Finding Text
Finding 2026-001 Material Weakness in Internal Control over Compliance U.S. Department of Housing and Urban Development 14.157 Section 207 Insured Loan Criteria: Improper administration of applicant wait list procedures. Criteria: In accordance with 24 CFR § 5.655 requirements, HUD/federal award requirements, and the Project’s established policies and procedures, the Project is required to administer applicant wait lists in a consistent, fair, and properly documented manner. Applicants should be processed in accordance with established eligibility and wait list procedures, and any exceptions or adjustments should be supported, approved, and documented. Condition: During our audit, we were made aware of an allegation that the former project manager allowed certain applicants to bypass the established wait list process. Cause: Management oversight over wait list administration was not sufficient to prevent or timely detect unauthorized adjustments or exceptions to the established process. Effect or Potential Effect: Improper administration of the wait list could result in applicants being treated inconsistently, eligible applicants being bypassed, unsupported tenant selection decisions, and potential noncompliance with federal award requirements or other applicable regulatory requirements. Identification of Repeat Finding: No prior-year finding Recommendation: Management should strengthen internal controls over applicant wait list administration. This should include limiting access to modify the wait list, requiring supervisory review and approval of any wait list changes or exceptions, maintaining documentation to support applicant selection and movement on the wait list, and periodically reviewing wait list activity for unusual or unsupported changes. Management should also consider performing a review of prior wait list activity to determine whether any applicants were improperly advanced or bypassed and whether further corrective action is necessary. Views of Responsible Officials and Planned Corrective Action: Management has reviewed the audit finding and acknowledges the allegation related to improper administration of the applicant wait list. The former project manager is no longer with the Project, and management responsibilities have been reassigned. Management plans to review wait list procedures, strengthen oversight and documentation requirements, and implement additional controls to ensure applicants are processed in accordance with established policies and applicable program requirements.