Audit 404556

Finding 2025-001 - Internal Controls and Accounting for Capital Fund Grants – Cash Management and Special Tests and Provisions – Noncompliance and Significant Deficiency – Capital Fund Grant Program ALN 14.872; Public and Indian Housing ALN 14.850 Condition & Cause: We examined all FY 2025 capital grant draws and expenditures for our review of the programs internal control activities. We found that the Authority is paying invoices out of nonfederal COCC funds and then reimbursing itself at a later date with capital fund draws. This is explicitly against federal cash management and PIH notices issued by HUD which require the draw and disbursement to occur in a three-day window. We found that the Authority accrued $245,420 of BLI 1408 funds from grant 501-24. We noted, however, that the Authority did not have associated costs matched against those revenues. We have provided adjustments to remove this revenue from the general ledger. In the prior year, we had a similar BLI 1408 adjustment as the one above in the amount of $373,285.10. During FY 2025 the Authority expended these BLI 1408 funds on development and modernization costs. We question, however, if these costs are eligible under BLI 1408, which is the management improvement line. Costs under this BLI are for management efficiencies which improve the Public Housing Authority’s ability to govern its public housing stock. We recommend that the client review its capital fund budget and consider allocating these BLI 1408 type costs to the BLI 1480 category. In addition to the above, we found that the Authority treated all costs as “hard” costs and placed them in the work in process line in the Public Housing 14.850 column of the FDS. This includes 1410 administrative fee costs which are paid to the COCC. We have provided adjustments to reclassify some of these costs to the “soft” classification for reporting purposes. Finally, we note that the Authority still has Capital Fund Grant 501-20 open. This grant has an end disbursement date of March 2026. As of the exit conference date the Authority has $309,586 of grant funds remaining to draw and $165,313 of grant funds remaining to expend. Likewise Capital Fund Grant 501-22 is also open. This grant has an end disbursement date of May 2026. As of the exit conference date the Authority has $1,555,436 of grant funds remaining to draw and expend. The Authority should focus on these grants immediately to avoid a loss of funding. Criteria: Federal Uniform Guidance 2 CFR Part 200, The Public Housing Capital Fund Program 24 CFR Part 905, PIH Notices, OMB Compliance Supplement Effect: Failure to manage grants effectively can result in loss of federal funding. Deficiencies in the internal control activities can lead to material misstatements and errors in the financial statements. Recommendation: We recommend that the Authority implement internal controls to strengthen the existing control environment. The Authority should draw and disburse capital funds within three days of receipt. The Authority should review BLI 1408 guidance to ensure that costs attributed to this line are eligible. The Authority should also review capital fund grant end dates to ensure proper and effective use of grant funds. Questioned Costs: None Repeat Finding: No Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.

Finding 2025-002 – Public and Indian Housing Participant Files – Eligibility – Internal Control over Participant Files – Noncompliance and Material Weakness – Public and Indian Housing Program – ALN 14.850 Condition & Cause: We reviewed thirty-five (35) resident files for compliance with applicable program requirements and identified noncompliance in twenty-three (23) files, with some files containing multiple deficiencies. The following deficiencies were noted: • One (1) resident file could not be located • One (1) file was missing the documentation for the recertification that agreed to the rent roll • Eleven (11) files had annual reexaminations that were completed materially past due or were not completed as of the audit fieldwork date • Four (4) files had miscalculations of annual income • Three (3) files were missing proper income verification • Two (2) files were missing proper deduction verification • Eight (8) files were missing documentation that an annual unit inspection was conducted • One (1) file did not have an annual Application for Continued Occupancy • Three (3) files were missing the EIV report for the action in review • Two (2) files were missing a valid Authorization for Release of Information The noncompliance was primarily caused by prolonged staff vacancies and high turnover within the department during the audit period, which limited the Agency’s ability to complete, maintain, and retain required documentation in a timely and accurate manner. Criteria: The Code of Federal Regulations, Admissions and Continued Occupancy Policy, and specific HUD guidelines in documenting and maintaining participant files Effect: Failure to properly verify and calculate annual income, maintain required documentation, inspect units, and complete timely reexaminations can result in a misstatement of rental income leading to improper funding for the LIPH program. Misstatements of rent may also cause an undue financial burden to the participant which goes against the mission of the Agency. Persistent noncompliance can result in increased scrutiny from regulatory agencies or termination of program funding. Recommendation: We recommend that the Agency conduct a resident file audit of existing residents in the LIPH program to determine the extent of any additional misstatements of rent expense. We also recommend that the Agency increase their monitoring and quality control review of the LIPH program files to determine whether occupancy specialists need additional training or procedures added to ensure compliance. Our experience with agencies that increase monitoring and review of the files is that there are dramatically decreased error rates. Questioned Costs: Based on extrapolation of known questioned costs, likely questioned costs are $66,512, or 2.6% of dwelling rental income. Repeat Finding: No Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.

Finding 2025-003 – Section 8 Participant Files – Eligibility – Internal Control over Participant Files – Noncompliance and Material Weakness – Section 8 Housing Assistance Cluster Program – ALNs 14.871, 14.879, and 14.EHV Condition & Cause: We reviewed forty (40) resident files for compliance across multiple areas and found seventeen (17) files to be noncompliant with some files containing multiple deficiencies. We specifically noted the following: • Two (2) files were unable to be located. • One (1) resident for which the HAP calculation is not supported by an action maintained in the file. • Three (3) files were missing proper verification of income. • Three (3) files had miscalculations of income • Nine (9) files were missing the EIV report • Four (4) files were missing a valid Authorization for Release of Information • One (1) file that did not have an annual reexamination completed when due or the Application for Continued Occupancy • One (1) file that did not have evidence of a biennial HQS inspection. Based on extrapolation, we found that the potential misstatement of HAP expense is immaterial to the financial statements. The noncompliance was primarily caused by high turnover within the department during the audit period, which limited the Agency’s ability to complete, maintain, and retain required documentation in a timely and accurate manner. Criteria: The Code of Federal Regulations, Housing Authority Administrative Plan, and specific HUD guidelines in documenting and maintaining participant files Effect: Failure to properly verify and calculate annual income, maintain required documentation, and complete timely reexaminations can result in a misstatement of HAP expense leading to improper funding for the HCV program. Misstatements of HAP may also cause an undue financial burden to the participant which goes against the mission of the agency. Persistent noncompliance can result in increased scrutiny from regulatory agencies and a decrease in vouchers or program funding. Recommendation: We recommend that the Agency conduct a resident file audit of existing residents in the HCV program to determine the extent of any additional misstatements of HAP expense. We also recommend that the Agency increase their monitoring and quality control review of the HCV program files to determine whether occupancy specialists need additional training or procedures added to ensure compliance. Our experience with agencies that increase monitoring and review of the files is that there are dramatically decreased error rates. Questioned Costs: None Repeat Finding: Yes Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.

Finding 2025-004 – Section 8 Waiting List – Eligibility – Internal Control over Waiting List – Noncompliance and Significant Deficiency – Section 8 Housing Assistance Cluster Program – ALNs 14.871, 14.879, and 14.EHV Condition & Cause: In our review of the Section 8 waiting lists, we found that the Agency did not administer Housing Choice Voucher waitlist preferences in accordance with HUD requirements and its own governing documents. Specifically, the local preferences programmed into their housing database are not included or detailed in the Agency’s Section 8 Administrative Plan. Furthermore, we found that the Agency was unable to provide documentation verifying that applicants met the eligibility criteria for the preferences claimed. The Agency experienced significant staff turnover, including executive and senior management, since the waitlist last accepted applications in 2021. During this period, the Agency did not ensure continuity of policies and internal controls related to waitlist administration. As a result, local preferences programmed into the housing software were not reconciled to the Administrative Plan, and procedures were not in place to ensure consistent verification and retention of documentation supporting applicants’ claimed preferences. Criteria: 24 CFR §982 details the requirements of administering the Housing Choice Voucher waitlist. Effect: The Agency cannot demonstrate that applicants were selected from the waitlist in accordance with HUD regulations and the Agency’s Administrative Plan. This condition increases the risk that applicants may have been improperly ranked or selected, undermining the integrity, transparency, and fairness of the waitlist process. Recommendation: We recommend that the Agency first review all local preferences currently programmed in the housing database and either remove those not formally adopted or update the Admin Plan to accurately reflect all preferences used. Second, implement procedures to ensure that staff obtain, verify, and retain documentation supporting applicants’ eligibility for any claimed waitlist preference. Furthermore, provide staff training on waitlist preference requirements and record retention to ensure consistent compliance with HUD regulations and the Admin Plan. Questioned Costs: None Repeat Finding: No Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.