Audit 45065

2022-001 ALN 14.871 ? Housing Voucher Cluster - Significant Deficiencies in Internal Controls over Emergency Housing Voucher Special Tests and Provisions Condition and Criteria: Per PIH Notice 2021-15, Section 6d, Emergency Housing Voucher unearned service fees should be reported as unearned revenue and in restricted cash. There should be no effect on the PHA's net position. Additionally, per PIH Notice 2021-15, Section 8h, PHAs are required to execute a General Deposit Agreement (HUD-51999) for EHV funding. As part of the agreement, Section 2 states that "All monies deposited by the HA with the depository shall be credited to the HA in a separate interest-bearing deposit or interest-bearing accounts." A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements of the financial statements on a timely basis. AU Section 265 states that deficiencies in controls over the period-end financial reporting process, including controls over procedures used to enter transactions totals into the general ledger; initiate, authorize, record and process journal entries into the general ledger; and record recurring and nonrecurring adjustments to the financial statements, are ordinarily at least significant deficiencies. Amount of Questioned Costs: None Context: During our audit, it was determined that misstatements were made to the current financial statements resulting from significant deficiencies in internal controls over HCV Special Test Provisions related to the financial reporting of Emergency Housing Voucher funding. In our testing of compliance with HCV special test provisions, we noted instances of misstatements due to errors in accounting and financial reporting relating to the Emergency Housing Voucher program. The Authority did not properly break out EHV reporting from HCV reporting. Unearned service fees were improperly accounted for which resulted in misstatements to net position that approached materiality. It was also noted that the Authority did not execute a General Deposit Agreement for EHV funding received. Cause: The Authority?s internal controls over the compliance with HCV special tests provisions that were in place were not being properly implemented. The Authority did not identify misstatements to the financial statements through their monitoring controls. The Authority also had a new Fee Accountant during the year and were not given sufficient time to apply proper monitoring controls over compliance with HCV Special Test provisions related to Emergency Housing Voucher funding received. Effect: The Authority?s financial statements required current year adjustments that approached materiality. Accounts that require adjustments that approached materiality include Cash ? Other Restricted, Unearned Revenue, Unrestricted Net Position and Other Assets. Auditor?s Recommendation: We recommend the Authority?s management continue to review the internal controls over compliance with Emergency Housing Voucher funding requirements to improve the detection and correction of misstatements. We also recommend that the Authority perform an analytical comparison of their current and prior year-end financial statements to help ensure that year-end financial reporting is accurate and complete. Grantee Response: Management acknowledges the finding and is following the auditor?s recommendation.

2022-001 ALN 14.871 ? Housing Voucher Cluster - Significant Deficiencies in Internal Controls over Emergency Housing Voucher Special Tests and Provisions Condition and Criteria: Per PIH Notice 2021-15, Section 6d, Emergency Housing Voucher unearned service fees should be reported as unearned revenue and in restricted cash. There should be no effect on the PHA's net position. Additionally, per PIH Notice 2021-15, Section 8h, PHAs are required to execute a General Deposit Agreement (HUD-51999) for EHV funding. As part of the agreement, Section 2 states that "All monies deposited by the HA with the depository shall be credited to the HA in a separate interest-bearing deposit or interest-bearing accounts." A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements of the financial statements on a timely basis. AU Section 265 states that deficiencies in controls over the period-end financial reporting process, including controls over procedures used to enter transactions totals into the general ledger; initiate, authorize, record and process journal entries into the general ledger; and record recurring and nonrecurring adjustments to the financial statements, are ordinarily at least significant deficiencies. Amount of Questioned Costs: None Context: During our audit, it was determined that misstatements were made to the current financial statements resulting from significant deficiencies in internal controls over HCV Special Test Provisions related to the financial reporting of Emergency Housing Voucher funding. In our testing of compliance with HCV special test provisions, we noted instances of misstatements due to errors in accounting and financial reporting relating to the Emergency Housing Voucher program. The Authority did not properly break out EHV reporting from HCV reporting. Unearned service fees were improperly accounted for which resulted in misstatements to net position that approached materiality. It was also noted that the Authority did not execute a General Deposit Agreement for EHV funding received. Cause: The Authority?s internal controls over the compliance with HCV special tests provisions that were in place were not being properly implemented. The Authority did not identify misstatements to the financial statements through their monitoring controls. The Authority also had a new Fee Accountant during the year and were not given sufficient time to apply proper monitoring controls over compliance with HCV Special Test provisions related to Emergency Housing Voucher funding received. Effect: The Authority?s financial statements required current year adjustments that approached materiality. Accounts that require adjustments that approached materiality include Cash ? Other Restricted, Unearned Revenue, Unrestricted Net Position and Other Assets. Auditor?s Recommendation: We recommend the Authority?s management continue to review the internal controls over compliance with Emergency Housing Voucher funding requirements to improve the detection and correction of misstatements. We also recommend that the Authority perform an analytical comparison of their current and prior year-end financial statements to help ensure that year-end financial reporting is accurate and complete. Grantee Response: Management acknowledges the finding and is following the auditor?s recommendation.