Finding 2025-005 N. Special Tests and Provisions: N4. Vacant Units Identification of the Federal Program: Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Assistance Listing Number: 14.856 Federal Program Name: Section 8 Project-Based Cluster Lower Income Housing Assistance Program – Section 8 Moderate Rehabilitation Program Year: January 1, 2025 through December 31, 2025 Program No.: Multiple Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): The Uniform Guidance 2 CFR section 200.303 states, “The recipient and subrecipient must: (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” “The PHA or owner must reduce claims for assistance on vacant units under certain circumstances. However, there are instances where special claims are allowed for vacancy losses, unpaid rent, and tenant damages on eligible units (24 CFR sections 880.611, 881.601, 882.411, 882.808(f), 883.701, 884.106, 886.109, and 886.309).” Condition: For 1 of 10 (10%) tenants with an end of participation action code sampled to test the Authority’s internal controls over and compliance with the vacant units compliance requirement, we noted that the claim (housing assistance payment) was not reduced in a timely manner. Cause: The Authority’s internal control over vacant units was not operating effectively during the fiscal year. Effect or Potential Effect: Claims for vacant units may not be reduced or may not be reduced in a timely manner. Questioned Costs: A total of $1,383 related to Assistance Listing No. 14.856, representing the two months of housing assistance payments that should have been reduced during fiscal year 2025. Context: There were 60 vacant units for the program during the fiscal year ended December 31, 2025. Identification as a Repeat Finding, if Applicable: This finding is not a repeat finding from the prior year. Recommendation: The Authority should reassess its internal control over vacant units to ensure claims are reduced or reduced in a timely manner. Views of Responsible Officials: CHA Management agrees and will strengthen oversight of vacancy payment processing by updating PBV quality-control procedures, training staff, and increasing compliance monitoring to prevent untimely or inaccurate claims.
Finding 2025-001 E. Eligibility, L. Reporting (Form HUD-50058 MTW), and N. Special Tests and Provisions – N1. Waiting List, N2. Reasonable Rent, N3. Utility Allowance Schedule, N6. Housing Assistance Payment Identification of the Federal Programs: Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Assistance Listing Number: 14.881 Federal Program Name: Moving to Work (MTW) Demonstration Program Public and Indian Housing (Public Housing) Program Year: January 1, 2025 through December 31, 2025 Program No.: IL002-01-00025D Section 8 – Housing Choice Vouchers (HCV) and Rental Assistance Demonstration (RAD) Program Year: January 1, 2025 through December 31, 2025 Program No.: Multiple Federal Assistance Listing Numbers: 14.871 and 14.879 Federal Program Name: Housing Voucher Cluster Section 8 – Housing Choice Vouchers (HCV) – Veterans Affairs Supporting Housing (VASH) and Emergency Housing Vouchers (EHV) Mainstream Vouchers Program Year: January 1, 2025 through December 31, 2025 Program No.: Multiple Federal Assistance Listing Number: 14.856 Federal Program Name: Section 8 Project Based Cluster Lower Income Housing Assistance Program – Section 8 Moderate Rehabilitation (MOD) Program Year: January 1, 2025 through December 31, 2025 Program No.: Multiple Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): 2 CFR section 200.303 of the Office of Management and Budget’s (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) states, “The recipient and subrecipient must: (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” MTW Demonstration Program and Housing Voucher Cluster Eligibility – Most Public Housing Authorities (PHAs) devise their own application forms that are filled out by the PHA staff during an interview with the tenant. The head of the household signs: (a) a certification that the information provided to the PHA is correct; (b) one or more release forms to allow the PHA to obtain information from third parties; (c) a federally prescribed general release form for employment information; and (d) a privacy notice. Under some circumstances, other members of the family are required to sign these forms (24 CFR sections 5.212, 5.230, and 5.601 through 5.615). The PHA must: • As a condition of admission or continued occupancy, require the tenant and other family members to provide necessary information, documentation, and releases for the PHA to verify income eligibility (24 CFR sections 5.230, 5.609, 960.259, and 982.516). • For both family income examinations and reexaminations, obtain and document in the family file third-party verification of: (1) reported family annual income; (2) the value of assets; (3) expenses related to deductions from annual income; and (4) other factors that affect the determination of adjusted income or income-based rent (24 CFR sections 960.259 and 982.516). • Determine income eligibility and calculate the tenant’s rent payment using the documentation from third-party verification in accordance with 24 CFR part 5 subpart F (24 CFR section 5.601 et seq.) (24 CFR sections 960.253, 960.255, 960.259, 982.201, 982.515, and 982.516). • Use the Enterprise Income Verification (EIV) system in its entirety to verify tenant employment and income information during mandatory reexaminations of family composition and income in accordance with 24 CFR 5.233; and reduce administrative and subsidy payment errors in accordance with 24 CFR 5.236 and other administrative guidance issued by HUD. • Select tenants from the waiting list (24 CFR sections 960.206 through 960.208 and 982.202 through 982.207). • Reexamine family income and composition at least once every 12 months (Public Housing program) or 24 months (HCV program) and adjust the tenant rent and housing assistance payment as necessary using the documentation from third-party verification (24 CFR sections 960.253, 960.257, 960.259, and 982.516). In addition, the Chicago Housing Authority (the Authority or CHA) is participating in HUD’s Moving to Work (MTW) Demonstration Program. The Authority’s initial MTW Agreement was signed by the Authority and HUD on February 6, 2000, at which time HUD allowed the Authority to implement its Plan for Transformation. On June 26, 2008, the Authority and HUD signed the Amended and Restated MTW Agreement that extended the Authority’s participation in the MTW program through December 31, 2018. On April 4, 2016, the MTW Agreement was further modified and extended through December 31, 2028. Through this agreement, HUD waived selected statutory and regulatory requirements to allow the Authority flexibility in achieving the stated objectives of the MTW Demonstration Program. As such, per the Authority’s HCV Administrative Plan, reexamination of family income and composition under the HCV program is performed biennially or triennially. Section 8 Project-Based Cluster Eligibility – The PHA or owner, as applicable, must: • Verify the eligibility of applicants by (a) obtaining signed applications that contain the information needed to determine eligibility (including designation as elderly, disabled, or homeless, if applicable), income, rent, and order of selection; (b) conducting verifications of family income and other pertinent information (such as assets, full time student and immigration status, and unusual medical expenses) through third parties the PHA or owner must use HUD’s Enterprise Income Verification (EIV) system in its entirety: (i) as a third-party source to verify tenant employment and income information during annual and streamlined reexaminations of family composition and income, and to reduce administrative and subsidy payment errors 24 CFR 5.233; (c) documenting inspections and tenant certifications, as appropriate; and, (d) determining that tenant income did not exceed the maximum limit set by HUD for the PHA’s jurisdiction, as shown in HUD’s published notice transmitting the Limits for Low-Income and Very Low-Income Families Under the Housing Act of 1937. For the Mod Rehab SRO program, eligible individuals must be homeless upon entry into the program (24 CFR sections 880.603, 881.601, 882.514, 882.808, 833.701, 884.214, 886.119, and 886.318). • Determine the total tenant rent payment in accordance with 24 CFR section 5.628. • Select participants from the waiting list in accordance with the admission policies in its administrative plan and maintain documentation which shows that, at the time of admission, the family actually met the preference criteria that determined the family’s place on the waiting list. For the Mod Rehab SRO program, eligible individuals may be referred to the PHA for eligibility determination as a result of the owner’s/sponsor’s outreach or through the PHA waiting list (24 CFR sections 880.603, 881.601, 882.514, 882.808(b)(2), 883.701, 884.214, and 886 subparts A and C). • Reexamine family income and composition at least once every 12 months and adjust the total rent payment and housing assistance payment, as necessary (24 CFR sections 5.657, 880.603, 881.601, 882.515, 883.701, 884.218, 886.124, and 886.324). The PHA or owner may elect to apply a streamlined income determination to families receiving fixed income as described in 24 CFR 5.657 (d)(3). MTW Demonstration Program and Housing Voucher Cluster Reporting (Form HUD-50058 MTW) – Per 24 CFR part 908 and 24 CFR section 982.158, the PHA is required to submit the Form HUD-50058 MTW, Family Report, each time the PHA completes an admission, annual reexamination, interim reexamination, portability move-in, or other change of unit for a family. The PHA must also submit the Form HUD-50058 when a family ends participation in the program or moves out of the PHA’s jurisdiction under portability. The following line items on Form HUD-50058 MTW contain critical information: (1) Line 1c – Program (2) Line 2a – Type of Action (3) Line 2b – Effective Date of Action (4) Line 2k – FSS Participation Now or in the Last Year (5) Line 3b, 3c – Last Name, First Name (6) Line 3e – Date of Birth (7) Line 3n – Social Security Numbers (8) Line 5a – Unit Address (9) Line 5h – Date Unit Last Passed HQS Inspection (10) Line 5i – Date of Last Annual Inspection (11) Line 7i – Total Annual Income (12) Line 13h – Contract Rent to Owner (13) Line 13k – Tenant Rent (14) Line 13x – Mixed Family Tenant Rent (15) Line 17a – Participation in Special Programs – Participation in the Family Self Sufficiency (FSS) Program (16) Line 17k(2) – FSS Account Information – Balance Section 8 Project-Based Cluster Reporting (Form HUD-50058) – The PHA is required to submit this form electronically to HUD each time the PHA completes an admission, annual reexamination, interim reexamination, portability move-in, or other change of unit for a family. The PHA must also submit the Family Report when a family ends participation in the program or moves out of the PHA’s jurisdiction under portability. The following line items on Form HUD-50058 contain critical information: (1) Line 2a – Type of Action (2) Line 2b – Effective Date of Action (3) Line 3b, 3c – Names (4) Line 3e – Date of Birth (5) Line 3n – Social Security Numbers (6) Line 5a – Unit Address (7) Line 5h, 5i – Unit Inspection Dates (8) Line 7i – Total Annual Income (9) Line 13h – Contract Rent to Owner (10) Line 13k or 13x – Tenant Rent Condition: MTW Demonstration Program – Eighty tenants and participants were selected for testing internal controls over compliance with the eligibility and Form HUD-50058 MTW reporting requirements for the program. These same tenants and participants were tested for compliance with Form HUD-50058 MTW reporting requirements. For the 80 tenants and participants selected, 40 were Public Housing and RAD tenants (23 Public Housing and 17 RAD) and 40 were Housing Choice Voucher (HCV) participants. • There were 11 Public Housing tenants, four RAD tenants, and 10 HCV participants for which control deviations were noted over eligibility (31.25% overall MTW deviation rate). • There were four Public Housing tenants and one HCV participant for which control deviations and compliance exceptions were noted over Form HUD-50058 reporting requirements (6.25% overall MTW deviation/exception rate). In addition, 80 tenants and participants were selected to test compliance with eligibility requirements for the program. For the 80 tenants and participants selected, 40 were Public Housing and RAD tenants (27 Public Housing and 13 RAD) and 40 were HCV participants. • There were 10 Public Housing tenants, three RAD tenants, and 18 HCV participants for which compliance exceptions were noted over eligibility requirements (38.75% overall MTW exception rate). The nature of the control deviations and compliance exceptions identified are as follows (some tenants/participants could have multiple issues): Control In the case that a certification and/or recertification was to be performed in 2025: • The examination/reexamination checklist was initialed by the certification specialist (CS), but forms were missing and/or not signed by tenant and recertification clerk (Public Housing – nine instances, RAD – four instances). • Relevant forms were not retained on file (Public Housing – three instances, RAD – four instances). • Annual income was not properly calculated; therefore, rent was not properly calculated (Public Housing – four instances, HCV – one instance). • Relevant forms were signed after the effective date (Public Housing – four instances, RAD – one instance). • Relevant forms were not signed (Public Housing – two instances). • Recertification was not conducted (Public Housing – one instance). In the case that a certification and/or recertification was to be performed in 2025 or in a prior year: • The recertification was not conducted within the required period (HCV – nine instances). Compliance In the case that a certification and/or recertification was to be performed: • Relevant forms were signed after effective date (Public Housing – four instances and RAD – one instance). • Relevant forms were not retained on file (Public Housing – two instances). • Annual income was not properly calculated; therefore, rent was not properly calculated (Public Housing – four instances, RAD – two instances). • Relevant forms were not updated or revised as required (Public Housing – one instance). • Recertification was not conducted (Public Housing – one instance, HCV – five instances). • Recertification was not conducted within the required period (RAD – one instance, HCV – thirteen instances). Housing Voucher Cluster – Forty participants were selected for testing internal controls over compliance with the eligibility and Form HUD-50058 reporting requirements for the program. These same participants were tested for compliance with Form HUD-50058 reporting requirements. There were two participants for which control deviations were noted over eligibility (5% deviation rate). Specifically, in the case that a certification and/or recertification was to be performed, the recertification was not conducted within the required period. In addition, 40 participants were selected for testing of compliance with eligibility requirements for the program. There were seven participants for which compliance exceptions were noted over eligibility requirements (17.50% exception rate). Specifically, in the case that a certification and/or recertification was to be performed in 2025: • The recertification was not conducted (one instance). • The recertification was not conducted within the required period (six instances). Section 8 Project-Based Cluster – Forty tenants were selected for testing internal controls over compliance with the eligibility and Form HUD-50058 reporting requirements for the program. These same tenants were tested for compliance with Form HUD-50058 reporting requirements. There were five tenants for which control deviations were noted over eligibility (12.50% deviation rate). Specifically, the reexamination performed in 2025 was not within the required twelve-month period. In addition, 40 participants were selected for testing of compliance with eligibility requirements for the program. There were 10 tenants for which compliance exceptions were noted over eligibility requirements (25% exception rate). The nature of the compliance exceptions was as follows: • Income calculated and in Form HUD-50058 did not agree to third-party income documentation (one instance). • In the case that a reexamination was to be conducted in 2025, the reexamination was not conducted in a timely manner (seven instances). • In the case that a reexamination was to be conducted in 2025, the reexamination was not conducted (two instances). MTW Demonstration Program, Housing Voucher Cluster and Section 8 Project-Based Cluster – Furthermore, the Authority’s quality review specialists perform a quality review of a sample of tenant/participant recertification files for all programs to ensure compliance with eligibility and reporting (Form HUD-50058 MTW) requirements and various special tests and provisions requirements. Forty tenants and participants were selected to test the quality control review. For the 40 tenants and participants selected, eight were Public Housing tenants, four were RAD tenants, 10 were HCV participants, 13 were Housing Voucher Cluster participants (five VASH, five EHV, and three Mainstream Vouchers) and five were MOD tenants. • There were 18 of 40 (45% deviation rate) quality control reviews sampled (five Public Housing tenants, one RAD tenant, two HCV participants, one VASH participant, four EHV participants, two Mainstream Vouchers participants, and three MOD tenants) for which control deviations were identified. The nature of the control deviations is as follows: o For eight of the 18, findings from the quality control review were not corrected in a timely manner (HCV – one instance, EHV – two instances, VASH – one instance, Mainstream Vouchers – one instance, and MOD – three instances). o For 11 of the 18, findings from the quality control review were not corrected (Public Housing – five instances, RAD – one instance, HCV – one instance, EHV – two instances, and Mainstream Vouchers – two instances). o For 15 of the 18, the Authority did not consistently monitor the file (i.e., follow-ups were not consistently documented to ensure corrections were made or made timely, or that proposed corrections were formally accepted or denied) (Public Housing – five instances, RAD – one instance, HCV – one instance, EHV three instances, Mainstream Vouchers – two instances, and MOD – three instances). Cause: MTW Demonstration Program, Housing Voucher Cluster and Section 8 Project-Based Cluster – Internal controls were not operating effectively during fiscal year 2025. In addition, the Authority redesigned its quality control review of tenant/participant files during fiscal year 2025 to include a more robust process related to the follow-up on identified findings and related corrections. However, the design of the internal control did not define what the Authority considers timely. Effect or Potential Effect: MTW Demonstration Program, Housing Voucher Cluster and Section 8 Project-Based Cluster – Ineligible tenants or participants may be inappropriately allowed to participate in federal programs, and information reported to HUD could be inaccurate or incomplete. Questioned Costs: MTW Demonstration Program, Section 8 Project-Based Cluster – Unknown. Housing Voucher Cluster – None. Context: MTW Demonstration Program – The Public Housing and RAD programs had 14,677 and 6,701 tenants on their rent rolls, respectively, during fiscal year 2025. The Public Housing and RAD programs reviewed 6,955 and 4,066 tenants for eligibility, respectively, during 2025. The HCV program had 44,590 participants during fiscal year 2025, and 32,748 participants that were reviewed for eligibility during 2025. All active tenants and participants have a Form HUD-50058 MTW, which is filed annually, biennially, or triennially. Housing Voucher Cluster – The program had 2,380 participants during fiscal year 2025 and 1,985 participants that were reviewed for eligibility during 2025. All active tenants and participants have a Form HUD-50058, which is filed annually, biennially, or triennially. Section 8 Project-Based Cluster – The program had 442 tenants during fiscal year 2025 and 424 tenants that were reviewed for eligibility during 2025. All active tenants and participants have a Form HUD-50058, which is filed annually. MTW Demonstration Program, Housing Voucher Cluster and Section 8 Project-Based Cluster – The Authority conducted 3,044 quality control reviews during fiscal year 2025. Identification as a Repeat Finding, if Applicable: MTW Demonstration Program – This finding is a repeat of finding 2024-001 from the prior year. Housing Voucher Cluster and Section 8 Project-Based Cluster – This finding is not a repeat finding from the prior year. Recommendation: MTW Demonstration Program, Housing Voucher Cluster and Section 8 Project-Based Cluster – The Authority should strengthen policies, procedures, and internal controls to ensure ineligible tenants or participants are not inappropriately allowed to participate in federal programs and reporting to HUD is complete and accurate. Views of Responsible Officials: CHA Management is in general agreement with the HCV findings, noting no ineligible HCV recipients were identified in the audit and significant process improvements had been implemented since the prior year audit. The CHA agrees with the Public Housing and RAD findings. Overall, the CHA will strengthen controls over eligibility, documentation, recertification, and HUD-50058 reporting through enhanced quality control reviews, a full tenant file audit, updated procedures, and improved tracking and training.
Finding 2025-002 N. Special Tests and Provisions: N16. Environmental Contaminants Testing and Remediation Identification of the Federal Program: Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Assistance Listing Number: 14.881 Federal Program Name: Moving to Work (MTW) Demonstration Program Public and Indian Housing (Public Housing) Program Year: January 1, 2025 through December 31, 2025 Program No.: IL002-01-00025D Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): The Uniform Guidance 2 CFR section 200.303 states, “The recipient and subrecipient must: (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” 24 CFR section 5.703 states, “To ensure that all residents live in safe, habitable dwellings, the items and components located inside the building, outside the building, and within the units of HUD housing must be functionally adequate, operable, and free of health and safety hazards. The standards under this section apply to all HUD housing.” Condition: Forty failed uniform physical condition standards (UPCS) inspections and 40 failed environmental inspections were selected for compliance testing out of the total 5,997 failed UPCS inspections and 1,108 failed environmental inspections, respectively, reported by the Authority. Internal controls were not in place to ensure that failed UPCS and environmental inspections were remediated or remediated timely. For 33 of the 40 (82.5%) failed UPCS inspections and 39 of the 40 (97.5%) failed environmental inspections tested for compliance, the Authority did not maintain adequate supporting documentation to evidence that the safety/environmental concern from the failed inspection was remediated or remediated in a timely manner. The nature of the issues is as follows: • For four failed UPCS inspections sampled, remediation was not completed. • For 22 failed UPCS inspections sampled, remediation was not completed timely. • For seven failed UPCS inspections sampled, part of the remediation was not completed and the other part was not completed timely. • For 39 failed environmental inspections sampled, the remediation was not completed in a timely manner. Cause: Internal controls were not in place over the follow-up of work orders related to failed UPCS and environmental inspection reports to ensure the identified safety/environmental concerns were remediated or remediated in a timely manner. Effect or Potential Effect: HUD housing may not meet the physical condition standards and environmental contaminants may not be remediated or remediated timely. Questioned Costs: None. Context: The Public Housing program had a total of 15,926 UPCS inspections performed during the year ended December 31, 2025, of which 5,997 were failed inspections that required remediation, 6,029 passed or passed with comments, 3,336 were inconclusive, 560 were canceled, and 4 were no show. The Public Housing program had a total of 1,108 environmental inspections performed during the year ended December 31, 2025. Identification as a Repeat Finding, if Applicable: This finding is a repeat of finding 2024-002 from the prior year. Recommendation: The Authority should implement internal controls over the monitoring of failed UPCS and environmental inspections to ensure that identified safety/environmental concerns are remediated or remediated in a timely manner. Adequate supporting documentation should be maintained of all remediation activities. Views of Responsible Officials: CHA Management agrees and had recently implemented and staffed a Green and Healthy Homes initiative that is actively addressing these concerns with subject matter experts. Specifically, the CHA will further reinforce environmental and inspection-related compliance by strengthening work-order controls, formalizing standard operating procedures, expanding environmental vendor oversight, and delivering ongoing training and quality-assurance reviews.
Finding 2025-003 N. Special Tests and Provisions: N4. NSPIRE/Housing Quality Standards Inspections Identification of the Federal Programs: Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Assistance Listing Number: 14.881 Federal Program Name: Moving to Work (MTW) Demonstration Program Section 8 – Housing Choice Vouchers (HCV) and Rental Assistance Demonstration (RAD) Program Year: January 1, 2025 through December 31, 2025 Program No.: Multiple Federal Assistance Listing Numbers: 14.871 and 14.879 Federal Program Name: Housing Voucher Cluster Section 8 – Housing Choice Vouchers (HCV) – Veterans Affairs Supporting Housing and Emergency Housing Vouchers Mainstream Vouchers Program Year: January 1, 2025 through December 31, 2025 Program No.: Multiple Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): The Uniform Guidance 2 CFR section 200.303 states, “The recipient and subrecipient must: (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” “MTW Agencies must ensure that housing assisted under the demonstration program meets housing quality standards established or approved by the Secretary. The HCV program regulations at 24 CFR sections 982.401 through 982.405 set forth basic housing quality standards (HQS) which all units must meet, and the PHA must verify by inspection, before initial assistance can be paid on behalf of a family and at least annually throughout the term of the assisted tenancy. Current HQS regulations consist of 13 key aspects of housing quality, performance requirements, and acceptability criteria to meet each performance requirement. HQS include requirements for all housing types, including single and multi-family dwelling units, as well as specific requirements for special housing types, such as manufactured homes, congregate housing, single room occupancy, shared housing, and group residences (Section 204(c)(3)(E) of Pub. L. No. 104-134 (42 USC 1437f (note))).” “The PHA must inspect the unit leased to a family at least biennially to determine if the unit meets Housing Quality Standards (HQS) and the PHA must conduct quality control re-inspections. The PHA must prepare a unit inspection report (24 CFR sections 982.158(d) and 982.405(b)).” The Authority performs inspections biennially, as per the Authority’s approved HCV Administrative Plan. Condition: MTW Demonstration Program – For 11 of 40 (27.5%) inspections sampled to test the Authority’s internal controls to ensure inspections are completed in accordance with the Authority’s HCV Administrative Plan and meet housing quality standards (HQS), we noted that the inspections completed by the Compliance Specialist in fiscal year 2025 were not conducted in accordance with the required biennial time frame. Based on the date of the prior inspections, the inspections were not conducted within the two years required by the HCV Administrative Plan. Housing Voucher Cluster – For 7 of 40 (17.5%) inspections sampled to test the Authority’s internal controls to ensure inspections are completed in accordance with the Authority’s HCV Administrative Plan and meet housing quality standards (HQS), we noted that the inspections completed by the Compliance Specialist in fiscal year 2025 were not conducted in accordance with the required biennial time frame. Based on the date of the prior inspections, the inspections were not conducted within the two years required by the HCV Administrative Plan. Cause: MTW Demonstration Program and Housing Voucher Cluster – The Authority’s internal control, whereby a knowledgeable Compliance Specialist (i.e., Inspector) performs a biennial inspection of the unit and completes a standardized inspection checklist to confirm the unit meets the housing quality standards, was not operating effectively during the fiscal year. Effect or Potential Effect: MTW Demonstration Program and Housing Voucher Cluster – HQS inspections may not be conducted biennially in accordance with the Authority’s HCV Administrative Plan. Questioned Costs: MTW and Housing Voucher Cluster – None. Context: MTW Demonstration Program – There were 27,055 HQS inspections for the HCV program under the MTW during the fiscal year ended December 31, 2025. Housing Voucher Cluster – There were 1,723 HQS inspections for the Housing Voucher Cluster programs during the fiscal year ended December 31, 2025. Identification as a Repeat Finding, if Applicable: MTW Demonstration Program – The finding is a repeat of finding 2024-004 from the prior year. Housing Voucher Cluster – This finding is not a repeat finding from the prior year. Recommendation: MTW Demonstration Program and Housing Voucher Cluster – The Authority should follow its established internal control over HQS inspections as outlined in its HCV Administrative Plan. Views of Responsible Officials: CHA Management generally agrees and noted that CHA personnel were generally found to be consistent and timely in requesting tenants to engage in the inspection process. The delays were primarily attributed to tenant failures to respond. Nevertheless, the CHA will ensure HQS/NSPIRE inspections are scheduled and completed on a timely basis by reviewing contractor processes, updating guidance, and using Yardi/Power BI reporting to monitor compliance.
Finding 2025-004 N. Special Tests and Provisions: H6. Housing Assistance Payment Identification of the Federal Programs: Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Assistance Listing Number: 14.881 Federal Program Name: Moving to Work (MTW) Demonstration Program Section 8 – Housing Choice Vouchers (HCV) and Rental Assistance Demonstration (RAD) Program Year: January 1, 2025 through December 31, 2025 Program No.: Multiple Federal Assistance Listing Numbers: 14.871 and 14.879 Federal Program Name: Housing Voucher Cluster Section 8 – Housing Choice Vouchers (HCV) – Veterans Affairs Supporting Housing and Emergency Housing Vouchers Mainstream Vouchers Program Year: January 1, 2025 through December 31, 2025 Program No.: Multiple Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): The Uniform Guidance 2 CFR section 200.303 states, “The recipient and subrecipient must: (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” “The PHA must pay a monthly HAP on behalf of the family that corresponds with the amount on line 12u of the HUD-50058. This HAP amount must be reflected on the HAP contract and HAP register (24 CFR section 982.158 and 24 CFR Part 982, Subpart K).” A “fully executed HAP” for the HCV Program means that the Housing Assistance Payments contract between the landlord (owner) and the Public Housing Agency (PHA) has been signed by both parties, signifying that the landlord has agreed to lease a unit to a voucher holder and the PHA has approved the unit and will provide housing assistance payments to the landlord on behalf of the tenant, with all necessary documents and conditions met according to HUD regulations. Similarly, a “tenancy addendum” is considered fully executed when both the landlord and tenant have signed the document, signifying their agreement to the additional terms and conditions outlined within it, which are now legally binding and part of the overall lease agreement; essentially, all parties involved have completed their required actions by signing the addendum. The PHA is required to accurately determine family income, adjusted income, tenant rent, and housing assistance payments (HAP) in accordance with HUD Housing Choice Voucher (HCV) Program requirements. Housing assistance payments must be disbursed in the proper amount based on the family’s eligibility, income determination, utility allowance, and approved contract rent. 24 CFR Part 982, Subpart K, section 982.516 (f) states “Accuracy of family income data. The PHA must establish procedures that are appropriate and necessary to assure that income data provided by applicant or participant families is complete and accurate. The PHA will not be considered out of compliance with the requirements in this section solely due to de minimis errors in calculating family income but is still obligated to correct errors once the PHA becomes aware of the errors. A de minimis error is an error where the PHA determination of family income deviates from the correct income determination by no more than $30 per month in monthly adjusted income ($360 in annual adjusted income).” Condition: MTW Demonstration Program – For 34 of 40 (85%) participants with a corresponding housing assistance payment (HAP) paid to the landlord during fiscal year 2025, we noted compliance exceptions of the following nature: • For one (RAD) of the 34, the HAP Register was not updated to reflect the correct HAP in a timely manner. • For 29 (HCV) of the 34, while the lease was executed between the landlord and the tenant, the Tenancy Addendum (HUD-52641-A) was not attached to the lease, and therefore not fully executed. • For one (RAD) of the 34, the “Amendment to the HAP Contract – Owner” with the updated HAP was not completed or on file. • For seven (one RAD and six HCV) of the 34, there was a missed reexamination date and therefore the HAP determination used outdated income. Adequate support was not provided for the missed reexamination date to evidence that the Authority was following its policies and procedures when a participant fails to comply with the Housing Choice Voucher program family obligations. Housing Voucher Cluster – For 28 of 40 (70%) participants with a corresponding housing assistance payment (HAP) paid to the landlord during fiscal year 2025, we noted compliance exceptions of the following nature: • For all 28, while the lease was executed between the landlord and the tenant, the Tenancy Addendum (HUD-52641-A) was not attached to the lease, and therefore not fully executed. Cause: MTW Demonstration Program – The Authority lacked an adequate internal control to ensure HAP Tenancy Addendums were completed, signed, and fully executed. In addition, the Authority’s internal control over HAP determination was not operating effectively during the fiscal year. Specifically, the HAP Register was not updated timely, and reexaminations were not completed by the required anniversary date and as a result, HAP continued to be calculated using income information that was no longer current. Housing Voucher Cluster – The Authority lacked an adequate internal control to ensure HAP Tenancy Addendums were signed and fully executed. Effect or Potential Effect: MTW Demonstration Program – The HAP Tenancy Addendums may not be completed or fully executed. The HAP Register may not properly reflect HAP. HAP may not be calculated using updated income. Housing Voucher Cluster – HAP Tenancy Addendums may not be completed or fully executed. Questioned Costs: MTW Demonstration Program – A total of $76,616 related to Assistance Listing No. 14.881, representing the seven participant files with HAP that used outdated income. The questioned costs were calculated using the monthly HAP paid the landlord during fiscal year 2025 multiplied by the number of months for which the HAP determination was based on outdated income. Housing Voucher Cluster – None. Context: HAP reported in the schedule of expenditures of federal awards totaled $762,336,909 for the year ended December 31, 2025, for the MTW Demonstration Program. HAP reported in the schedule of expenditures of federal awards totaled $37,392,356 for the year ended December 31, 2025, for the Housing Voucher Cluster. Identification as a Repeat Finding, if Applicable: MTW Demonstration Program and Housing Voucher Cluster – This finding is not a repeat finding from the prior year. Recommendation: MTW Demonstration Program and Housing Voucher Cluster – The Authority should implement internal controls over the execution of HAP Tenancy Addendums. The Authority should follow its established policies, procedures and internal controls over HAP determinations. Views of Responsible Officials: CHA Management asserts its position that the agency is in compliance with the instructions provided by HUD, noting that participant signatures are not required for the HUD 52641A Tenancy Addendum to be executed. That guidance states that the signature on the HAP contract is sufficient to execute the Tenancy Addendum. However, CHA also recognizes that the auditors’ position is based on the explicit text documented on page 4-14.871-22 in the 2025 OMB Compliance Supplement (2 CFR Part 200, Appendix XI Compliance Supplement), which states that signatures are required on the Addendum itself to be properly executed. Nevertheless, according to the HUD instructions provided to the CHA, all HAP contracts were properly executed, and no further action is deemed necessary in that regard. The CHA will seek clarification from HUD and the authors of the 2025 OMB Compliance Supplement to resolve this apparent discrepancy in guidance.
Finding 2025-006 I. Procurement, Suspension and Debarment Identification of the Federal Program: Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Assistance Listing Number: 14.881 Federal Program Name: Moving to Work (MTW) Demonstration Program Public and Indian Housing (Public Housing) Program Year: January 1, 2025 through December 31, 2025 Program No.: IL002-01-00025D Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): The Uniform Guidance 2 CFR section 200.303 states, “The recipient and subrecipient must: (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” The Uniform Guidance 2 CFR section 200.318, general procurement standards states “(a) Documented procurement procedures. The recipient or subrecipient must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services.” The Uniform Guidance 2 CFR section 200.319 states that “all procurement transactions under the Federal award must be conducted in a manner that provides for full and open competition and is consistent with the standards of this section and §200.320.” The Authority’s procurement policy for an intergovernmental purchasing agreement requires an agency contract and amendments. The Authority’s internal control procedures require procurements of more than $500,000 to have Board of Commissioners’ approval. Recipients and subrecipients are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. “Covered transactions” include contracts for goods and services awarded under a non-procurement transaction (e.g., grant or cooperative agreement) that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR 180.220. When a recipient or subrecipient enters into a covered transaction with an entity at a lower tier, the recipient or subrecipient must verify that the entity, as defined in 2 CFR 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration (GSA) and available at SAM.gov, (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR 180.300). Condition: For one of nine (11.1%) procurement transactions and one of 40 (2.5%) procurement transactions tested for internal controls over and compliance with federal procurement compliance requirements, respectively, we identified one procurement exception. Specifically, the procurement lacked Board of Commissioners approval, and no executed agreement or amendment existed for fiscal year 2025. Therefore, the Authority was unable to demonstrate compliance with Uniform Guidance procurement standards. For three of 40 (7.5%) procurement transactions tested for internal controls over and compliance with the suspension and debarment compliance requirement, the suspension and debarment check was not performed or retained on file before entering the covered transaction. Therefore, the Authority was unable to demonstrate compliance with Uniform Guidance suspension and debarment standards. Cause: The Authority’s internal controls over the review and approval of procurement transactions and the review and retention of suspension and debarment checks were not operating effectively. Effect or Potential Effect: Procurements may not be made in accordance with Uniform Guidance procurement standards. Contractors/vendors may be suspended or debarred. Questioned Costs: A total of $6,412,600 related to Assistance Listing No. 14.881, representing one procurement with a procurement exception (invoices totaling $6,412,600). Context: The one procurement and three suspension and debarment transactions totaled $8,443,452 out of 40 procurement transactions sampled for compliance totaling $38,544,823. Public Housing expenditures reported in the schedule of expenditures of federal awards were $253,935,873 for the year ended December 31, 2025, representing 21.32% of total federal expenditures under Assistance Listing No. 14.881 of $1,190,937,657. Identification as a Repeat Finding, if Applicable: The finding is a partial repeat of finding 2024-006 from the prior year. Recommendation: The Authority should follow its established internal controls over the review and approval of procurement transactions and the review and retention of suspension and debarment checks. Views of Responsible Officials: CHA Management agrees. This finding pertains to an intergovernmental contractual agreement with the Chicago Police Department, which was under renegotiation and not yet approved by the Board. Although the suspension and debarment check had been performed, it was not documented in accordance with CHA procedures. Going forward, the CHA will ensure compliance with its existing procurement process and procedures.