Finding Text
2025-001 – ACTIVITIES ALLOWED OR UNALLOWED Material Noncompliance / Material Weakness U.S. Department of Housing and Urban Development ALN #: 14.872 – Public Housing Capital Fund CRITERIA A PHA may use Capital Funds for operating costs only if it is included in the CFP 5-Year Action Plan that is approved by the PHA Board of Commissioners and HUD… A PHA with 250 or more units may use no more than 20 percent of its annual Capital Fund grant for activities that are eligible under the Operating Fund at 24 CFR part 990. (24 CFR 905.314 (I)) CONDITION Prior to year-end audit adjustments, the Authority recorded unearned revenue related to the 2023 and 2024 Capital Fund Formula Grants drawdowns for operations on the Central Office Cost Center. This amount should have been reflected as revenue on the public housing programs. CAUSE The Authority’s internal controls did not prevent the misunderstanding of the guidance contained in HUD’s Capital Fund Guidebook related to the use of Capital Funds for operations and the Authority incorrectly recorded the draw down for capital funds for operating costs. EFFECT As a result, prior to adjustments, the financial position of the public housing programs appeared to be worse off than it actually was which could lead management to make decisions that are not in the best interest of the Public Housing program. QUESTIONED COSTS None identified as the Public Housing Program was reimbursed. CONTEXT We selected a sample of 15 transactions charged to the Capital Fund Program from a population of approximately 150 transactions. This represented approximately 81% of Capital Fund Program Costs. This was not a statistically valid sample. REPEAT FINDING Not a repeat finding. RECOMMENDATION We recommend that the Authority enhance internal controls to ensure a review by those involved with the project the guidance contained in HUD’s Capital Fund Guidebook and the requirements of 24 CFR 905.202 related to eligible costs of the Capital Fund Program. AUDITEE’S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.