Audit 411231

Finding 2025-008: Material Weakness in Internal Control Over Compliance – Housing Choice Voucher Program Federal Program Information Assistance Listing Number: 14.871 Program: Housing Choice Voucher Cluster Criteria: Management is responsible for establishing and maintaining effective internal controls over federal programs that provide reasonable assurance of compliance with applicable federal statutes, regulations, and program requirements. Internal controls should include documented procedures, supervisory reviews, monitoring activities, and controls designed to ensure compliance deficiencies are prevented or detected and corrected in a timely manner. Condition: During our audit of the Housing Choice Voucher Program, we identified deficiencies in the Agency's internal control structure over compliance. Specifically, we noted: • The Agency did not utilize a tenant file completeness checklist to help ensure all required eligibility and compliance documentation was maintained. • Supervisory reviews of tenant files were not consistently performed or documented. • Compliance processes relied heavily on employee knowledge and experience rather than formalized procedures and monitoring controls. • Required HOTMA provisions were not timely incorporated into the Administrative Plan. • Audit testing identified compliance deficiencies affecting multiple compliance areas within the Housing Choice Voucher Program. The existence of compliance deficiencies across multiple compliance requirements indicates that controls designed to monitor compliance were not operating effectively during the audit period. Cause: The Agency has not established a comprehensive system of internal controls over compliance for the Housing Choice Voucher Program. Management did not implement sufficient supervisory review procedures, compliance monitoring activities, or standardized documentation processes to ensure compliance requirements were consistently met. In addition, compliance responsibilities were concentrated among a limited number of employees and relied heavily on institutional knowledge rather than formal policies and procedures. Effect: As a result of these control deficiencies, noncompliance with federal program requirements was not prevented or detected in a timely manner. Weaknesses in the control environment increase the risk that additional compliance violations may occur and remain undetected, potentially affecting program operations and future funding. The deficiencies also contributed to the compliance findings reported elsewhere in this Schedule of Findings and Questioned Costs. Recommendation: We recommend the Agency strengthen its internal control structure over compliance by: 1. Developing and implementing written compliance procedures for the Housing Choice Voucher Program. 2. Establishing tenant file checklists to ensure required documentation is maintained. 3. Performing and documenting supervisory reviews of tenant files on a periodic basis. 4. Establishing procedures to monitor HUD notices, regulatory changes, and program requirements. 5. Providing training to staff responsible for administering the Housing Choice Voucher Program. 6. Periodically reporting compliance monitoring results to the Board of Commissioners and documenting corrective actions for identified deficiencies. Views of Responsible Officials: The Housing Agency agrees with the finding.

Finding 2025-009: Noncompliance – Special Tests and Provisions Federal Program Information Assistance Listing Number: 14.871 Program: Housing Choice Voucher Cluster Criteria: Housing authorities administering the Housing Choice Voucher Program are required to comply with Special Tests and Provisions established by HUD. These requirements include maintaining adequate documentation supporting the management of the waiting list, performing annual reviews of utility allowances, and conducting Housing Quality Standards (HQS) quality control inspections in accordance with HUD requirements. Effective compliance procedures should ensure these activities are performed and documented timely. Condition: During our testing of Special Tests and Provisions requirements for the Housing Choice Voucher Program, we identified the following instances of noncompliance: • The Agency did not maintain adequate documentation supporting the administration of its waiting list. • The Agency did not perform and document the required annual utility allowance review during 2025. • The Agency did not perform required HQS quality control inspections. These deficiencies indicate that required compliance procedures were not consistently performed and monitored during the year. Cause: The Agency did not establish adequate procedures to ensure compliance with Special Tests and Provisions requirements of the Housing Choice Voucher Program. Compliance activities were not subject to sufficient supervisory review or monitoring, and management did not adequately ensure required documentation was maintained. In addition, the Agency's compliance system relied heavily on employee knowledge and experience rather than documented procedures and formal oversight. Effect: Failure to maintain waiting list documentation reduces transparency and limits the Agency's ability to demonstrate that applicants are selected and housed in accordance with HUD requirements. Failure to perform utility allowance reviews increases the risk that participant assistance calculations may be based on outdated utility cost information. Failure to perform HQS quality control inspections limits management's ability to verify that inspection activities are being completed in accordance with HUD requirements and may result in deficiencies remaining undetected. Recommendation: We recommend the Agency: 1. Establish written procedures addressing all Special Tests and Provisions requirements applicable to the Housing Choice Voucher Program. 2. Maintain documentation supporting waiting list management activities and decisions. 3. Perform and document annual utility allowance reviews in accordance with HUD requirements. 4. HQS quality control inspections. 5. Implement supervisory review procedures to periodically verify compliance with these requirements. 6. Report compliance monitoring results to management and the Board of Commissioners on a regular basis. Views of Responsible Officials: The Housing Agency agrees with the finding.

Finding 2025-010: Noncompliance and Significant Deficiency – Allowable Activities and Allowable Costs Federal Program Information Assistance Listing Number: 14.871 Program: Housing Choice Voucher Cluster Criteria: Federal awards may only be charged costs that are allowable, reasonable, allocable, and properly supported. Costs charged to a federal program must benefit that program and must be allocated in accordance with an equitable and documented methodology. Management is responsible for establishing procedures to ensure expenditures are properly assigned to benefiting programs and reviewed for allowability prior to being charged to federal awards. Condition: During our testing of expenditures charged to the Housing Choice Voucher Program, we determined property insurance costs had been improperly allocated to the Voucher program. During fiscal year 2025, the Agency recorded an audit adjustment to reallocate $14,202.98 of property insurance expense from the Housing Choice Voucher Program to the Public Housing Program. Audit procedures further identified that similar allocation errors had occurred during the previous two fiscal years totaling approximately $24,964.76. No adjustment was recorded for the prior-year amounts. Property insurance costs associated with Public Housing properties do not benefit the Housing Choice Voucher Program and therefore should not be charged to the federal program. Cause: The Agency did not maintain adequate controls over the allocation of shared costs between programs. Management did not perform sufficient review of allocation methodologies to ensure expenses were charged to the program receiving the benefit. In addition, there was inadequate oversight of accounting transactions affecting federal programs. Effect: As a result of these deficiencies, costs were improperly charged to the Housing Choice Voucher Program. Improper cost allocations resulted in noncompliance with federal cost principles and increased the risk that federal funds could be used for expenditures that did not benefit the program. In addition, financial reports submitted by the Agency did not accurately reflect program costs. Recommendation: We recommend the Agency: 1. Review all cost allocation methodologies used to distribute shared costs among programs. 2. Maintain documentation supporting the basis for cost allocations. 3. Implement a supervisory review process to ensure expenditures are charged only to benefiting programs. 4. Periodically review significant expense accounts to identify and correct allocation errors on a timely basis. 5. Provide training to accounting personnel regarding federal cost principles and allocability requirements. Views of Responsible Officials: The Housing Agency agrees with the finding.