Finding 2024-001 E. Eligibility, L. Reporting (Form HUD-50058 MTW), and N. Special Tests and Provisions – N1. Waiting List, N2. Reasonable Rent, N3. Utility Allowance Schedule, N6. Housing Assistance Payment Identification of the federal program: Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Assistance Listing Number: 14.881 Federal Program Name: Moving to Work (MTW) Demonstration Program Public and Indian Housing (Public Housing) Program Year: January 1, 2024 through December 31, 2024 Program No.: IL002-01-00024D Section 8 – Housing Choice Vouchers (HCV) and Rental Assistance Demonstration (RAD) Program Year: January 1, 2024 through December 31, 2024 Program No.: Multiple Criteria or specific requirement (including statutory, regulatory or other citation): 2 CFR section 200.303 of the Office of Management and Budget’s (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) states the following regarding internal control: “The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Eligibility – Most Public Housing Authorities (PHAs) devise their own application forms that are filled out by the PHA staff during an interview with the tenant. The head of the household signs: (1) one or more release forms to allow the PHA to obtain information from third parties; (2) a federally prescribed general release form for employment information; and (3) a privacy notice. Under some circumstances, other members of the family are required to sign these forms (24 CFR sections 5.212, 5.230, and 5.601 through 5.615). The PHA must: • As a condition of admission or continued occupancy, require the tenant and other family members to provide necessary information, documentation, and releases for the PHA to verify income eligibility (24 CFR sections 5.230, 5.609, 960.259, and 982.516). • For both family income examinations and reexaminations, obtain and document in the family file third-party verification of: (1) reported family annual income; (2) the value of assets; (3) expenses related to deductions from annual income; and (4) other factors that affect the determination of adjusted income or income-based rent (24 CFR section 960.259 and 982.516). • Determine income eligibility and calculate the tenant’s rent payment using the documentation from third-party verification in accordance with 24 CFR part 5 subpart F (24 CFR sections 5.601 et seq.) (24 CFR sections 960.253, 960.255, 960.259, 982.201, 982.515, and 982.516). • Select tenants from the waiting list (24 CFR sections 960.206 through 960.208 and 982.202 through 982.207). • Reexamine family income and composition at least once every 12 months (Public Housing program) or 24 months (HCV program) and adjust the tenant rent and housing assistance payment as necessary using the documentation from third-party verification (24 CFR sections 960.253, 960.257, 960.259, and 982.516). In addition, the Chicago Housing Authority (the Authority) is participating in HUD’s Moving to Work (MTW) Demonstration Program. The Authority’s initial MTW Agreement was signed by the Authority and HUD on February 6, 2000, at which time HUD allowed the Authority to implement its Plan for Transformation. On June 26, 2008, the Authority and HUD signed the Amended and Restated MTW Agreement that extended the Authority’s participation in the MTW program through December 31, 2018. On April 4, 2016, the MTW Agreement was further modified and extended through December 31, 2028. Through this agreement, HUD waived selected statutory and regulatory requirements to allow the Authority flexibility in achieving the stated objectives of the MTW Demonstration Program. As such, per the Authority’s HCV Administrative Plan, reexamination of family income and composition under the HCV program is performed biennially or triennially. Reporting (Form HUD-50058 MTW) – Per 24 CFR part 908 and 24 CFR section 982.158, the PHA is required to submit the Form HUD-50058 MTW, Family Report, each time the PHA completes an admission, annual reexamination, interim reexamination, portability move-in, or other change of unit for a family. The PHA must also submit the Form HUD-50058 when a family ends participation in the program or moves out of the PHA’s jurisdiction under portability. The following line items on Form HUD-50058 MTW contain critical information: (1) Line 1c – Program (2) Line 2a – Type of Action (3) Line 2b – Effective Date of Action (4) Line 2k – FSS Participation Now or in the Last Year (5) Line 3b, 3c – Last Name, First Name (6) Line 3e – Date of Birth (7) Line 3n – Social Security Numbers (8) Line 5a – Unit Address (9) Line 5h – Date Unit Last Passed HQS Inspection (10) Line 5i – Date of Last Annual Inspection (11) Line 7i – Total Annual Income (12) Line 13h – Contract Rent to Owner (13) Line 13k – Tenant Rent (14) Line 13x – Mixed Family Tenant Rent (15) Line 17a – Participation in Special Programs – Participation in the Family Self Sufficiency (FSS) Program (16) Line 17k(2) – FSS Account Information – Balance Condition: Eighty tenants and participants were selected for testing internal controls over compliance with the eligibility and Form HUD-50058 MTW reporting requirements for the program. These same tenants and participants were tested for compliance with Form HUD-50058 MTW reporting requirements. For the 80 tenants and participants selected, 40 were Public Housing and RAD tenants (23 Public Housing and 17 RAD) and 40 were Housing Choice Voucher (HCV) participants. There were five Public Housing tenants, two RAD tenants, and four HCV participants for which control deviations were noted over eligibility and Form HUD-50058 reporting requirements (13.8% overall MTW deviation rate). There was one Public Housing tenant and one RAD tenant for which compliance exceptions were noted over Form HUD-50058 MTW reporting requirements (2.5% overall MTW exception rate). The nature of the control deviations and compliance exceptions identified are as follows: Control: • In the case that a certification and/or recertification was to be performed in 2024, relevant forms were signed after the effective date and submittal to HUD (Low Rent—three instances and RAD—one instance). • In the case that a certification and/or recertification was to be performed in 2024, it was not retained on file (Low Rent—one instance). • In the case that a recertification was to be performed in 2024, the examination/re-examination checklist was initialed by the certification specialist (CS), but forms were missing and/or not signed by tenant and recertification clerk (Low Rent—one instance). • In the case that a change in unit was to be performed in 2024, previous re-examination was not retained on file and HUD Key Line items could not be agreed (RAD—one instance). • In the case that a certification and/or recertification was to be conducted in 2024, relevant forms were not signed before HUD 50058 effective date (HCV—two instances). • In the case that a certification and/or recertification was to be conducted in 2024, recertification was not conducted (HCV—one instance). • In the case that a certification and/or recertification was to be conducted in 2024, the Form HUD 50058, Family Report, was not sent (i.e., no MTCS sent date was visible in Yardi) (HCV—one instance). Compliance: • In the case that a certification and/or recertification was to be performed in 2024, it was not retained on file and HUD Key Line items could not be agreed (Low Rent—one instance). • In the case that a change in unit was to be performed in 2024, previous re-examination was not retained on file and HUD Key Line items could not be agreed (RAD—one instance). In addition, 80 tenants and participants were selected for testing of compliance with eligibility requirements for the program. For the 80 tenants and participants selected, 40 were Public Housing and RAD tenants (23 Public Housing and 17 RAD) and 40 were HCV participants. In our testing, there were six Public Housing tenants, two RAD tenants, and one HCV participant with compliance exceptions (11.3% overall MTW exception rate). The nature of the compliance exceptions identified is as follows: • In the case that a certification and/or recertification was to be performed, relevant forms were not signed (Low Rent—one instance). • In the case that a certification and/or recertification was to be performed, annual income was not properly calculated. Therefore, rent was not properly calculated (Low Rent—one instance). • In the case that a certification and/or recertification was to be performed, relevant forms were not signed and annual income support was not provided. Therefore, EY could not determine whether annual income and rent were properly calculated (Low Rent—one instance). • In the case that a certification and/or recertification was to be performed, annual income support was not provided. Therefore, EY could not determine whether annual income and rent were properly calculated (Low Rent—one instance). • In the case that a certification and/or recertification was to be performed, relevant forms were signed after the effective date and submittal to HUD (Low Rent—two instances and RAD—one instance). • In the case that a certification and/or recertification was to be conducted in 2024, recertification was not conducted (RAD—one instance). • In the case that a certification and/or recertification was to be conducted in 2024, recertification was not conducted (HCV—one instance). Furthermore, for Public Housing, RAD, and HCV, the quality review specialists perform a quality review of a sample of tenant/participant recertification files to ensure compliance with eligibility and reporting (Form HUD-50058 MTW) requirements. For Public Housing and RAD, management did not maintain evidence of documentation of completeness and accuracy regarding populations utilized in selecting samples for the quality control reviews performed for the entirety of FY24. In addition, management did not design an internal control to ensure findings identified in the quality control review are resolved. Also, for HCV, a control was tested in FY23 but found to be ineffective due to control design deficiency: The Authority was not consistently documenting follow-up activities on identified findings from the quality control reviews in a timely manner. Corrective action was not implemented until late 2024, however, as a substantial portion of the audit year was not subject to the revised control. Cause: Management has not designed an internal control to ensure that the compliance requirements are met. Effect or Potential Effect: Ineligible tenants or participants may be inappropriately allowed to participate in federal programs, and information reported to HUD could be inaccurate or incomplete. Questioned Costs: None. Context: The Public Housing programs had 12,417 (Low Rent) and 5,706 (RAD) tenants on its rent rolls, respectively, as of December 31, 2024. The Low Rent and RAD programs reviewed 6,630 and 4,923 tenants, respectively, during 2024. The HCV program had 51,403 participants as of December 31, 2024, and 33,545 participants who were reviewed for eligibility during 2024. All active tenants and participants have a Form HUD-50058 MTW, which is filed annually (Public Housing and RAD), biennially (HCV), or triennially (HCV). Identification as a Repeat Finding, if Applicable: This finding is a repeat of finding 2023-001 from the prior year. Recommendation: The Authority should design sufficiently precise policies, procedures, and internal controls to ensure ineligible tenants or participants are not inappropriately allowed to participate in federal programs and reporting to HUD is complete and accurate. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.
Finding 2024-002 N. Special Tests and Provision: N17. Environmental Contaminants Testing and Remediation Identification of the federal program: Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Assistance Listing Number: 14.881 Federal Program Name: Moving to Work (MTW) Demonstration Program Public and Indian Housing (Public Housing) Program Year: January 1, 2024 through December 31, 2024 Program No.: IL002-01-00024D Criteria or specific requirement (including statutory, regulatory or other citation): The Uniform Guidance 2 CFR section 200.303 states, “The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” 2 CFR section 5.703 states, “HUD housing must be decent, safe, sanitary and in good repair. Owners of housing described in §5.701(a), mortgagors of housing described in §5.701(b), and PHAs and other entities approved by HUD owning housing described in §5.701(c), must maintain such housing in a manner that meets the physical condition standards set forth in this section in order to be considered decent, safe, sanitary and in good repair. These standards address the major areas of the HUD housing: the site; the building exterior; the building systems; the dwelling units; the common areas; and health and safety considerations.” Condition: Forty failed uniform physical condition standards (UPCS) inspections and 30 failed environmental inspections were selected for compliance testing out of the total 5,633 failed UPCS inspections and 176 failed environmental inspections, respectively, reported by the Authority. Internal controls were not in place to ensure that failed UPCS and environmental inspections were remediated. For 23 of the 40 (57.5%) failed UPCS inspections and 17 of the 30 (56.7%) failed environmental inspections tested for compliance, the Authority did not maintain adequate supporting documentation to evidence that the safety/environmental concern from the failed inspection was remediated or remediated in a timely manner. The nature of the issues is as follows: • For eight failed UPCS inspections sampled, remediation was not completed. • For 15 failed UPCS inspections sampled, remediation was not completed timely. • No work order was available for 10 failed environmental inspections sampled; therefore, testing for remediation/correction of safety concerns/findings could not be performed • For four failed environmental inspections sampled, the work order was in completed status; however, no documentation/support was available to evidence that the safety concerns/findings were remediated/completed. • For three failed environmental inspections sampled, the remediation was not completed in a timely manner. Cause: Internal controls were not in place over the creation and follow-up of work orders related to failed UPCS and environmental inspection reports to ensure the identified safety/environmental concerns were remediated. Effect or Potential Effect: HUD housing may not meet the physical condition standards and environmental contaminants may not be remediated. Questioned Costs: None. Context: The Public Housing program had a total of 15,263 UPCS inspections performed during the year ended December 31, 2024, of which 5,633 were failed inspections that required remediation, 6,267 passed with comments, 2,763 were inconclusive, and 600 were canceled. The Public Housing program had a total of 176 environmental inspections performed during the year ended December 31, 2024. Identification as a Repeat Finding, if Applicable: This finding is a repeat of finding 2024-003 from the prior year. Recommendation: The Authority should implement internal controls over the monitoring of failed UPCS and environmental inspections to ensure that identified safety/environmental concerns are remediated. Adequate supporting documentation should be maintained of all remediation activities. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.
Finding 2024-003 N. Special Tests and Provisions: N3. Utility Allowance Schedule Identification of the federal program: Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Assistance Listing Number: 14.881 Federal Program Name: Moving to Work (MTW) Demonstration Program Rental Assistance Demonstration (RAD) Program Year: January 1, 2024 through December 31, 2024 Program No.: Multiple Criteria or specific requirement (including statutory, regulatory or other citation): The Uniform Guidance 2 CFR section 200.303 states, “The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” “The PHA must maintain an up-to-date utility allowance schedule. The PHA must review utility rate data for each utility category each year and must adjust its utility allowance schedule if there has been a rate change of 10 percent or more for a utility category or fuel type since the last time the utility allowance schedule was revised (24 CFR section 982.517).” Condition: RAD – The underlying details supporting the analysis of changes in utility rate data and evidence of review over the annual utility allowance schedule were not retained. Cause: RAD – Supporting documentation for the inputs to the utility allowance schedule analysis of changes in utility rate data prepared by a third-party service provider and evidence of review over the annual utility allowance schedule by Authority management were not retained by the Authority. Effect or Potential Effect: RAD – The utility allowance schedule could be inaccurate or incomplete. Questioned Costs: None. Context: The RAD program had 5,706 tenants on its rent rolls as of December 31, 2024. Identification as a Repeat Finding, if Applicable: This finding is a partial repeat of finding 2024-004 from the prior year. Recommendation: RAD – The Authority should implement and retain supporting documentation of internal controls over the utility allowance schedule and amounts reported on line 12m or 15g of the Form HUD-50058. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.
Finding 2024-004 N. Special Tests and Provisions: N4. NSPIRE/Housing Quality Standards Inspections Identification of the federal program: Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Assistance Listing Number: 14.881 Federal Program Name: Moving to Work (MTW) Demonstration Program Section 8 – Housing Choice Vouchers (HCV) and Rental Assistance Demonstration (RAD) Program Year: January 1, 2024 through December 31, 2024 Program No.: Multiple Criteria or specific requirement (including statutory, regulatory or other citation): The Uniform Guidance 2 CFR section 200.303 states, “The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Condition: For 4 of 40 (10%) inspections sampled to test the Authority’s internal controls to ensure inspections are completed in accordance with the Authority’s HCV Administrative Plan and meet housing quality standards (HQS), we noted that the inspections completed by the Compliance Specialist in fiscal year 2024 were not conducted in accordance with the required biennial time frame. Based on the date of the prior inspections, the inspections were not conducted within the two years required by the HCV Administrative Plan. Cause: The Authority’s internal control, whereby a knowledgeable Compliance Specialist (i.e., Inspector) performs a biennial inspection of the unit and completes a standardized inspection checklist to confirm the unit meets the housing quality standards, was not operating effectively during the fiscal year. Effect or Potential Effect: HQS inspections may not be conducted biennially in accordance with the Authority’s HCV Administrative Plan. Questioned Costs: None. Context: There were 28,111 HQS inspections performed for the HCV program under the MTW during the fiscal year ended December 31, 2024. Identification as a Repeat Finding, if Applicable: This finding is not a repeat finding from the prior year. Recommendation: The Authority should follow its established internal control over HQS inspections as outlined in its HCV Administrative Plan. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.
Finding 2024-005 N. Special Tests and Provisions: N1. Wage Rate Requirements Identification of the federal program: Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Assistance Listing Number: 14.881 Federal Program Name: Moving to Work (MTW) Demonstration Program Public and Indian Housing (Public Housing) Program Year: January 1, 2024 through December 31, 2024 Program No.: IL002-01-00024D Criteria or specific requirement (including statutory, regulatory or other citation): The Uniform Guidance 2 CFR section 200.303 states, “The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Condition: For three of 24 (12.5%) contracts/task orders sampled to test the Authority’s internal control to ensure certified payroll reports (CPRs) are submitted by contractors/subcontractors, we noted the following: • For one (4.2%) of the 24, the contract summary checklist completed at contract closeout was not prepared or reviewed correctly, as it was noted that CPR findings were still outstanding and the contract could not be closed. • For two (8.3%) of the 24, the reviewed contract summary checklist was not provided. Cause: The Authority’s internal control to ensure all CPRs have been submitted prior to contract closeout was not operating effectively. Effect or Potential Effect: Required CPRs from contractors and subcontractors may not be submitted. Questioned Costs: None. Context: Public Housing expenditures reported in the schedule of expenditures of federal awards were $171,219,053 for the year ended December 31, 2024, representing 15.1% of total federal expenditures under Assistance Listing No. 14.881 of $1,106,629,432. Identification as a Repeat Finding, if Applicable: This finding is not a repeat finding from the prior year. Recommendation: The Authority should follow its established internal control to ensure all CPRs are submitted by contractors/subcontractors prior to contract closeout. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.
Finding 2024-006 I. Procurement, Suspension and Debarment Identification of the federal program: Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Assistance Listing Number: 14.881 Federal Program Name: Moving to Work (MTW) Demonstration Program Public and Indian Housing (Public Housing) Program Year: January 1, 2024 through December 31, 2024 Program No.: IL002-01-00024D Criteria or specific requirement (including statutory, regulatory or other citation): The Uniform Guidance 2 CFR section 200.303 states, “The Non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” The Uniform Guidance 2 CFR section 200.318, general procurement standards states “(a) Documented procurement procedures. The recipient or subrecipient must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services.” The Uniform Guidance 2 CFR section 200.319 states that “all procurement transactions under the Federal award must be conducted in a manner that provides for full and open competition and is consistent with the standards of this section and §200.320.” The Authority’s procurement policy for a cooperative (“piggyback”) procurement requires an agency contract and amendments. The Authority’s internal control procedures require procurements of more than $500,000 to have Board of Commissioners' approval. Condition: For one of nine (11.1%) procurement transactions sampled to test the Authority’s internal controls to ensure procurements are executed and documented in accordance with the Uniform Guidance procurement standards, we noted that the procurement was not approved by the Board of Commissioners and there was no executed agreement or amendment that covered fiscal year 2024. Cause: The Authority’s internal control over the review and approval of procurement transactions was not operating effectively. Effect or Potential Effect: Procurements may not be following Uniform Guidance procurement standards. Questioned Costs: A total of $3,500,000 related to Assistance Listing No. 14.881, representing the one procurement that was not approved by the Board and did not have an agreement or amendment in place that covered fiscal year 2024. Context: The one procurement totaled $3,500,000 out of nine procurement transactions sampled totaling $4,983,902. Public Housing expenditures reported in the schedule of expenditures of federal awards were $171,219,053 for the year ended December 31, 2024, representing 15.1% of total federal expenditures under Assistance Listing No. 14.881 of $1,106,629,432. Identification as a Repeat Finding, if Applicable: This finding is not a repeat finding from the prior year. Recommendation: The Authority should follow its established internal control over the review and approval of procurement transactions. Views of Responsible Officials: Management concurs with the finding and has developed a plan to correct the finding.