Audit 405727

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Public and Indian Housing Program Federal Assistance Listing Numbers: 14.850 Noncompliance – N. Special Tests and Provisions - Recording of Declarations of Trust/Declaration of Restrictive Covenants Against Public Housing Property Non Compliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Special Tests and Provisions Criteria: A current Declaration of Trust ("DOT"), in a form acceptable to HUD, must be recorded against all public housing property owned by PHAs (or private entities for public housing developed under 24 CFR Part 905, Subpart F) that has been acquired, developed, maintained, or assisted with funds from the US Housing Act of 1937. A DOT is a legal instrument that grants HUD an interest in public housing property. Condition: Based upon inspection of the Authority’s files and on discussion with management, there were properties that the Authority owns and insures that did not have DOTs on file during the time of audit. Context: The Authority owns 468 public housing unit. During the audit, it was noted that only 300 of the 468 public housing units were covered by the DOTs on file. Cause: There is a significant deficiency in internal controls over the compliance for the special tests and provisions type of compliance related to the recording of DOTs against public housing property. The Authority has not properly filed DOTs in compliance with program requirements. Effect: The Public and Indian Housing Program is in non-compliance with the special tests and provisions type of compliance related to the recording of DOTs against public housing property. Recommendation: We recommend that the Authority files proper DOTs on the public housing properties. Authority Response: The Authority accepts the recommendation of the auditor and will ensure all necessary DOTs are recorded.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Section 8 Housing Choice Vouchers Program Federal Assistance Listing Numbers: 14.871 Noncompliance – N. Special Tests and Provisions - Reasonable Rent Non Compliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Special Tests and Provisions Criteria: Reasonable Rent. The Authority must do the following: The Authority must determine that the rent to owner is reasonable at the time of initial leasing. Also, the Authority must determine reasonable rent during the term of the contract (a) before any increase in the rent to owner, and (b) at the HAP contract anniversary if there is a 5 percent decrease in the published Fair Market Rent in effect 60 days before the HAP contract anniversary. The Authority must maintain records to document the basis for the determination that rent to owner is a reasonable rent (initially and during the term of the HAP contract) (24 CFR sections 982.4, 982.54(d)(15), 982.158(f)(7), and 982.507). Condition: Based upon inspection of the Authority’s files and discussion with management, there were newly leased units, including unit transfers, for which the evaluation of rent reasonableness was not performed. Context: There were approximately twelve (12) newly leased units, including unit transfers. Of a sample size of two (2) units, two (2) units' documentation of reasonable rent was not available for examination. Our sample size is statistically valid. Known Questioned Costs: Unknown Cause: There is a significant deficiency in internal controls over the compliance for the special tests and provisions type of compliance related to reasonable rent. The Authority has not properly considered, designed, implemented, maintained and monitored a system of internal controls that reasonably assures the program is in compliance. Effect: The Section 8 Housing Choice Vouchers program is in non-compliance with the special tests and provisions type of compliance related to reasonable rent. Recommendation: We recommend the Authority design and implement internal control procedures related to reasonable rent that will reasonably assure compliance with the Uniform Guidance and the compliance supplement. Authority Response: The Authority has recognized the significant deficiency in the Section 8 Housing Choice Vouchers Program and has started to implement internal control procedures related to reasonable rent that will ensure compliance with federal regulations. Starting in August 2025, the Authority hired a third party vendor to complete rent reasonableness determinations for all Housing Choice Voucher units.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Public Housing Capital Fund Program Federal Assistance Listing Numbers: 14.872 Noncompliance - C. Cash Management Non Compliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Cash Management Criteria: In accordance with 2 CFR 200.305, payment methods for federal awards must minimize the time elapsing between the transfer of federal funds and the disbursement of those funds by the recipient. Condition: The Authority drew down federal funds in advance of immediate cash needs for allowable program expenditures. As of year end, a portion of the funds drawn remained unexpended and was reported as unearned revenue in the financial statements. This indicates that federal funds were received prior to the incurrence of eligible expenditures. Context: During review of the financial statements, the Authority was noted to have unexpended federal funds on hand at year end that had been drawn prior to the disbursement of allowable program costs. Specifically, amounts recorded as unearned revenue represented federal funds received in advance of immediate cash needs. This condition was identified through review of drawdown activity, general ledger balances, and year end financial reporting records. Known Questioned Costs: $270,215 Cause: The Authority did not have adequate procedures in place to monitor the timing of grant drawdowns in relation to actual program cash needs and allowable expenditures. As a result, federal funds were requested and received prior to the incurrence of eligible costs under the Public Housing Capital Fund Program. Effect: The Authority was not in compliance with federal cash management requirements governing the timing of federal fund drawdowns. As a result, federal funds were held in advance of immediate cash needs, increasing the risk of improper cash management and noncompliance with Uniform Guidance and HUD requirements. Recommendation: We recommend the Authority strengthen its cash management procedures to ensure federal funds are drawn only for immediate cash needs related to allowable program expenditures. Management should implement monitoring and review controls over grant drawdown activity, including periodic reconciliation of drawdowns to incurred expenditures, to ensure compliance with 2 CFR 200.305 and HUD requirements. Authority's Response: The Authority accepts the recommendation of the auditor. The Authority will increase oversight in the Public Housing Capital Fund Program to ensure that established internal control policies are being followed on a timely basis. Federal funds drawn under the Public Housing Capital Fund Program should be limited to amounts needed to meet the Authority’s immediate cash requirements for allowable program expenditures. Accordingly, the Authority should implement procedures to ensure grant funds are not drawn in advance of actual or imminent eligible expenditures.