Audit 404893

Finding 2025-001 – Section 8 Tenant Files – Eligibility – Internal Control over Tenant Files – Noncompliance & Material Weakness – Section 8 Housing Assistance Program Cluster – ALNs 14.871, 14.879, & 14.EHV Condition: We reviewed one hundred eighty (180) tenant files for compliance across multiple areas and found fifty-one (51) files to be noncompliant, or 28.3%. Of these, twenty-two (22) files contained errors related to adjusted annual income, or 11.7%. Specifically: • Twelve (12) files – Improper or missing verification of income • Eight (8) files – Identified miscalculations of income • Two (2) files – Unsupported or miscalculated deductions Additional identified discrepancies include units not undergoing a biennial HQS inspection (20), improper or unsupported utility allowances (10), missing EIV reports (5), and an unsigned Continued Occupancy Application and 9886 (1). Error rates declined both compared to the prior year and within the current audit period, indicating improvement in program compliance. The overall file error rate decreased from 32% in 2024 to 28.3% in 2025, and the income-based error rate decreased more substantially, from 21% in 2024 to 11.7% in 2025. Improvement was also evident within the audit period itself — files with discrepancies dropped from 34% in the April 2025 HAP register sample to 23% in the September 2025 HAP register sample. Testing identified instances where tenant income appears to have been underreported, resulting in overstated HAP expense. Known Questioned Costs were identified within the sample and extrapolated to the population to estimate Likely Questioned Costs, as disclosed below. The extrapolated misstatement represents 0.5% of total HAP expense, which has been determined to be material at the financial statement level. Cause: The identified noncompliance is attributable in part to operational challenges the organization faced during the audit period. Management was in the process of transitioning from physical to electronic file management, and the quality control team responsible for reviewing files for compliance was newly established. These concurrent transitions likely contributed to inconsistencies in documentation practices and income calculation procedures during this period. Criteria: Title 24 of the Code of Federal Regulations, the Housing Authority’s Administrative Plan, and specific HUD guidelines in documenting and maintaining Housing Choice Voucher tenant files. Effect: Errors in income verification and calculation, compounded by the absence of mandatory EIV reports, increase the risk that unreported or underreported income is going undetected. This may have resulted in overpaid HAP to owners and understated rental charges to assisted families. Units lacking required HQS inspections may have unaddressed health and safety deficiencies. Recommendation: We recommend that the Agency continue strengthening its quality control processes to ensure tenant files contain all required documentation, income is accurately verified and calculated, and units are inspected within required timeframes prior to processing Housing Assistance Payments. Questioned Costs: Approximately $976,652 Repeat Finding: Yes Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.