Audit 411487

Finding 2025-001 – Public Housing Tenant Files – Eligibility – Internal Control over Tenant Files Noncompliance and Material Weakness – Low Income Public Housing – ALN 14.850 Condition & Cause: We randomly selected fifty-five (55) tenant files for review. We noted thirty-five (35) tenant files were out of compliance in one or more categories. Of these, eleven (11) files, or 20%, were impacted by errors related to adjusted annual income. Based on these errors, we extrapolated the potential rental charge misstatement and found it represented approximately 0.9% of total program rental revenue, which is immaterial to the financial statements. The counts below reflect total instances per category, not unique files. In our review, we noted: • Nine (9) files had improper or missing income verification; • Three (3) files contained a miscalculation of annual income; • Three (3) files contained improper or unverified deductions from annual income; • Eighteen (18) annual reexaminations were completed more than three months past the due date; • Fifteen (15) files lacked documentation of required unit inspections; • Seven (7) files were missing the required Enterprise Income Verification (EIV) report at the annual reexamination, or the reports were generated significantly after the effective date; • Three (3) files were missing a completed 9886 or 9886-A; • One (1) file did not contain an application for continued occupancy at the annual reexamination. Agency management attributed these deficiencies to significant staff turnover during the past several years. It should be noted that, as a mitigating action, the Agency has contracted with a third-party vendor for assistance in processing reexaminations and is currently soliciting a contract for an independent inspector. Criteria: Title 24 of the Code of Federal Regulations, the Housing Authority’s Admissions and Continued Occupancy Policy, and specific HUD guidelines in documenting and maintaining the Public Housing tenant files. Effect: Failure to properly verify and calculate tenant income can result in misstatements of dwelling rental income and the operating subsidy earned by the Housing Authority. Late reexaminations delay the identification of changes in tenant income and household composition, increasing the risk that tenants are charged incorrect rent for extended periods. The lack of timely unit inspections compromises the Agency’s ability to ensure that units are free of health and safety hazards. Additionally, continued compliance exceptions increase the Agency’s exposure to heightened regulatory scrutiny from HUD. Recommendation: The Authority has implemented QC processes for most reexaminations; however, timeliness remains an issue. We recommend enhancing QC monitoring to flag files before deadlines lapse, continuing third-party support to bring overdue reexaminations current, and continue providing targeted staff training to address income calculation and verification errors. Regarding inspections, we recommend the Authority proceed with contracting an independent inspector and develop a plan with target dates to eliminate the current backlog. Going forward, the Authority should implement procedures, such as cross-training, temporary assignments, or continued use of third-party inspectors, to ensure inspections remain timely during staff turnover or vacancies. Questioned Costs: None Repeat Finding: Yes Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.

Finding 2025-002 – Housing Choice Voucher Tenant Files – Eligibility – Internal Control over Tenant Files Noncompliance & Material Weakness – Housing Choice Voucher Program – ALN 14.871 Condition & Cause: We randomly selected one hundred fifteen (115) tenant files for review. After reviewing seventy-five (75) files, we identified that the error rate was sufficient to establish that certain program criteria were not met on a pervasive basis. Given time constraints and the consistency of errors identified, we determined that continued full-scope testing of the remaining forty (40) files was unlikely to alter the conclusion. For the remaining files, we performed a limited procedure to confirm the PHA could locate and produce the file but did not test them for substantive compliance. Of the seventy-five (75) files reviewed for full compliance, we noted fifty-five (55) tenant files were out of compliance in one or more categories. Of these, six (6) files, or 8.0%, were impacted by errors related to adjusted annual income. We were able to extrapolate identified misstatements of HAP and found the potential misstatement to represent 0.16% of program HAP expense, which is immaterial to the financial statements. A summary of the review results is as follows: • Three (3) files contained a miscalculation of annual income; • Three (3) instances of missing or improper income verification; • Two (2) files contained unverified deductions from annual income; • Forty-four (44) annual reexaminations were conducted more than three months late; • Eighteen (18) files where the EIV was either missing or obtained unreasonably late; • Ten (10) files lacked evidence of an annual unit inspection; and • Three (3) files were missing a completed 9886 or 9886-A. Agency management attributed these deficiencies to significant staff turnover during the past several years. Management efforts to mitigate these circumstances include contracting with a third party to assist with processing reexaminations and conducting a salary survey to improve staff retention. Notably, the current status of late reexaminations shows improvement. During the prior year field visit in June 2025, the Agency had a backlog of 800+ annual reexaminations; during the current year field visit in July 2026, that backlog was below 250 annual reexaminations. Criteria: Title 24 of the Code of Federal regulations, the Housing Authority Administrative Plan, and specific HUD guidelines in documenting and maintaining Housing Choice Voucher tenant files. Effect: Failure to complete timely reexaminations or properly verify and calculate annual income can result in a misstatement of HAP expense leading to improper funding for the HCV program. Misstatements of HAP may cause an undue financial burden to the participant, which is incongruent with the mission of the Agency. The absence of required annual inspections compromises the Authority’s ability to ensure housing units meet HUD Housing Quality Standards (HQS), potentially affecting tenant safety and increasing the risk of further noncompliance. Continued noncompliance exposes the Agency to increased regulatory scrutiny. Recommendation: We acknowledge that the Authority has implemented internal quality control measures for tenant file actions and has taken steps to stabilize staffing within the department. We recommend continued and increased monitoring and refinement of these controls, including ensuring supervisory or second-level review of verification of income and HAP calculations occurs timely. To support long-term compliance, staff should continue to receive regular training, particularly in areas such as income verification and HAP calculation. In addition, the Authority should continue to prioritize clearing the backlog of overdue reexaminations to bring all tenant files current and in compliance with HUD requirements. This includes identifying and properly documenting any missing components of tenant file actions. Lastly, the Agency should adopt procedures to ensure inspections are completed within the required timeframes, even during periods of staffing shortages. Questioned Costs: None Repeat Finding: Yes Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.