Audit 380207

Finding 2024-003: U.S. Department of Housing and Urban Development, Community Project Funding Statement of Condition: During the fiscal year ended June 30, 2024, the Organization failed to submit the required Federal Financial Report (SF-425) and Real Property Status Report (SF-429) during the reporting period. These reports are essential for federal oversight and accountability of grant funds and federally funded property. Criteria: Under 2 CFR §200.329(c)(2) and (d), recipients of federal awards must submit financial reports using the SF-425 on a semi-annual basis and must submit the SF-429 annually to report the status of real property purchased, constructed, or renovated with federal funds. These requirements are reinforced by the terms and conditions of the grant agreement and the Office of Management and Budget (OMB) guidance. Cause: The Organization's staff charged with grant management were unaware of the reporting requirements, indicating a lack of training and internal controls to ensure compliance with federal reporting obligations. Effect: Failure to submit the SF-425 and SF-429 reports compromises the federal governments' ability to monitor the financial and property management of the grant, which may result in delays in future funding disbursements, increased risk of questioned costs, and potential noncompliance with federal grant regulations. Context: Neither semi-annual SF-425 nor the annual SF-429 was submitted by the Organization during the fiscal year ended June 30, 2024. Questioned costs: $0 Recommendation: Management should review the grant agreement and applicable federal regulations to identify all required reports, and implement procedures to ensure submission of all required reports by their due dates. Management's Response and Corrective Action Plan: Management agrees with the finding and is taking steps to file all required reports.

Finding 2024-004: U.S. Department of Housing and Urban Development, Community Project Funding Statement of Condition: During the audit of the Schedule of Expenditures of Federal Awards (SEFA), it was noted that management omitted a material federal award from the SEFA. This omission resulted in an inaccurate representation of total federal expenditures and led to the identification and testing of an additional major program that was not initially included in the audit plan. Criteria: Under 2 CFR §200.510(b), the Organization must prepare a SEFA that includes all federal awards expended during the fiscal year. The SEFA is used to determine major programs and assess audit coverage under the Uniform Guidance. Cause: The omission was due to staff turnover in the real estate development department and inadequate internal controls over the compilation and review of the SEFA. Management did not have a formal process to ensure completeness and accuracy of federal award reporting. Effect: The SEFA was materially misstated, which impacted the auditor's major program determination. As a result, an additional major program was required to be tested. Context: The omitted federal award was active during the fiscal year and had significant expenditures that met the threshold for major program consideration. The award was managed by a separate department within the organization, and its exclusion from the SEFA was not identified during internal review processes. The error was discovered during audit fieldwork when reconciling grant activity to the general ledger and federal drawdowns. This indicates a breakdown in communication and oversight between departments responsible for federal award management and financial reporting. Questioned costs: $0 Recommendation: Management should implement stronger internal controls over the preparation and review of the SEFA. This should include reconciliation procedures between grant records, accounting records, and the SEFA, as well as a formal review by finance leadership prior to submission. Management's Response and Corrective Action Plan: Management agrees with the finding and will ensure that the SEFA is accurate going forward via enhanced review of the organizations funding.

Finding 2024-001: U.S. Department of Housing and Urban Development, HOME Investments Partnerships Program Statement of Condition: During the fiscal year ended June 30, 2024, required annual tenant income recertifications were not properly conducted. A review of 22 tenant files revealed multiple instances of noncompliance with HOME program requirements related to tenant eligibility, income verification, utility allowance calculations, and lease documentation. Specifically: 1) 9 tenants in the program were not recertified during the fiscal year, violating the requirement under 24 CFR §92.203 requiring a tenant's income to be recertified at least annually. 2) 4 tenants in the program were not timely recertified prior to the effective date of thei lease, potentially resulting in ineligible assistance periods. 3) 3 of the tenant's files did not contain documentation supporting the tenant's income, or the documentation provided did not agree with the completed Tenant Income Certification (TIC), violating income verification standards under 24 CFR §92.203(d). 4) 5 of the tenant's files did not contain documentation supporting the tenant's utility allowance, or the documentation provided did not agree with the completed Tenant Income Certification (TIC), which is required to ensure accurate rent determinations under 24 CFR §92.252. 5) 3 of the tenant's files did not contain the HOME lease addendum, violating leasing requirements under 24 CFR §92.253. 6) 2 of the tenant's files did not contain documentation supporting the tenant's disability or homelessness status upon entry to the program, which is required by the HOME loan or grant agreement for the unit the tenant has leased. 7) 2 of the tenant's files did not contain background checks prior to entry into the program, which is required by the HOME loan or grant agreement for the unit the tenant has leased. Criteria: The HOME program requires participates to ensure that tenant eligibility is properly documented and maintain, specifically as it relates to income determinations and annual recertifications (24 CFR §92.203), rent limitations and utility allowances (24 CFR §92.252), and tenant protections and leasing requirements (24 CFR §92.253). Cause: The deficiencies stem from high employee turnover in the leasing department, inadequate file management, and lack of internal control in tracking tenants' annual recertification dates to ensure timely completion of the recertification. Effect: Failure to timely recertify tenants' income on an annual basis and maintain complete and accurate documentation as required under the HOME program requirements may result in leasing units to ineligible tenants, miscalculation of rents, and noncompliance with federal regulations. Context: The population size is 155 units, which were constructed using funds from the HOME program. Questioned costs: $0 Recommendation: Management should implement procedures to track tenant's annual recertification dates to ensure timely recertification; utilize checklists to ensure all required documentation, including income verification, disability and homelessness statuses, utility allowance calculations, background checks, and HOME lease addendums are properly maintained; conduct periodic internal audits of tenant's files; and evaluate staffing capacity of the leasing department. Management's Response and Corrective Action Plan: Management agrees with the recommendation and has already adjusted procedures to track annual recertification dates, supported by checklists to ensure all required documentation is complete and accurate. Periodic internal audits of tenant files will be conducted to maintain compliance. Additionally, a newly hired Senior Director of Operations will have total oversight of this process to ensure all recommendations are followed. Leasing staff continue to complete training to develop their knowledge and abilities.

Finding 2024-002: U.S. Department of Housing and Urban Development, HOME Investments Partnerships Program Statement of Condition: During the fiscal year ended June 30, 2024, HQS unit inspections were not sufficiently tracked and supporting documentation was not properly maintained by management. Of the 155 units with HOME funding, the following issues were identified: 1) 9 units failed inspection, and no passing letter or inspection results was provided to confirm that noncompliance was timely corrected. 2) 12 units received an initial inspection notice, however no passing letter or inspection results were provided to verify whether the unit passed or failed the inspection. 3) 89 units had no inspection-related documentation provided, making it impossible to determine whether inspections were required or conducted during the period under audit. Criteria: Per 24 CFR §92.251 and §92.504, participants must ensure the housing assisted with HOME funds meet property standards, including ongoing compliance with Housing Quality Standards (HQS). Documentation of inspections and necessary corrective actions must be maintained to demonstrate compliance with program requirements. Cause: The deficiencies appear to stem from a lack of adequate tracking on when inspections are due under the HOME program and inadequate recordkeeping and monitoring procedures related to unit inspections. Effect: Without sufficient documentation provided for examination, the auditor could not verify whether units met required HQS or whether deficiencies were corrected in a timely manner. This raises concerns about the program's compliance with federal inspection and monitoring requirements. Context: The population size is 155 units, which were constructed using funds from the HOME program. Questioned costs: $0 Recommendation: Management should implement procedures to track the HOME units inspections in order to properly document when the unit has passed a HQS inspection, and determine when the unit's next required inspection is due based on the number of HOME units at the property, as some are required annually, biennially, and triennially. Management should also implement procedures for saving inspection results and corrective actions, and provide training for staff on compliance documentation requirements. Management's Response and Corrective Action Plan: Management agrees with the recommendation and will implement procedures to track HOME unit inspections through updated Tenant Selection Plans and tags in property management software, ensuring proper documentation of inspection results and scheduling of subsequent inspections according to required frequencies (annual, biennial, or triennial). Procedures will also be formalized for saving inspection reports. Corrective actions will continue to be entered into current property management software. Additionally, staff will receive training on inspection compliance and documentation requirements to ensure consistent and accurate recordkeeping. Implementation and utilization of partner provided portals will allow for easier tracking and reporting of HOME units.