Finding 2025-007: Financial Condition - Section 8 Housing Choice Voucher Program, Federal Assistance Listing #14.871, this is repeated from Finding 2025-003 in Section II, Financial Statement Findings Material Weakness Criteria: The Section 8 Housing Choice Voucher Program is a federal program in which the administrative expenses reimbursed are limited to a calculation which consists of the total number of units leased and an allowable administrative fee rate established by the federal government. Therefore, there is a limit as to the amount of administrative fees the Authority can receive. Consequently, it is important that the Authority monitor the actual administrative expenses incurred and the amount of administrative fee received. Condition: During the fiscal year ended June 30, 2025, the Authority’s administrative expenses exceeded the fee earned as follows: Administrative fee earned $ 84,699 Administrative expenses (115,484) Unreimbursed administrative expenses $ (30,785) In the previous year the administrative fees earned exceeded administrative expenses by $10,841. At the beginning of the year in July 2024, the Authority had 102 vouchers leased and started to decrease in 2025 and ended the year at 85 vouchers. Subsequently, we noted by December 2025 the number of leased vouchers had decreased to 73. At the beginning of the fiscal year July 2024, the beginning administrative net position was $45,135 and due to the loss as noted above, the ending administrative net position as of June 30, 2025 was $15,646. If the losses continue the Authority will need to supplement this program with non-federal sources. In addition, the HAP net position was $23,093 as of June 30, 2025 but it is against HUD regulations to use any of these funds for administration as it is restricted specifically for HAP payments. Cause: The cause of this condition is the expenses exceeding the income sources of the administrative fees earned. Effect or Potential Effect: The effect of this condition could result in future questioned costs and the future inability for the Authority to remain a viable entity. Recommendation: We recommend the Authority review the various program costs related to each respective federal program and to cut expenses where considered necessary. The analysis of the various expenses should be considered carefully in order to maintain the operating efficiency and effectiveness of the federal programs View of Responsible Official: Management agrees with the Finding.
Finding 2025-008: Section 8 Housing Choice Voucher Program, Federal Assistance Listing #14.871 Compliance Requirement – Eligibility, Special Tests and Provisions over HQS Quality Control Re-Inspections and Utility Allowance Schedule Material Weakness/Noncompliance Criteria: The Authority has entered into an annual contributions contract (ACC) with HUD to administer the Section 8 Voucher Program in accordance with HUD regulations and requirements §982.151. Along with the various compliance requirements required, the Authority should have controls in place over the compliance requirements. In the ideal situation, duties related to program compliance would be segregated so that noncompliance can be prevented or detected. Condition: During our audit we noted material weaknesses in the internal controls over compliance requirements as well as instances of noncompliance. These are summarized below by requirement: • Eligibility – During our audit of Section 8 participant files we noted the Section 8 files are primarily maintained by one person and there is no review or any evidence of any documentation such as a checklist to indicate there was a review process. This could lead to material noncompliance related to Eligibility. • HQS Quality Control – The Authority must perform a unit inspection in the Section 8 program and also conduct quality control re-inspections. During our audit we noted the Authority is performing the initial unit inspection but does not have a quality control re-inspection procedure in place. All of the inspections were completed by the Section 8 Coordinator but no re-inspection was being performed. • Utility Allowance Schedule – According to CFR 982.517, the Authority must maintain an up-to- date utility allowance schedule. The Authority 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. During our audit we noted the Authority did not maintain any documentation to support that the review of the utility rate data had been reviewed and that that utility allowance schedule had been based on any supporting data other than that deemed necessary by the Authority. Cause: The Authority has not performed an analysis of possible risk in relation to various compliance requirements and has not documented the internal controls. Effect or Potential Effect: The lack of segregation of duties related to the controls over the categories above are considered material weaknesses that result in noncompliance. Recommendation: The Authority should review its controls over processes to determine which controls could be implemented in order to achieve a segregation of duties. The Authority should determine and document its internal control procedures to prevent noncompliance with federal program requirements. View of Responsible Official: Management agrees with the Finding.