Non-major program, reported in accordance with 2 CFR 200.516(a) (4)) Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Public Housing Capital Fund Program Federal Assistance Listing Numbers: 14.872 Noncompliance - C. Cash Management Non Compliance Material to the Financial Statements: Yes Material Weakness in Internal Control over Compliance for Cash Management Criteria: In accordance with 2 CFR 200.305, payment methods for federal awards must minimize the time elapsing between the transfer of federal funds and the disbursement of those funds by the recipient. Federal funds drawn under the Public Housing Capital Fund Program should be limited to amounts needed to meet the Authority’s immediate cash requirements for allowable program expenditures. Accordingly, the Authority should implement procedures to ensure grant funds are not drawn in advance of actual or imminent eligible expenditures. Condition: The Authority drew down federal funds in advance of immediate cash needs for allowable program expenditures. As of year end, a portion of the funds drawn remained unexpended and was reported as unearned revenue in the financial statements. This indicates that federal funds were received prior to the incurrence of eligible expenditures. Context: During review of the financial statements, the Authority was noted to have unexpended federal funds on hand at year end that had been drawn prior to the disbursement of allowable program costs. Specifically, amounts recorded as unearned revenue represented federal funds received in advance of immediate cash needs. This condition was identified through review of drawdown activity, general ledger balances, and year end financial reporting records. Known Questioned Costs: $828,938* * Represents federal funds drawn under the Public Housing Capital Fund Program in advance of immediate cash needs, which remained unexpended at year end and are not in compliance with cash management requirements under 2 CFR 200.305. Cause: The Authority did not have adequate procedures in place to monitor the timing of grant drawdowns in relation to actual program cash needs and allowable expenditures. As a result, federal funds were requested and received prior to the incurrence of eligible costs under the Public Housing Capital Fund Program. Effect: The Authority was not in compliance with federal cash management requirements governing the timing of federal fund drawdowns. As a result, federal funds were held in advance of immediate cash needs, increasing the risk of improper cash management and noncompliance with Uniform Guidance and HUD requirements. Recommendation: We recommend the Authority strengthen its cash management procedures to ensure federal funds are drawn only for immediate cash needs related to allowable program expenditures. Management should implement monitoring and review controls over grant drawdown activity, including periodic reconciliation of drawdowns to incurred expenditures, to ensure compliance with 2 CFR 200.305 and HUD requirements.
Finding 2025-003 (Non-major program, reported in accordance with 2 CFR 200.516(a) (4)) Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Public Housing Capital Fund Program Federal Assistance Listing Numbers: 14.872 Noncompliance - B. Allowable Costs/Cost Principles Non Compliance Material to the Financial Statements: Yes Material Weakness in Internal Control over Compliance for Allowable Costs/Cost Principles Criteria: In accordance with 2 CFR Part 200, Subpart E – Cost Principles, costs charged to a federal award must be reasonable, necessary, allowable, and properly documented, and must be allocated and classified in accordance with applicable federal cost principles. The Authority is responsible for ensuring that expenditures charged to the Public Housing Capital Fund Program are allowable under program requirements and supported by adequate documentation in accordance with applicable federal regulations. In addition, capital assets acquired or constructed with federal funds must meet capitalization criteria in accordance with accounting principles generally accepted in the United States of America, including sufficient documentation to support the nature of the expenditure and its eligibility for capitalization rather than current period expense. Condition: The Authority recorded certain expenditures funded through the Public Housing Capital Fund Program as capital asset additions during the year ended March 31, 2025. These expenditures were not supported by sufficient documentation to demonstrate that they were allowable program costs and met the criteria for capitalization under applicable program requirements. As a result, audit adjustments were recorded to reclassify these amounts from capital assets to current period expense. This indicates that the costs initially charged to the Public Housing Capital Fund Program were not adequately supported at the time of recording to substantiate their eligibility and proper classification. Context: During our audit of the Authority’s Public Housing Capital Fund Program, expenditures for the year ended March 31, 2025, we identified expenditures of $763,370 that were initially recorded as capital asset additions. These expenditures were not adequately supported in accordance with applicable Public Housing Capital Fund Program requirements to substantiate their eligibility and proper classification. Known Questioned Costs: $763,370* * Represents expenditures charged to the Public Housing Capital Fund Program that lacked sufficient documentation to support allowability and/or proper classification as capital asset additions in accordance with program requirements and applicable cost principles. Cause: The Authority did not have adequate procedures in place to ensure that sufficient supporting documentation was obtained and evaluated to support both the allowability of the costs under program requirements and their classification as capital assets. Effect: As a result, capital assets, and net position were misstated and expenses were understated, as expenditures that did not meet capitalization criteria or were not sufficiently supported under program requirements were initially recorded as capital asset additions. This condition also increases the risk that expenditures charged to the Public Housing Capital Fund Program may not be properly supported or appropriately classified in accordance with applicable requirements. Recommendation: We recommend that the Authority strengthen its internal controls over Public Housing Capital Fund Program expenditures by enhancing its review process to ensure that all costs recorded as capital asset additions are properly supported and meet applicable program requirements.
Finding 2025-004 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Housing Voucher Cluster - Section 8 Housing Choice Vouchers, Mainstream Vouchers, and Emergency Housing Vouchers Federal Assistance Listing Numbers: 14.871, 14.879, and 14.EHV Noncompliance - N. Special Tests and Provisions – Housing Quality Standards Inspections Non Compliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Special Tests and Provisions Criteria: Housing Quality Standards Inspections. The PHA must inspect the unit leased to a family at least annually to determine if the unit meets the 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)). For units that fail inspection the PHA must correct all life threatening HQS deficiencies within 24 hours and all other deficiencies within 30 days. Condition: Based upon inspection of the Authority’s files and on discussion with management, there were units that failed inspections that did not pass reinspection within 30 days without penalty. Context: There are approximately five hundred ninety four (594) Housing Voucher Cluster units with failed inspections. Of a sample size of twenty five (25) failed inspections, one (1) unit did not pass reinspection within 30 days. Housing assistance payments were not abated and the tenant was not relocated in a timely manner. Our sample size is statistically valid. Known Questioned Costs: Below $25,000 threshold. Cause: There is a significant deficiency in internal controls over the compliance for the special tests and provisions type of compliance related to housing quality standards inspections. The Authority's oversight and supervisory review procedures are not adequately structured to detect or prevent delays in reinspection and enforcement of HQS requirements. Effect: Due to the breakdown in internal controls over HQS inspection follow-up, at least one sampled unit did not receive a timely reinspection within the required 30-day timeframe following an initial failed inspection. This resulted in continued Housing Assistance Payments being made for a unit that was not in full compliance with HQS requirements, without timely implementation of required corrective actions such as abatement or tenant relocation. Recommendation: We recommend the Authority establish procedures to ensure Housing Assistance Payments are promptly abated or tenant relocation is initiated when units fail to meet HQS requirements beyond regulatory timeframes. Periodic internal monitoring or quality control reviews should also be implemented to ensure ongoing compliance with HUD regulations and to mitigate the risk of recurring deficiencies.