Finding 2025-003 – Public Housing Advance to Creative Housing Limited Partnership – ALN 14.850 Low Rent Public Housing Program – Noncompliance and Material Weakness Condition & Cause: During the audit, we determined that the Housing Authority advanced $257,202.70 of Public Housing funds to Creative Housing Limited Partnership (CHLP) for cash flow purposes. CHLP is a tax credit limited partnership and is a separate legal entity from the Housing Authority. Public Housing funds were used to provide cash flow financing to CHLP rather than for allowable Public Housing program purposes. The condition appears to have resulted from management's determination that Public Housing funds could temporarily be used to meet CHLP's cash flow needs without obtaining the necessary HUD authorization or establishing that such use was an allowable Public Housing expenditure. Criteria: Public Housing Operating Funds are restricted Federal funds and may only be used for purposes authorized under Section 9(e) of the United States Housing Act of 1937, applicable HUD requirements, and the terms and conditions of the Federal award. HUD identifies the Operating Fund as funding provided to PHAs for the operation and management of public housing. HUD PIH Notice 2025-14, Revised FDS Line Definitions, specifically cautions PHAs that Federal funds are normally not fungible between different Federal programs and states that the inappropriate use of restricted funds, including operating subsidy, for even a temporary loan, constitutes an ineligible cost and results in program noncompliance. The Notice further states that Public Housing Operating Funds are restricted funds that may only be used for the operation and management of Public Housing and may not be used to cover or support non-public-housing program activities. HUD's guidance also distinguishes between transactions involving Public Housing activities and transactions involving affiliated or separate entities. HUD explains that affiliates are treated as separate entities for purposes of applicable requirements and that Public Housing funds may not be used to finance or develop projects that do not include Public Housing units. Accordingly, Public Housing funds may not be advanced or temporarily loaned to a separate tax-credit entity for cash-flow purposes when the funds are not being used for an allowable Public Housing purpose or otherwise authorized by HUD. Effect: The use of Public Housing funds for CHLP's cash flow needs resulted in $257,202.70 of Public Housing funds being unavailable for authorized Public Housing program purposes. Because the funds were advanced to a separate tax credit limited partnership, the transaction represents noncompliance with the requirements governing the use of Public Housing funds. Recommendation: We recommend that the Housing Authority immediately discontinue the use of Public Housing funds to provide advances or other financing to CHLP unless specifically authorized by HUD and otherwise determined to be allowable. The Housing Authority should require CHLP to repay the $257,202.70 advance as soon as practicable and maintain documentation supporting the repayment. Management should also establish procedures requiring review and approval of all transfers or advances between the Housing Authority and related entities to ensure that such transactions comply with federal requirements and applicable HUD guidance. Questioned Costs: $257,202.70 Repeat Finding: No Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.
Finding 2025-006 – Tenant Files – Eligibility – ALN 14.850 Low Rent Public Housing Program – Noncompliance and Material Weakness Condition & Cause: The Housing Authority's tenant files did not consistently contain the documentation necessary to demonstrate compliance with federal requirements for the Public Housing program. The exceptions identified indicate deficiencies in the Housing Authority's file review, documentation, and quality control processes. We reviewed 10 Public Housing participant files and identified noncompliance in nine files. Some files contained more than one exception. The following conditions were identified: • Six participants did not receive an annual unit inspection during the fiscal year; • One file lacked adequate income verification; • Two files lacked a declaration of citizenship for at least one household member; • Two files lacked a Social Security card; • One file lacked a lead-based paint disclosure for a household with a member under age six; • One file lacked the annual application for continued occupancy; and • One file did not contain the required EIV report at annual reexamination. Criteria: For the Public Housing program, 24 CFR §960.257(a) requires annual reexamination of family income and composition for families paying income-based rent and requires appropriate rent adjustments upon verification of the information. The PHA must adopt written policies governing annual and interim reexaminations and conduct reexaminations in accordance with those policies. The Housing Authority is also required to comply with applicable HUD requirements concerning inspections, lead-based paint disclosures, Social Security documentation, citizenship documentation, HAP contracts, utility allowances, EIV, and other required participant documentation. 2 CFR §200.303(a) additionally requires the Housing Authority to establish and maintain effective internal controls over Federal awards, while 2 CFR §200.303(c) requires management to evaluate and monitor compliance with applicable Federal requirements. Effect: The deficiencies increase the risk that participants may receive assistance for which they are not eligible or may receive assistance in amounts that are not properly calculated. Inadequate documentation also prevents the Housing Authority from demonstrating compliance with federal program requirements. In addition, the absence of timely inspections and required tenant documentation increases the risk that housing units may not meet program requirements and that participant eligibility and continued assistance may not be properly supported. Recommendation: We recommend that the Housing Authority complete and implement comprehensive SOPs and QC procedures for both the Housing Choice Voucher and Public Housing programs. At a minimum, the procedures should establish: 1. Required documentation for initial eligibility and annual reexaminations; 2. Required income and deduction verification procedures; 3. Procedures for reviewing EIV information; 4. Required citizenship and identity documentation; 5. Required HAP contracts and other program documents; 6. Procedures for maintaining current utility allowances; 7. Annual inspection procedures and supervisory monitoring; 8. Lead-based paint documentation requirements; 9. Required annual applications for continued occupancy; 10. Supervisory review of tenant files before completion of annual reexaminations; and 11. Periodic independent QC reviews with documented corrective action. Management should also review the files identified during the audit and correct any eligibility, rent, assistance, inspection, or documentation deficiencies. 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 2025-004 – Procurement Deficiencies – Procurement and Suspension and Debarment – ALN 14.850 Low Rent Public Housing, ALN 14.872 Capital Fund Program – Noncompliance and Material Weakness Condition & Cause: We reviewed a sample of three vendor contracts and payments over the Housing Authority’s $40,000 small purchase threshold. For two large purchases, we have determined that the Housing Authority has not shown compliance with its procurement policy or federal procurement requirements. • The Authority purchased three vehicles from Gary Yeomans Ford for a total of $127,434. We found no evidence that the purchases were solicited or advertised, no documentation that other vehicle suppliers were solicited or considered, and no sole-source justification on file supporting a noncompetitive procurement. • The Authority paid Epp-lectric $214,269 for a metering project. This was documented and procured as a small purchase (three quotes obtained) instead of a formal sealed bid, even though the dollar amount required formal bidding. The deficiencies can be attributed to a lack of oversight over procurement during the audit period. Criteria: Procurement Standards outlined in 2 CFR 200 require full and open competition once purchases exceed an entity’s small purchase threshold and lay out specific methods for meeting that requirement. The Authority’s own policy sets that threshold at $40,000. Effect: Without proper competition and documentation, the Authority can’t show these purchases were reasonable or the best use of federal funds. Recommendation: The Authority should strengthen its procurement procedures to ensure staff use the correct method and require documented review and approval before a purchase is made. All parties involved with procurement should also receive training in procurement requirements. 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 – Policies and Procedures Require Review and Update – ALN 14.871 Housing Choice Voucher Program, ALN 14.850 Low Rent Public Housing, ALN 14.872 Capital Fund Program – Significant Deficiency Condition & Cause: The Housing Authority has not adequately reviewed and updated several policies and procedures necessary to provide current guidance to employees and ensure compliance with applicable federal requirements and generally accepted internal control practices. Specifically, we noted: 1. The capitalization policy establishes a $500 threshold for capitalization and tracking of nonexpendable equipment. The threshold has contributed to difficulty maintaining an accurate inventory of equipment, including appliances. 2. The investment policy was adopted in December 2009 and has not been updated to reflect current requirements and practices. 3. The Housing Authority does not have a comprehensive financial policies and procedures manual addressing the flow of financial documents, internal controls over Housing Authority assets, authorization procedures, financial reporting responsibilities, and segregation of duties. 4. The Housing Authority does not have a formal conflict-of-interest policy applicable to Board members and employees. 5. The procurement policy was last revised April 23, 2024. The policy states that Board of Commissioners approval is not required for any procurement action. The current policy also establishes informal procurement thresholds of up to $40,000, with requirements for three quotations for purchases between $10,000 and $40,000 and sealed bids for purchases exceeding $40,000. The conditions appear to have resulted from an inadequate process for periodically reviewing and updating policies to reflect changes in federal requirements, HUD guidance, and the Housing Authority's current operations. Criteria: 2 CFR §200.303(a) requires a recipient or subrecipient to establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance of compliance with Federal statutes, regulations, and the terms and conditions of Federal awards. 2 CFR §200.303(c) further requires management to evaluate and monitor compliance and §200.303(d) requires prompt action when instances of noncompliance are identified. With respect to procurement, 2 CFR §200.318(a) requires the recipient or subrecipient to maintain and use documented procurement procedures that are consistent with applicable State, local, and tribal laws and regulations and the Federal procurement standards contained in 2 CFR §§200.317–200.327. 2 CFR §200.318(c)(1) also requires written standards of conduct covering conflicts of interest for employees involved in the selection, award, and administration of contracts. HUD's Public Housing Procurement Handbook 7460.8 states that PHAs are required to establish and follow a written procurement policy consistent with 2 CFR §§200.317–200.327. The Handbook also addresses the authority and responsibility of the PHA Board for approving the procurement policy and delegating procurement authority. The Housing Authority's own Board-approved procurement policy establishes procurement thresholds and procedures that are required to be followed unless properly amended by the Board. Accordingly, the Housing Authority is required to maintain policies that are consistent with applicable Federal requirements and to administer procurements in accordance with its approved policies. Effect: Outdated or incomplete policies increase the risk that employees will not have adequate guidance to perform their responsibilities consistently and that the Housing Authority will not comply with applicable federal, HUD, state, and local requirements. In particular, the absence of comprehensive financial policies and procedures and an updated procurement policy increases the risk of unauthorized transactions, inadequate competition, unsupported procurements, conflicts of interest, inadequate segregation of duties, and inconsistent treatment of Housing Authority transactions. Recommendation: We recommend that the Housing Authority conduct a comprehensive review of all financial, procurement, investment, capitalization, conflict-of-interest, and other significant administrative policies at least annually and whenever applicable federal or HUD requirements change. Specifically, the Housing Authority should: • Revise the capitalization policy and establish a threshold that is practical to administer while maintaining adequate control over material nonexpendable equipment; • Update the investment policy to reflect current requirements and investment practices; • Develop and formally adopt a comprehensive financial policies and procedures manual; • Develop and implement a formal conflict-of-interest policy applicable to Board members, employees, and other applicable parties; • Revise the procurement policy to reflect current federal and HUD requirements, including HUD Handbook 7460.8, Rev. 3 and applicable provisions of 2 CFR Part 200; • Establish clear Board approval requirements for significant procurement contracts and other material commitments; and • Establish a formal process for management and the Board to periodically review and approve policy updates. 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 2025-005 – Tenant Files – Eligibility – ALN 14.871 Housing Choice Voucher Program – Noncompliance and Material Weakness Condition & Cause: The Housing Authority's tenant files did not consistently contain the documentation necessary to demonstrate compliance with federal program requirements for the Housing Choice Voucher program. The exceptions identified indicate deficiencies in the Housing Authority's file review, documentation, and quality control processes. We reviewed 25 Housing Choice Voucher participant files and identified noncompliance in 16 files. Some files contained more than one exception. The following conditions were identified: • Three files lacked adequate or proper verification of income; • Two files contained income calculation errors; • One file did not contain adequate verification of income deductions; • Seven files lacked required identification documentation for at least one household member, including Social Security cards and/or birth certificates; • Three files lacked declarations of citizenship; • Two files did not contain the HAP contract for the assisted unit; • One file contained an outdated utility allowance on the HUD-50058; • One file lacked a complete authorization for release of information; and • One file did not contain the required EIV report at annual reexamination. Five of the 25 files reviewed, or 20 percent of the sample, contained exceptions directly related to adjusted annual income. The deficiencies appear to have resulted from inadequate management oversight, insufficient documented Standard Operating Procedures (SOPs), and the absence of an effective Quality Control (QC) process for reviewing tenant files. Management informed us that, as of the audit fieldwork date, the Housing Authority had begun developing SOPs and QC procedures. Criteria: The Housing Choice Voucher Program requires PHAs to maintain documentation supporting family eligibility, income, deductions, family composition, and continued assistance. Under 24 CFR §982.201(a), a PHA may admit only eligible families to the Housing Choice Voucher Program. Eligibility includes applicable income eligibility requirements and citizenship or eligible immigration status. 24 CFR §982.516(a) requires the PHA to conduct an examination of family income and composition at least annually and obtain and document third-party verification of reported annual income, assets, expenses related to deductions, and other factors affecting adjusted income, unless an allowable exception applies. Section 982.516(f) further requires the PHA to establish procedures to assure that income data is complete and accurate and requires corrective action when errors are identified. For citizenship and immigration status, 24 CFR §5.508 requires each family member to submit appropriate evidence of citizenship or eligible immigration status as a condition of assistance or continued assistance under a Section 214-covered program. HUD requires PHAs to use the Enterprise Income Verification system in their day-to-day operations. HUD explains that EIV is used to supplement and verify tenant-provided income information during required annual reexaminations and to reduce subsidy payment and administrative errors. Effect: The deficiencies increase the risk that participants may receive assistance for which they are not eligible or may receive assistance in amounts that are not properly calculated. Inadequate documentation also prevents the Housing Authority from demonstrating compliance with federal program requirements. In addition, the absence of timely inspections and required tenant documentation increases the risk that housing units may not meet program requirements and that participant eligibility and continued assistance may not be properly supported. Recommendation: We recommend that the Housing Authority complete and implement comprehensive SOPs and QC procedures for both the Housing Choice Voucher and Public Housing programs. At a minimum, the procedures should establish: 1. Required documentation for initial eligibility and annual reexaminations; 2. Required income and deduction verification procedures; 3. Procedures for reviewing EIV information; 4. Required citizenship and identity documentation; 5. Required HAP contracts and other program documents; 6. Procedures for maintaining current utility allowances; 7. Annual inspection procedures and supervisory monitoring; 8. Lead-based paint documentation requirements; 9. Required annual applications for continued occupancy; 10. Supervisory review of tenant files before completion of annual reexaminations; and 11. Periodic independent QC reviews with documented corrective action. Management should also review the files identified during the audit and correct any eligibility, rent, assistance, inspection, or documentation deficiencies. 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 2025-007 –Waiting List – Eligibility – Internal Control over Waiting Lists – ALN 14.871 Housing Choice Voucher Program, ALN 14.850 Low Rent Public Housing Program – Noncompliance and Material Weakness Condition & Cause: The Housing Authority was unable to provide a copy or electronic extract of the waiting list as it existed on or near the date of applicant selection or offer. The Housing Authority also could not provide a sufficient audit trail demonstrating the applicant's position on the waiting list, applicable preferences, and the basis for selection. As a result, we were unable to determine from the records maintained by the Housing Authority whether applicants and selected participants were consistently selected in accordance with applicable federal requirements, the Housing Authority's Administrative Plan, and the Admission and Continued Occupancy Policy (ACOP). The condition appears to have resulted from the absence of a documented procedure requiring Housing Authority personnel to capture and retain the waiting list, applicant ranking, applicable preferences, and selection information at or near the time each applicant is selected or offered assistance. The Housing Authority also does not have an adequate records-retention procedure specifically addressing waiting-list documentation and the preservation of an audit trail of applicant selections. Criteria: For the Housing Choice Voucher Program, 24 CFR §982.204(a) requires participants, except for special admissions, to be selected from the PHA waiting list in accordance with the PHA's Administrative Plan. Section 982.204(b) requires the PHA to maintain information that permits participants to be selected from the waiting list in accordance with the PHA's admission policies, including applicant name, family unit size, date and time of application, and qualification for local preferences. For the Public Housing program, 24 CFR §960.206(c)(1) requires the PHA to use its approved selection method when selecting among applicants with the same priority, and §960.206(c)(2) specifically requires the selection method to leave a clear audit trail that can be used to verify that each applicant was selected in accordance with the method specified in the PHA Plan. Additionally, 2 CFR §200.334 requires recipients and subrecipients to retain Federal award records, including financial, supporting, and statistical records, for the applicable retention period. Accordingly, the Housing Authority should maintain sufficient waiting-list records and supporting documentation to demonstrate that applicants were selected in accordance with applicable Federal requirements, the PHA's Administrative Plan, ACOP, and PHA Plan, including applicable preferences and selection priorities. Effect: The inability to reconstruct the waiting list and applicant selection process prevents the Housing Authority from demonstrating that applicants were selected in accordance with federal requirements and the Housing Authority's Administrative Plan and ACOP. This condition increases the risk of inconsistent treatment of applicants, inappropriate selection of applicants, failure to properly apply preferences, and undetected manipulation or alteration of the waiting list. Recommendation: We recommend that the Housing Authority establish and implement written procedures requiring the preservation of the waiting list and related applicant-selection documentation at the time of each selection. At a minimum, the Housing Authority should retain documentation showing: • The waiting list in effect at or near the date of selection; • Applicant name or identification number; • Applicant rank or position; • Applicable preferences; • Date of selection; • Basis for selection; • Date and method of offer; • Disposition of the offer; and • Any subsequent changes to the applicant's status or position on the waiting list. The Housing Authority should also establish appropriate retention periods and access controls to ensure that waiting-list records cannot be altered or deleted without an adequate audit trail. Management should periodically review waiting-list selections through its QC process to verify compliance with the Administrative Plan, ACOP, and applicable federal requirements. 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.