Audit 406528

FINDINGS – MAJOR FEDERAL AWARD PROGRAMS AUDIT DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT S3800-010 Finding Reference Number 2026-001 – Inadequate Documentation of Supervisory Review and Compliance Oversight of Tenant Certifications S3800-011 Title and Assistance Listing Number of Federal Program - 14-157 Supportive Housing for the Elderly S3800-015 Type of Finding - Federal Award Finding S3800-016 Finding Resolution Status – In Process S3800-017 Information on Universe Population Size – 43 rental units S3800-018 Sample Size Information – 7 rental units S3800-019 Identification of Repeat Finding and Finding Reference Number – Not Applicable S3800-020 CRITERIA: 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain effective internal control over Federal awards that provides reasonable assurance the entity is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the award. Internal controls should be consistent with the principles in the GAO Standards for Internal Control in the Federal Government (Green Book) or the COSO Internal Control–Integrated Framework. HUD Handbook 4350.3, REV-1, Change 4 requires owners and management agents to: • Verify household income, assets, and eligibility prior to completing certifications; • Ensure tenant certifications are accurate and compliant with HUD requirements through appropriate supervisory or compliance review; • Maintain documentation supporting eligibility determinations and certifications within each tenant file. S3800-030 STATEMENT OF CONDITION: A review of tenant certification files identified deficiencies in the design and operation of internal controls over supervisory review of tenant certifications. The population consisted of 43 tenant units, from which a sample of seven (7) tenant files was selected for testing. Four (4) of the seven (7) files reviewed lacked sufficient evidence that tenant certifications received an independent supervisory or compliance review prior to the certification effective date. Specifically, tenant files lacked documentation demonstrating review and approval of income and asset calculations, including supervisory approval signatures, review checklists, approval stamps, electronic approvals, or other evidence that an independent review was completed before certifications became effective. As a result, management could not demonstrate that key compliance controls operated as designed to detect and prevent errors before certifications were finalized. S3800-032 CAUSE: Management transitioned to a new independent compliance review provider and although the written procedures for defining supervisory review responsibilities, documentation standards or approval requirements did not change, management did not ensure site personnel consistently followed the standardized procedures for documenting supervisory reviews and approvals. As a result, supervisory review controls were inconsistently applied and documentation supporting management oversight was not consistently maintained. S3800-033 EFFECT OR POTENTIAL EFFECT: Because documented supervisory review controls were not consistently performed or retained: • Audit testing identified multiple undetected certification errors attributable to weaknesses in supervisory review. • Weaknesses in supervisory review also contributed to incomplete move-in documentation. • The deficiencies increase the risk of improper Housing Assistance Payments (HAP), tenant rent miscalculations, HUD noncompliance, repeat audit findings, and potential repayment obligations. S3800-035 Auditor Non-Compliance Code - (S) Internal Control Deficiencies S3800-040 Questioned Costs Questioned costs were not quantified during this audit. However, because supervisory review controls were not consistently documented or performed, management cannot demonstrate that tenant certifications were properly reviewed prior to certification. As a result, there is an increased risk that improper Housing Assistance Payments were made. Any repayment obligation would depend upon the results of recalculating affected tenant certifications. Property(s) and associated questioned costs this finding applies to: S3800-037 FHA/Contract Number - 127EE034 S3800-038 Questioned Costs - $0 S3800-045 REPORTING VIEWS OF RESPONSIBLE OFFICIALS: Management will endeavor to check files at the site level to ensure that the approval of each certification is retained on file. Management will work with the site managers and the compliance reviewing company to ensure accuracy of certifications, verifications and rent calculations. The deficiencies found in the files audited will be corrected by Compliance and the site manager and reviewed by the Affordable Housing Director for completion and accuracy. S3800-050 CONTEXT See statement of condition and effect. S3800-080 RECOMMENDATION We recommend management: 1. Enforce written policies and procedures requiring documented independent supervisory or compliance review of all tenant certifications prior to certification approval. 2. Require documentation of supervisory approval, electronic workflow approvals, or other verifiable documentation, to be retained in each tenant file. 3. Implement ongoing monitoring activities, including periodic quality control reviews and internal testing of tenant certifications, to verify that supervisory review controls are operating effectively and deficiencies are promptly corrected. S3800-090 Auditor's Summary of the Auditee's Comments on the Findings and Recommendations Management will endeavor to check files at the site level to ensure that the approval of each certification is retained on file. Management will work with the site managers and the compliance reviewing company to ensure accuracy of certifications, verifications and rent calculations. The deficiencies found in the files audited will be corrected by Compliance and the site manager and reviewed by the Affordable Housing Director for completion and accuracy. S3800-130 Response Indicator – Agree S3800-140 Completion Date – 6/29/2026 S3800-150 Response Management concurs with the finding and has taken appropriate corrective action as indicated previously.