2025-005 ALN 14.850 – Public Housing Operating Fund – Special Tests and Provisions – Insufficient Deposit Collateral Criteria and Condition: The Authority did not fully collateralize uninsured bank balances as of March 31, 2025. Amount of Questioned Costs: None. Context: During our Firm’s deposit collateral testing, it was noted that the Authority's deposits with Stock Yards Bank and Central Bank and Trust were not sufficiently collateralized. The Authority, therefore, has a high level of custodial credit risk due to the Authority's lack of controls in place to properly monitor the security of their deposits. Cause: Effect or Potential Effect: The Authority did not have proper monitoring controls in place to ensure all funds over $250,000 were collateralized. The Authority's bank balances that were uninsured and uncollateralized in the amount of $1,018,237 existed as of March 31, 2025. Auditor’s Recommendation: Procedures should be implemented requiring the proper level of management to check all bank balances monthly to ensure compliance with cash management policies and HUD collateralization policies. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.
2025-006 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 or Potential 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.
2025-007 ALN 14.850 – Public Housing Operating Fund – Eligibility – Other Condition and Criteria: In accordance with HUD eligibility compliance requirement, Uniform Guidance Single Audit compliance requires that for tenant eligibility, tenant files include certain information and documentation that is both accurate and complete such as to obtain and document third-party verification of annual income and other factors that affect the determination of adjusted income or income-based rent, and then properly calculate the rent payment using this documentation. Per 24 CFR sections 5.230, 5.609, & 982.516, tenants are required to provide necessary information, documentation, and releases for the Authority to verify income eligibility. During our audit, it was determined that internal control deficiencies over compliance existed over the Authority’s Public Housing Operating Fund program eligibility determination process. The Authority's staff had inadequate internal controls over the Authority’s Public Housing Operating Fund tenant eligibility process which has led to incomplete and inaccurate eligibility documentation. We noted that 100% of the files tested had issues relating to missing third-party verification of income or deduction sources, missing or improperly filled out HUD required forms, missing move-in and annual inspection forms, or lack of rent choice forms. We determined that these internal control deficiencies and resulting noncompliance appeared to be consistent and prevalent among the Authority's tenant files. Amount of Questioned Costs. None. Context: Within the 25 tenant files selected and tested for compliance with laws and regulations, 25 of these tenant files did not either have an EIV report, signed Declaration of Section 214 Status, move-in and annual inspections, or lack of rent choice forms. Cause: The Authority’s staff's internal controls over the eligibility determination process that were in place lacked the necessary controls over information and communication of HUD regulatory requirements to properly follow HUD’s eligibility requirements as determined by 24 CFR. There appears to be a lack of quality control procedures in place regarding the monitoring of tenant files in order to catch inaccurate and/or incomplete required tenant eligibility documentation and rent calculations. Effect or Potential Effect: The Authority is not in compliance with HUD requirements over documentation in tenant files. Auditor’s Recommendation: In general, we recommend that the Authority review documentation requirements regarding tenant files. The Authority should also begin performing quality control procedures including internal audits of tenant files to ensure that these files are accurate and complete. We also recommend that Authority staff to obtain training through related training seminars and classes and to monitor HUD news and notices for any new guidance or changed to the public housing industry. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.
2025-009 ALN 14.850 – Public Housing Operating Fund – Special Tests and Provisions – Environmental Review Condition and Criteria: Per 24 CFR sections 50, 58, 58.36, and 50 Subpart E, the Authority shall perform environmental testing and lead based testing. During our audit, it was determined that the Authority did not perform environmental or lead based testing. Amount of Questioned Costs. None. Context: The environmental testing and lead based testing were unable to be provided. Cause: The absence of environmental and lead based testing 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 or Potential Effect: The Authority is not in compliance with HUD requirements over environmental and lead based testing. Auditor’s Recommendation: Management should ensure environmental testing and lead based testing is performed timely. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.
2025-010 ALN 14.850 – Public Housing Operating Fund – Procurement and Suspension and Debarment Condition and Criteria: During our audit, it was determined that internal control deficiencies over compliance existed related to the Authority’s compliance with the Housing Capital Fund Program’s procurement and suspension and debarment compliance provisions. In accordance with 2 CFR part 215.40 through 215.48, all procurement transactions should be conducted in a manner in which to provide, to the maximum extent practical, open and free competition. It also states that some form of cost or price analysis shall be made and documented in the procurement files in connection with every procurement action. Lastly, in accordance with the Authority’s Procurement Policy, small purchase procedures for purchases or procurements of goods and services in excess of $10,000 but not exceeding $40,000 requires documentation of all quotes that must be maintained in the procurement file. Also, in accordance with 2 CFR part 180, for covered transactions, non-Federal entities are required to verify that entities are not suspended, debarred, or otherwise excluded before contracting with the entities. Additionally, the Authority's Procurement Policy did not include any Policy guidelines for procurements that piggyback off of Federal or State governmental agencies as was done for one of the two procured contracts tested above and no support for how the original Federal or State Contract was procured (which method) was obtained by the Authority for this contract. This also resulted in our inability to determine whether competition was open and competitive and whether the contractor was debarred, suspended, or otherwise excluded for this procured contract. For the other procured contract that was tested, it was noted that the Authority did not select the proper procurement method based on their Procurement Policy as the Small Purchases Process was used instead of Sealed Bidding. Also, the Authority had smaller contracts within the Small Purchases threshold that were procured that either did not have adequate or complete documentation to verify that the Procurement Policy was followed, or they did not have an executed contract in place. Also, supporting documentation for costs expended on contracts during the year did not include works orders and purchase orders. Per 24 CFR § 85.36(b)(9), “grantees and subgrantees will maintain records sufficient to detail the significant history of a procurement. These records will include but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.” Therefore, the PHA must maintain information supporting their selection for procurements. Lastly, HUD conducted an onsite Procurement Review of the Authority on January 29, 2025, to provide a review on procurement. The review was prompted by concerns raised from multiple sources regarding the Authority’s, expenditure of federal funds. This assessment found there is non-compliance within the Authority and HUD concerns related to procurement activities and regulations. Amount of Questioned Costs: Unknown. Context: As a result of the determination that the internal controls over procurement and suspension and debarment were likely to be ineffective, and due to the fact that the Authority explained that they could not locate or provide certain procurement documentation for our audit, 100% of contracts tested had issues with noncompliance. All 3 of these tested disbursements lacked supporting procurement documentation evidencing whether or not proper procurement actions were taken, or compliance requirements were followed. Cause: The Authority’s internal controls over the Program’s procurement that were in place were deficient. Authority employees with the ability to procure goods and services were not complying with Federal procurement regulations or the Board-approved Procurement Policy as adequate documentation of all procurement actions was not being maintained on file, including documentation of bids or quotes, cost or price analysis, and verification of suspension and debarment from the System for Award Management (SAM) Exclusions website. Effect or Potential Effect: As a result of a lack of supporting procurement documentation on file, the Authority may have procured goods and services that did not provide for open and free competition, or that were not reasonably priced, which could have led to Federal funding waste. Also, the lack of evidence that the Authority obtained verification that awarded contractors were not suspended or debarred means that the Authority may have entered into covered transactions with contractors who were prohibited from contracting on projects using Federal awards, which opens up the Authority to the potential for contracting with a contractor who may have previously committed fraud, embezzlement, theft, etc., or that has a history of failing to perform. Auditor’s Recommendation: We recommend that the Authority review over all their ongoing contracts and, for those contracts that are either missing or expired, perform the necessary procurement actions and ensure that all procurement actions are adequately documented and maintained on file in accordance with the Authority's Board-approved Procurement Policy. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.
2025-008 ALN 14.872 – Public Housing Operating Fund Program – Special Tests and Provisions – Wage Rate Requirements Condition and Criteria: The Authority, under prior management, was not able to provide necessary documentation such as the weekly certified payroll reports and employee interviews as required by the Department of Labor’s Davis-Bacon Act. The Davis-Bacon Act requires a contractor whose contract is over $2,000 to provide weekly certified payrolls to prove that they are paying prevailing wage rates. Amount of Questioned Costs: None. Context: Under prior management, as a result of the determination that the internal controls over Dave-Bacon wage rate requirements were likely to be ineffective, and due to the fact that the Authority explained that they could not locate any weekly certified payrolls or interviews for our audit, no tests of noncompliance were performed. Cause: Under prior management, no procedure existed for projects to follow up on stipulations within the contract requiring contractors to submit weekly wage reports, nor does a procedure exist whereby the Authority interviews contracted employees to ensure they are being paid fairly. Effect or Potential Effect: Under prior management, the Authority did not have proper controls in place to ensure compliance with the Department of Labor’s Davis-Bacon Act. As a result, contractors could be underpaying works while working on Authority projects. Auditor’s Recommendation: We recommend that the Authority implement procedures to follow up on the obligations of contractors to produce weekly wage reports and compare them with prevailing wage rates. Also, make physical inspections and interview employees to ascertain that information is accurate. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation.
2025-011 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 accumulated expenses over the course of several weeks, ultimately submitting large lump-sum drawdowns to reimburse the total amount incurred. 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 or Potential 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. 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.