Corrective Action Plans

We will review tenant’s files for the deficiencies identified above and implement new internal control procedures to correct these conditions. We will also provide increased supervision and training over this area. We anticipate a complete resolution of this type of error by February 29, 2024.

This finding is a result of a) staff changes that occurred throughout the year without an adequate training and transition strategy, b) a lack of sufficiently detailed written procedures, and c) a lack of resources to adequately review staff work and provide feedback. Status/timeline: This is amongst the first areas that will be addressed by our fee accountant. Enhanced policies and procedures to be written within 30 days of fee accountant start date. The Directof Finance and Accounting along with the fee accountant will help ensure procedures are being followed with proper supporting documentation provided for each draw.

Federal agency: U.S. Department of Housing and Urban Development Federal program title: Housing Choice Voucher Program ALN Number: 14.871 & 14.879 Award Period: April 1, 2022 through March 31, 2023 Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance Recommendation: We recommend management should designate one person to review a sample of the new files entering the program to determine if files were prepared and processed in accordance with internal policies and compliance requirements. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: The compliance officer will ensure that at least 3 of the 15 files selected for review each month are new intakes to determine if files were prepared and processed in accordance with internal policies and compliance requirements. Name(s) of the contact person(s) responsible for corrective action: Regla Exavier and Ruchelle Hobbs Planned completion date for corrective action plan: January 1, 2024.

Federal agency: U.S. Department of Housing and Urban Development Federal program title: Housing Choice Voucher Program ALN Number: 14.871 & 14.879 Award Period: April 1, 2022 through March 31, 2023 Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance Recommendation: We recommend management should designate one person to review a sample of the files that have been recertified each month, to determine if the tenant files were prepared in accordance with internal policies and until the compliance deficiencies have been corrected. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: The compliance officer will review at least 15 files monthly and 30 SEMAP files annually to determine if the participant files were prepared in accordance with internal policies and follow up until the compliance deficiencies have been corrected. The HCVP Director will ensure that HCV staff has corrected all files within 10 days of receipt. Name(s) of the contact person(s) responsible for corrective action: Regla Exavier and Ruchelle Hobbs Planned completion date for corrective action plan: No later than 1/1/2024

Federal agency: U.S. Department of Housing and Urban Development Federal program title: Housing Choice Voucher Program ALN Number: 14.871 & 14.879 Award Period: April 1, 2022 through March 31, 2023 Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance Recommendation: We recommend management should designate one person to oversee the inspection process to ensure that all inspections are being performed in a timely manner. Furthermore, management should ensure no HAP payments are issued for units that have not passed HQS housing inspections. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: The HCV Director will utilize MONDAY.com to monitor and trac abatement and family failed inspections. The compliance officer will review PIC on a monthly bases to ensure all inspection 50058 has been submitted and accepted by HUD, as well as reporting late HQS inspections. Name(s) of the contact person(s) responsible for corrective action: Ruchelle Hobbs, Regla Exavier Planned completion date for corrective action plan: no later than 1st quarter 2024.

Action Taken: The Project contracts its accounting and financial reporting processes to an outside Independent Contractor that provides specialty services of this nature to skilled nursing facilities nationwide. The Independent Contractor rearranged their staffing structure for the Project and assigned specific staff to provide the Project services and respond to financial questions that arise during the year. The implementation of these processes will ensure that annual financial reports are filed timely, which in turn will ensure timely calculations of surplus cash followed by timely surplus cash deposits. As of date, the Project has been meeting the surplus cash deposit requirements. Mr. Mark Stern was designated to implement and monitor the plan of corrective action for this finding. Completion Date: 02/13/2023

Action Taken: The Project contracts its accounting and financial reporting processes to an outside Independent Contractor that provides specialty services of this nature to skilled nursing facilities nationwide. The Independent Contractor rearranged their staffing structure for the Project and assigned specific staff to provide the Project services and respond to financial questions that arise during the year. The implementation of these processes will ensure that annual financial reports are filed timely. As of date, the Projects financial reporting has made significant progress in meeting deadlines, and the Project anticipates the June 30, 2024 filing to meet the deadline. The Project has designated Mr. Mark Stern to monitor the plan of corrective action for this finding. Anticipated Completion Date: 09/30/2024

2023-003 Condition: Deficiencies Noted in Examination of Low-Rent Public Housing Tenant Files Steps to resolve: We will review the internal control procedures over tenant file re-certifications and documents. Management has implemented procedures along with staffing changes in order to clear this finding in FY 2023. Individual responsible for correction: Ms. Denise Brooks-Jones, Acting Executive Director Timeframe: As of March 31, 2024

2023-001 Condition: Deficit in COCC Steps to resolve: The Authority's continued conversion to private based ownership via tax credits and Rental Assistance Demonstration will ease the burden of capital need. Once all our properties are converted this issue will not exist. Individual responsible for correction: Ms. Denise Brooks-Jones, Acting Executive Director Timeframe: As of March 31, 2024

2023-002 Condition: Deficiencies Noted in Examination of Section Eight Participant Files Steps to resolve: The Authority will review its internal control procedures over tenant file re-certifications. Individual responsible for correction: Ms. Denise Brooks-Jones, Acting Executive Director Timeframe: As of March 31, 2024

CORRECTIVE ACTION PLAN FOR FINDINGS REPORTED UNDER UNIFORM GUIDANCE Kelso Housing Authority April 1, 2022 through March 31, 2023 This schedule presents the corrective action the Authority is planning to take for findings included in this report in accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Finding ref number: 2023-001 Finding caption: The Housing Authority had inadequate internal controls for ensuring compliance with depository agreement requirements for its Section 8 Housing Choice Voucher program. Name, address, and telephone of Authority contact person: Joleen Reece, Executive Director 360-423-3490 1415 S. 10th Avenue Kelso, WA 98626 Corrective action the auditee plans to take in response to the finding: The Authority has initiated the change to an interest-bearing arrangement for the HCV bank account as of December 5, 2023. Anticipated date to complete the corrective action: January 1, 2024.

2023-101 Eligibility Recommendation: The Authority should establish policies and procedures to ensure that tenants' eligibility determinations will be reviewed and approved by an employee that is independent of the initial eligibility determination. Action Taken: Authority concurs and has implemented the recommendation. Anticipated Completion date: Fiscal year 2024

2023-01 - Section 223(f) Mortgage Insurance for the Purchase or Refinancing of Existing Multifamily Housing Projects, ALN #14.155 Statement of Condition: The Project does not have sufficient internal controls in place over eligibility Response: Developac, Inc., Management Agent, will immediately implement the following corrective actions to cure said deficiency: 1. Management Agent will be solely responsible for updating housing software with the annual income limits provided by HUD 2. Management Agent will periodically review tenant move-in files for eligibility verification

Responsible Party Name: Fred Gibbs Position: President, Management Agent Telephone Number: (913) 709-1811 Federal Agency U.S. Department of Housing and Urban Development Federal Program Supportive Housing for the Elderly (Section 202) Compliance Requirements A/B – Activities Allowed or Unallowed and Allowable Costs/Cost Principles Finding Type Federal Awards Auditee’s Comments on Finding We agree with the auditors’ finding. Corrective Action We will follow procedures to ensure expenditures include supporting documentation before they are posted to the general ledger, and we will review the accuracy / completeness of the documentation prior to making payment. Anticipated Completion Date December 31, 2023

Responsible Party Name: Fred Gibbs Position: President, Management Agent Telephone Number: (913) 709-1811 Federal Agency U.S. Department of Housing and Urban Development Federal Program Supportive Housing for the Elderly (Section 202) Compliance Requirements E - Eligibility Finding Type Federal Awards Auditee’s Comments on Finding We agree with the auditors’ finding. Corrective Action We will follow procedures to ensure tenant eligibility and establishing and maintaining security deposits for tenants moving out and we will review the accuracy / completeness of the documentation being processed in the tenant files on a periodic basis. Anticipated Completion Date December 31, 2023

Responsible Party Name: Fred Gibbs Position: President, Management Agent Telephone Number: (913) 709-1811 Federal Agency U.S. Department of Housing and Urban Development Federal Program Supportive Housing for the Elderly (Section 202) Compliance Requirements N – Special Tests and Provisions Finding Type Financial Statement and Federal Awards Auditee’s Comments on Finding We agree with the auditors’ finding. Corrective Action We will follow our policies and procedures to ensure that our accounting records are kept accurate and complete, and a responsible official will review and sign off on the monthly financial statements. Anticipated Completion Date December 31, 2023

Views of Responsible Officials and Planned Corrective Actions: Due to the effects of Covid and the current workforce pool, it was difficult finding and retaining qualified accounting personnel. In the past, the Organization experienced little turnover in the accounting department. Moving forward, we have found qualified accounting personnel that will assist the Organization in making sure the audited financial statements are submitted to HUD by the deadline. Management will ensure that the audited financial statements are submitted in a timely manner.

Views of Responsible Officials and Planned Corrective Actions: As of August 3, 2023, all 5 payments to the reserve for replacements account that were in arrears from the year ended March 31, 2023 were deposited to the reserve for replacement bank account. To ensure that all deposits to the reserve for replacement are made monthly moving forward, management has created the following procedures and checklists. As part of the monthly financial statement review, the executive director will review the reserve for replacement bank account and related year-to-date ledger to ensure the deposits are being made monthly in a timely fashion. All variances will be investigated and reconciled. Management is looking into setting up an automatic transfer from the general bank account to the reserve for replacement bank account. This will ensure the monthly deposits to the reserve for replacements occur automatically.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Section 8 Housing Choice Vouchers, Mainstream Vouchers, Emergency Housing Vouchers Assistance Listing Numbers: 14.871, 14.879, 14.EHV (the “Housing Voucher Cluster”) Noncompliance – E. Eligibility – Tenant Files Non Compliance Material to the Financial Statements: Yes Material Weakness in Internal Control over Compliance for Eligibility Criteria: Tenant Files. The PHA must do the following: As a condition of admission or continued occupancy, require the tenant and other family member to provide necessary information, documentation, and releases for the PHA to verify income eligibility (24 CFR sections 5.230, 5.609, and 982.516). These files are required to be maintained and available for examination at the time of audit. Condition: Based upon inspection of the Authority’s files and on discussion with management, there were documents that were unavailable for examination at the time of audit. Context: There are approximately 8,789 units. Of a sample size of eighty-seven (87) tenant files, the following was noted: • HUD-9886 Authorization for Release of Information was missing in 8 files • Annual 50058 form was missing in 7 files • Verification of income and assets was missing in 10 files • Annual inspection report was missing in 2 files Our sample size is statistically valid. Known Questioned Costs: $216,820 Cause: There is a material weakness in internal controls over the compliance for the eligibility type of compliance related to the maintenance of tenant files. The Authority has not properly considered, designed, implemented, maintained and monitored a system of internal controls that assures the program is in compliance. Effect: The Housing Voucher Cluster is in material non-compliance with the eligibility type of compliance related to the maintenance of tenant files. Recommendation: We recommend the Authority design and implement internal control procedures that will assure compliance with the Uniform Guidance and the compliance supplement. Views of responsible officials and planned corrective action: The Authority accepts the recommendation of the auditor on the inspection of tenant files and has made arrangements to comply with the compliance requirements of the Housing Voucher Cluster. The added controls will consist of additional training that will be completed by Continued Eligibility staff related to the Electronic File Protocol and the procurment of an IT vendor that will develop reports to identify missing SharePoint attachments within electronic tenant files. Ingrid Layne, the Director of Assisted Housing will be responsible to implement this corrective action by March 31, 2024.

Finding 2023-001 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Mainstream Vouchers Assistance Listing Number: 14.879 Noncompliance – N. Special Tests and Provisions – Housing Quality Standards 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 discussions with management, the Authority did not properly abate one (1) out of eight (8) annual failed inspections selected for testing. Context: The Authority did not properly abate one (1) out of eight (8) failed inspections selected for testing. As a result, the Authority was not in compliance with the HQS as required by 24 CFR sections 982.158(d) and 982.405(b). Our sample size is statistically valid. Known Questioned Costs: $6,984 Cause: There is significant deficiency in internal controls over the compliance for the special tests and provisions type of compliance related to HQS inspections. The Authority has not properly considered, designed, implemented, maintained and monitored a system of internal controls that assures the program is in compliance. Effect: The Mainstream Vouchers Program is in non-compliance with the with the special tests and provisions type of compliance related to HQS inspections. Recommendation: We recommend the Authority design and implement internal control procedures that will reasonably assure compliance with the Uniform Guidance and the compliance supplement. Views of responsible officials and planned corrective action: The Authority has recognized the deficiencies in the Section 8 Housing Choice Vouchers Program and has implemented internal control procedures in 2023 that will ensure compliance of federal regulations. Those controls consist of the weekly monitoring of a report generated by the agency business software which identifies units that need abatements that leverages new categories from a new inspection template implemented in 2023. That report is compared to te manually gathered report for units in need of abatement that is provided by the inspections vendor. Ingrid Layne, the Director of Assisted Housing will be responsible to implement this corrective action by March 31, 2024.

Management will deposit $6,609 into the Reserve for Replacement account as soon as possible.

Finding 2023-002 – Housing Choice Voucher Program – Internal Control over Waiting List – Noncompliance and Material Weakness - Housing Choice Voucher Program - subsidy ALN #14.871 Corrective Action Plan: Finding 2023-002 correctly identifies the same underlying cause (recruiting and retaining qualified staff) as well as alluding to another underlying problem—antiquated software and IT systems—as contributing factors. Our detailed analysis of the issues giving rise to Finding 2023-001 and the strategic and comprehensive remedies being pursued will result in better outcomes in implementing RHA’s waiting list policies and procedures. For example, a new eligibility unit under an eligibility manager, will bring focus to sound waiting list management. However, another critical underlying cause is the system of waiting list preferences and having a waiting list that remains open regardless of the size. RHA proposes to do away with all preferences except that of giving higher priority to residents of Wake County and those who are employed in Wake County. An applicant’s preference can change multiple times while they are on the waiting list. Anytime one applicant provides new information that changes their preferences and position on the waiting list, the waiting list changes. Greatly simplifying RHA’s waiting list by eliminating most preferences will result in a more manageable waiting list going forward. An additional remedy RHA has implemented is closing the HCV waiting list for the first time in its history. This will greatly reduce the administrative burden of adding new applicants on a continual basis and then annually updating (purging) an unnecessarily large waiting list. Staff in the eligibility unit will have more time to focus on better management of the waiting list. These additional changes in RHA’s program management will complement the other changes discussed under Funding 2023-001. Person Responsible: HCV Director Priscilla Batts and her Eligibility Manager Anticipated Completion Date: The system of closing and opening waiting lists based on the adequacy of the size of the waiting list has been implemented on October 1, 2023. It is anticipated that the list will reopen on April 1, 2024, RHA’s go-live date for the new software. The elimination of most preferences will be implemented at the same time—April 1, 2024.

Finding 2023-001 – Housing Choice Voucher Program Tenant Files – Eligibility – Internal Control over Tenant Files – Noncompliance and Material Weakness - Housing Choice Voucher Program - subsidy ALN #14.871 Corrective Action Plan: Finding 2023-001 for the most part correctly identifies the cause of this finding: “We noted that the Authority has experienced difficulty in hiring, training, and retaining quality staff. This is the cause for each of the instances of noncompliance referenced.” The “Great Resignation” during the pandemic affected the HCV Program significantly as staff began to search for other opportunities and potential staff did not find RHA’s compensation competitive. Other negative impacts related to the pandemic included the moratorium on evictions and termination of assistance. Participants had fewer incentives to comply and became lax, resulting in increased levels of work to counter this lax attitude towards program rules. Later in 2022, the end of moratoria resulted in RHA’s voucher utilization rates plummeting as landlords exercised their rights to evict and terminate as well as pursuing rapidly increased market rents instead of renewing leases of voucher participants or renting to voucher holders for the first time. The efforts to retain landlords and issue hundreds of vouchers strained the departments’ staffing resources. The underlying cause of the findings was not just the pandemic effects. RHA recognized that it had underinvested in program operations. First, compensation levels were not close to being competitive. Second, RHA did not invest enough in staff training, a key factor in retention. Third, RHA had also underinvested in technology, using inefficient systems and paper-intensive operations. Fourth, in addition to underinvesting in compensation, RHA also did not allocate resources to staffing, resulting in an understaffed department—managers and line staff. And fifth, these areas of underinvestment led to an organizational structure and staffing model that resulted in staff roles being very narrow. Multiple staff were involved in individual aspects of processes like annual recertifications. It did not require much training, and it relied on staff to do narrow repetitive tasks in a conveyor-belt fashion without anyone being accountable for an entire process. For example, between one and two staff were responsible for doing calculations for participants’ rent portion and subsidy amounts for 3,800 or so annual recertifications and scores of interim recertifications. Four “client specialists” were each responsible for facilitating almost 1,000 participants’ compliance with recertification requirements prior to the two account specialists’ calculation work. In 2023, RHA started to address the root cause that led to this and other findings—underinvestment: 1. RHA’s Human Resources issued an RFP for a firm to do an analysis of compensation levels and make recommendations for classification of positions and competitive compensation. The study was completed and implemented effective the first pay period in December 2023. Individual compensation increases averaged more 10 percent, with staff in the operating departments like HCV benefiting from even higher salaries. These increases were on top of a five percent increase in all salaries effective July 1, 2023, in anticipation of the results of the study. 2. The Director of HCV immediately, upon direction to increase training, contracted with Nan McKay to provide HCV Specialist Certification training to all staff responsible for any part of the eligibility and ongoing occupancy processes. Prior to this effort, only one HCV staff member had been certified. All but one staff person failed the certification class. Going forward, all new staff will be required to pass Nan McKay’s HCV Specialist Certification class by the end of probation. 3. The HCV Director also contracted for Manager and Supervisor Training by Nan McKay for all supervisory staff. All completed certification requirements. 4. The HCV Director also recommended and implemented proposals to reorganize the department by ensuring that managers had a manageable supervisory load of not more than six staff per manager. The new structure created an eligibility unit headed by an eligibility manager (for the first time) as well as two units of ongoing eligibility staff of 12 HCV specialists overseen by two managers. These actions represent a significant increase in staffing and supervision. This reorganization also entails the implementation of a “case management” model in which each HCV Specialist is responsible and accountable for an initial case load of 300 voucher participants. Managers will be responsible for mentoring, training, quality control (file audits) and evaluation of the work of their staff. This reorganization of the department reflects multiple strategies to address some of the root causes that gave rise to the audit finding. 5. By the time the new CEO came on board on April 17, 2023, RHA had completed the evaluation of bids for new software and selected YARDI’s Voyager, Rent Café portals, and other applications to replace antiquated systems. Contract negotiations between RHA and YARDI were completed in July 2023. This initiative represented both a commitment to far greater efficiency and accuracy as well as a willingness to invest in program operations. Implementation and setup are well underway and April 1, 2024, is the “go-live” date. Needless to say, this commitment of resources and countless hours of staff time over nine months has had short-term impacts on RHA’s ability to address identified weaknesses. However, RHA is committed to long-term benefits while enduring short-term pain. These investments in a comprehensive strategic plan for long-term improvements in customer service, compliance, and performance will yield positive results without necessarily making major progress over the short term. To effect improvements over the short term, RHA has implemented the following measures: 1. The HCV director contracted with Nan McKay to assist RHA with catching up on compliance work that has stalled as a result of short staffing and lack of trained staff. Nan McKay’s own difficutly in retaining trained staff and hiring and training new staff delayed their assistance. This delay was further exacerbated by cyber event at the beginning of May 2023. RHA’s computers and systems were locked down by a threat actor requiring ransom. This event reduces RHA operations to manual processes and lack of access to key information to perform compliance work.Nan McKay’s efforts to assist are increasing over time. 2. HCV managers are increasing their efforts to perform qualify control efforts, focusing their staff’s attention on enforcing participants’ compliance with program requirements, including deadlines, and using what they learned from their training. Person Responsible: Priscilla Batts, HCV Director, is principally responsible and accountable for focusing her team on the strategic initiatives outlined above. Anticipated Completion Date: Some of the corrective actions above have been implemented, for example, competitive compensation, training, and outsourcing some of the compliance work. However, these are mainly system changes that will be fully implemented in 2024, for example, new software, with significant improvements that will be evidenced by December 31, 2024.

Finding 2023-003 – Low-Income Public Housing Tenant Files – Eligibility – Internal Control over Tenant Files – Noncompliance and Significant Deficiency Corrective Action Plan: The underlying causes of Finding 2023-03 include many, if not all, the causes underlying Finding 2023-01: 1. Pandemic effects on staffing and resident habits. 2. Underinvestment in staff compensation. 3. Underinvestment in training. 4. Underinvestment in adequate staffing levels. 5. An organizational structure that diffuses accountability for compliance, including timeliness of annual recertifications. In the Housing Management Department, all rent calculations are centralized and completed by one Central Office employee. A management system that does not hold property managers accountable for compliance and relies on one employee doing rent calculations for over 1,200 residents is likely to result in lack of compliance when other negative factors (1 to 5) come into play. RHA’s action plan includes: • Competitive compensation to attract and retain qualified staff. • Increasing senior management staff so that portfolio managers will have manageable supervisory loads of no more than five property manager each. • Reorganizing property staffing by upgrading office assistants to Housing Management Specialists, who will perform all recertication tasks, reviewed by their managers. • All Housing Management Specialists will receive certification training on rent calculation as well as property manager certification for high-performing staff who will become eligible for promotion. • Sites with complex social and other problems will have dedicated property managers, instead of splitting managers between sites. • New state-of-the-art software will greatly improve efficiency in communications with residents, paperless processes, and allow managers and their staff to gauge their performance, including timeliness on an ongoing basis. More qualified and talented property managers, supervised, mentored, and held accountable by portfolio managers, as well as supported by trained and higher qualified housing management specialists will work as a team to ensure compliance, including timely completion of recertications. Person Responsible: Sonia Anderson Director of Housing Management, portfolio managers, and property managers. Anticipated Completion Date: Implementation of all remedies will be completed by June 30, 2024.

Finding 2023-001: At March 31, 2023, the Corporation's residual receipts account was not invested in an interest bearing account. Comments on the Finding and Each Recommendation: The Agent should transfer the residual receipts account to an interest bearing account. Action(s) taken or planned on the finding: Agreed. The Agent concurs with the finding and the auditor's recommendation. The Corporation transferred the residual receipts account to an interest bearing account on October 31, 2023.