and should be monitored by management to ensure the Public Housing Program does not incur any of these costs.
View of Responsible Official: Management agrees with the Finding.
Criteria: According to 24 CFR §5.801of Uniform financial reporting standards established by HUD, requires the Authority to submit financial information through the HUD REAC system no later than 60 days after the end of the fiscal year of the reporting period.
Condition: The Authority did not submit the Unaudited Submission to REAC until February 12, 2025 which was required by November 30, 2024.
Cause: Management did not get the financial information to the fee accountant in a timely manner in order for the REAC submission to be completed within the required deadlines.
Effect or Potential Effect: The Authority is in noncompliance with external reporting requirements of HUD.
Recommendation: In the future the Authority needs to get the information needed to submit the electronic submission to REAC and to allow the audit to be completed and submitted within the time requirements.
View of Responsible Official: Management agrees with the Finding.
Criteria – The Agency has an established Procurement Policy which sets forth threshold and documentation requirements for management to follow to ensure that the Agency is in compliance with local as well as federal requirements. The Agency must follow the procurement standards established at 2 CFR sections 200.318 through 200.26.
In addition, as part of the internal controls over federal award programs, the Agency shall maintain records in sufficient detail to document procedures were followed to ensure contracts are awarded respective to local and federal requirements.
Condition - During our audit of Public Housing transactions, we noted instances where the procurement process was not adequately documented to ensure compliance with local and federal requirements. These items are summarized as follows:
• Procurement Policy – During our audit, we noted the Agency has not updated its policy for several years. The policy not only should comply with local requirements but also the compliance requirements contained in 2 CFR sections 200.318 through 200.326. The current policy applies to regulations at 24 CFR 85.36 and not the current language requirements.
• Procurement Approval – The Agency’s current policy requires any procurement in excess of $2,000 but not exceeding $100,000, no less than three price quotations shall be obtained where practical. The names, addresses and/or telephone numbers of the offerors and person contacted, and the date and amount of each quotation shall be recorded and maintained as public record. During our audit we noted the Agency entered into a contract for flooring and expended $43,073 but had no documentation to support that bids were obtained other than the vendor that was awarded the contract. Bids should have been obtained and documented as noted above.
• Wage Rates – Projects funded with Public Housing Funds are required to comply with Wage Rate Requirements contained in Par 4, 20-001 which requires all labors and mechanics employed by contractors or subcontractor 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. During our audit we noted the flooring contract as noted in the previous bullet point was not monitored for the prevailing wage requirement.
Cause – The Agency’s internal controls are not adequate over the documentation of procurement procedures.
Effect or Potential Effect - The Agency’s internal controls over procurement documentation is not adequate and the procurement policy is not updated to reflect the Federal requirements contained in 2 CFR sections 200.318 through 200.326.
Recommendation - We recommend the Agency make a concentrated effort to maintain the procurement files in a manner sufficient to ensure proper procurement procedures were followed. This documentation should include the significant history of each procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection and the basis for the contract price. In addition, when required the Wage Rate compliance procedures should be documented.
View of Responsible Official: Management agrees with the Finding.