Tenant Eligibility Requirements • Federal Program: Public and Indian Housing, Federal Assistance Listing No. 14.850 • Criteria or specific requirement: Eligibility requirements in accordance with 24 CFR 960 relating to admission to, and occupancy of, public housing. • Condition: The audit identified exceptions in tenant files exams relating to rent calculations, and overdue reexaminations. • Four files contained rent calculation errors resulting in a projected misstatement of $27,515. • Six files were noted with an overdue re-examination. • Cause: Weakness in internal controls over tenant’s annual certifications relating to proper documentation and calculation of rent. • Identification as a repeat finding: This is a repeat finding (See 2024-002). • Recommendation for Corrective Actions: Establish procedures for management review and supervision over tenant’s annual certifications. Specific internal control procedures should be implemented to ensure, for both family income examinations and reexaminations, documentation in the family file of (1) waiting list documentation; (2) properly executed rent choice documentation; (3) utility allowance schedule annually and (4) other factors that affect the determination of adjusted income or income- based rent in accordance with CFR section 960. • Views of Responsible Officials and Planned Corrective Actions: We will review tenant’s files for the deficiencies identified above and implement new internal control procedures to correct these conditions. We will also provide increased supervision and training over this area. We anticipate a complete resolution of this type of error by February 28, 2026.
Davis-Bacon Act Wage Compliance • Federal Program: Public and Indian Housing, FALN No. 14.850. • Criteria: The Davis-Bacon Act requires that all laborers and mechanics employed by contractors or subcontractors for work on construction contracts more than $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 DOL (40 USC 276a to 276a-7). • Condition: A review of internal controls over monitoring the wage rates for compliance with the Davis Bacon Act revealed that contracts did not include the required prevailing wage rate clause. • Effect: Wage rates may not be in compliance with federal regulations. • Cause: Weakness in internal controls over tenant’s annual certifications relating to proper documentation and calculation of rent. • Identification as a repeat finding: This is a repeat finding (See 2024-003). • Recommendation: Internal controls should be established to collect, review, and monitor wages paid by contractors to its workers as well as ensure all construction contracts greater than $2,000 should include the required prevailing wage rate clause. The Authority should enforce submission of payrolls by withholding funds until the contractor has complied with the certified payroll submission. The Authority should review each payroll to ensure wages are at least the minimum wage rate for the worker’s classification. The Authority should periodically interview construction workers on site to verify the validity of the payroll information. • View of Responsible Officials and Planned Corrective Actions: We were not aware of the requirement to include the required prevailing wage rate clause in every contract greater than $2,000. We will ensure the required clause is included in all construction contracts greater than $2,000.
Financial Reporting • Context: In a review of twenty-three tenant eligibility files: • Federal Program: Public Housing Capital Fund, FALN No. 14.872 • Criteria: For modernization projects, the PHA shall submit and Actual Modernization Cost Certificate (AMCC) within 90 days after the expenditure end date. • Condition: Actual Modernization Cost Certificates (AMCC) for Capital Fund grants 501-18, 501-19, 501-20, 501-21, and 501-22 had not been completed and submitted to HUD after the required 90 days following the final expenditure date. • Effect: the PHA failed to timely inform HUD of the completion of its Capital Fund programs. • Recommendation: Internal controls should be established to ensure timely reporting of completed Capital Fund grants. • View of Responsible Officials and Planned Corrective Actions: We completed and submitted SMCC for Capital Fund programs 501-18, 501-19, 501-20, 501-21, and 501-22 on November 12, 2025. We will submit future AMCC for each grant within the 90-day deadline of the final expenditure date.
Material Misclassifications • Criteria: A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions to prevent or detect misstatements of the financial statements on a timely basis. AU-C Section 265 Communication Internal Control Related Matters Identified in an Audit, identifies deficiencies in controls over the period-end financial reporting process, including controls over procedures used to enter transactions and journal entries into the general ledger and to record recurring and nonrecurring adjustments to the financial statements that was not initially identified by the entity’s internal controls even if management subsequently corrects the misstatement. • Condition: Material misclassifications in the financial statements under audit. • Context: Several items were discovered that were misclassified. More specifically, several disbursements were noted that contained tangible assets that were more than the capitalization threshold and the useful lives of those assets exceeded one year. • Effect: Expenses were overstated by $302,370 and capital assets were understated by $302,370. • Identification as a repeat finding: This is a repeat finding (See 2024-001). • Recommendation: Review procedures for proper classification of expenditures and enforce capitalization policy. • Views of Responsible Officials and Planned Corrective Actions: We will review our policies and procedures regarding classification of expenditures. We will also enforce our capitalization policy for all tangible assets purchased with a useful life exceeding one year.
Period Performance • Federal Program: Public Housing Capital Fund, FALN No. 14.872 • Criteria: o Obligations. Unless an extension is approved by HUD, a PHA must obligate at least 90 percent of each Capital Fund grant within 24 months of the funds becoming available to the PHA for obligation. o Expenditures. For Capital Fund grants, unless an extension is approved by HUD, a PHA must expend all grant funds no later than 48 months after execution of the HUD ACC Amendment. o Capital Funds for Operating Costs. Capital Funds are not considered obligated until the PHA has budgeted and drawn down the funds. To meet this requirement, the funds, must be budgeted in Line BLI 1406 (Operations) and the PHA must submit the voucher request in LOCCS. The voucher request date must occur before those funds are reported as obligated in LOCCS under the Obligation & Expenditure tab. • Condition: A review of the Capital Fund expenditures revealed on grant, 501-18 was 100% expended on March 26, 2025, which was beyond the COVID extended due date of May 29, 2024. Current year operating transfers in Capital Fund program 501-23 were obligated on November 14, 2023, prior to the voucher request dates of July 11, 2024, January 13, 2025, and January 24, 2025. • Effect: Expenditures for Capital Fund program 501-18 were not expended by the extended due dates. In addition, operating funds were obligated prior to being drawn down. • Recommendation: Internal controls should be established to ensure expenditure amounts are updated timely and that the PHA reaches its 100% expended threshold within four years of award of the grant. In addition, the PHA should ensure voucher request are made and funds are drawn down for operating costs prior to them being reported as an obligation of the grant. • View of Responsible Officials and Planned Corrective Actions: The 501-18 grant was complicated by the COVID epidemic and we encountered significant delays. Our remaining on-going grants were expended timely. We were not aware of the requirement to submit a voucher request and actually draw down grant funds to be used for operating costs before they are obligated. Going forward, we will request and draw those funds down prior to reporting those funds as being obligated.