Finding 2025-004: Activities Allowed/Allowable Costs/Cost Principles Public Housing Program, Assistance Listing #14.850 Section 8 Housing Choice Voucher Cluster Program, Assistance Listing #14.871 Material Weakness - Repeat Finding Criteria: A properly designed internal control structure relies greatly on a proper segregation of duties between several individuals. The duties related to initiating, authorizing, recording, processing and reporting financial data would be segregated so there is less likelihood that a misstatement of the entity’s financial statements would occur. In addition, the controls over the significant areas should be documented in order to determine that the controls are functioning. Condition: The Agency consists of limited administrative employees and as a result does not have personnel assigned responsibilities in such a way that different employees handle different parts of the same transaction. The limited number of employees results in an inadequate overall internal control structure design. Cause: The Agency has not properly implemented and documented the internal controls as designed. Effect or Potential Effect: The lack of controls over the categories above could result in questioned costs and misstatements in the financial statements in the future. Recommendation: The Agency needs to review and re-evaluate its internal control procedures over the significant areas of its internal control structure and make sure the controls are well documented to ensure the controls are identifiable and traceable during the audit process. Further, we noted in March 2026 that the Agency adopted a new internal control policy but needs to implement the policy. View of Responsible Official: Management agrees with the Finding.
Finding 2025-005: External Reporting – REAC Submission Public Housing Program, Assistance Listing #14.850 Material Weakness/Noncompliance – Repeat Finding Criteria: According to 24 CFR §5.801of Uniform financial reporting standards established by HUD, requires the Agency to submit financial information through the HUD REAC system no later than 60 days after the end of the fiscal year of the reporting period. Condition: The Agency did not submit the Unaudited Submission to REAC until April 15, 2026, which was required by December 1, 2025. Cause: Management did not get the financial information to the fee accountant in a timely manner in order for the REAC submission to be completed within the required deadlines. Effect or Potential Effect: The Agency is in noncompliance with external reporting requirements of HUD. Recommendation: In the future the Agency needs to get the information needed to submit the electronic submission to REAC and to allow the audit to be completed and submitted within the time requirements. View of Responsible Official: Management agrees with the Finding.
Finding 2025-006: Financial Condition Public Housing Program, Assistance Listing #14.850 Material Weakness Criteria: The Public Housing Program has limited revenue resources, and the financial condition should be monitored closely to ensure the Agency can continue to operate in an effective and efficient manner. Condition: During our audit for the year ended September 30, 2025, we noted the Agency continues to report an operating loss from operations before the recording of depreciation. Below is a table that depicts the loss during the respective years. This table does not include any funds used for operations from the capital funds: Year Ended 9/30/25 $ (32,739) Year Ended 9/30/24 $ (41,946) Year Ended 9/30/23 $ 96,094 Year Ended 9/30/22 $ 122,181 Unrestricted net position represents the amount available to be used to meet the Agency’s ongoing obligations to creditors, requirements for cash outlays in the next fiscal year as well as the financial capacity to sustain operations. Below is a table that depicts the changes in the unrestricted net position during the respective years: Unrestricted Net Position as of 9/30/25 $ 31,511 Unrestricted Net Position as of 9/30/24 $ 88,304 Unrestricted Net Position as of 9/30/23 $ 196,775 Unrestricted Net Position as of 9/30/22 $ 174,793 Cause: The Agency is incurring operating and capital costs that exceed the resources available, which is not conducive to sound fiscal policy. Effect or Potential Effect: The effect of this could result in the future declining financial condition of the Agency and could jeopardize the financial viability of the Housing Agency after this year if the expenses continue to exceed revenues as indicated previously. Recommendation: We recommend the Agency review the operating expenses and determine which areas could be reduced. In addition, the Board should take a proactive role in monitoring the financial condition of the Agency. The Board should refrain from approving a budget deficit and should be approved based on available financial resources. View of Responsible Official: Management agrees with the Finding.
Finding 2025-007: Eligibility Public Housing Program, Assistance Listing #14.850 Section 8 Housing Choice Voucher Cluster Program, Assistance Listing #14.871 Material Weakness Criteria – In accordance with the Public Housing Program regulations under 24 CFR Part 960 and the Housing Choice Voucher Program regulations under 24 CFR 982.201, housing authorities are required to establish and maintain procedures governing (1) eligibility determinations; (2) determination of income, rent, and Housing Assistance Payments (HAP); and (3) leasing and continued occupancy. These procedures are essential to ensure compliance with HUD program requirements. Condition – During our audit of tenant and participant files within the Public Housing and Housing Choice Voucher Programs, we noted no evidence of a supervisory review control being performed or documented. File processing and eligibility determinations appeared to be completed by a single individual without independent review. The absence of a supervisory review increases the risk that errors or noncompliance may not be detected in a timely manner. Cause – Although supervisory review procedures were reportedly in place in prior years, turnover in administrative personnel resulted in these controls not being consistently performed or documented. Management did not implement adequate procedures to ensure continuity of this key internal control. Effect or Potential Effect – The lack of supervisory review over tenant and participant files increases the risk of noncompliance with HUD eligibility requirements, including improper eligibility determinations, inaccurate rent calculations, and incorrect HAP payments. This could result in questioned costs, repayment obligations, or potential program sanctions. Recommendation – We recommend the Agency strengthen its internal control structure over tenant and participant file processing by implementing and documenting a formal supervisory review process. This review should be performed by a qualified individual independent of the preparer. Additionally, the Agency should establish procedures to ensure continuity of controls during staff turnover, including cross-training and written policies and procedures. View of Responsible Official: Management agrees with the Finding.
Finding 2025-008: Eligibility, Flat Rent Requirements Public Housing Program, Assistance Listing #14.850 Material Weakness/Noncompliance- Repeat Finding Criteria: As required by the 2014 Appropriations Act, paragraph (2)(b)(i) Section 3(a) of the United States Housing Act of 1937, as amended by Section 201, establishes new parameters that PHAs must use when determining the flat rent amounts. Specifically, flat rents must now be set at no less than 80 percent of the applicable Fair Market Rent (FMR) and adjusted annually. In addition, most recently HUD issued Notice: PIH 2021-27 which clarifies HUD’s interpretation of the statutory amendment to flat rents and procedures to obtain specific exemptions. Condition: During our audit we noted the Agency did not adjust the flat rents during the calendar year 2025 until October 2025, which resulted in tenant not paying the appropriate amount of rent and resulted in a projected loss of income for the Agency of $5,880 for the year ended September 30, 2025. Cause: The Agency did not adjust the flat rents annually as required or obtain an appropriate exemption to reflect current market conditions. Effect or Potential Effect: Because the flat rents were not adjusted correctly, this resulted in an estimated loss of rental income of $5,880 and affected ten tenants. Recommendation: We recommend the Agency review the flat rents and adopt them according to the flat rent regulations on an annual basis. The Agency should review HUD Notice PIH 2021-27 for the updated procedures on flat rents and exemptions and to implement accordingly. View of Responsible Official: Management agrees with the Finding.
Finding 2025-009: Special Tests and Provisions - HQS Re-Inspections Section 8 Housing Choice Voucher Cluster Program, Assistance Listing #14.871 Material Weakness/Noncompliance Criteria: In accordance with 24 CFR 982.158(d) and 24 CFR 982.405(b), the Agency is required to inspect each assisted unit at least annually to ensure compliance with Housing Quality Standards (HQS). In addition, the Agency must perform and document quality control re-inspections to ensure the effectiveness and accuracy of the inspection process. Condition: During our audit, we noted the Agency does not have a system in place to perform quality control re-inspections. While annual inspections are conducted by the maintenance supervisor, no additional procedures were implemented to provide independent quality control over the inspection process for the year ended September 30, 2025. Cause: The condition appears to be the result of the Agency not establishing procedures to perform and document required quality control re-inspections. Effect or Potential Effect: The lack of quality control re-inspections increases the risk that deficiencies in unit conditions may not be identified or corrected in a timely manner. As a result, the Agency is not in compliance with Section 8 Housing Choice Voucher Program requirements. Recommendation: We recommend the Agency establish and implement procedures for performing quality control re-inspections in accordance with the applicable CFR requirements. Documentation supporting the completion and results of these re-inspections should be maintained in the Agency’s records. View of Responsible Official: Management agrees with the Finding.