Finding Text
Federal Agency: U.S. Department of Housing and Urban Development Federal Program Title: Public and Indian Housing Assistance Listing Numbers: 14.850 Award Period: 1/1/2022-12/31/2022 Type of Finding: Significant Deficiency in Internal Control Over Compliance, Other Matters Criteria or Specific Requirement: In accordance with HUD regulations under 24 CFR Sections 5.601, 960.253, 960.255, and 960.259, for both family income examinations and reexaminations, obtain and document in the family file third party verification of (a) reported family annual income, (b) the value of assets, (c) expenses related to deductions from annual income, and (d) other factors that affect the determination of adjusted income or income-based rent. The PHA must determine income eligibility and calculate the tenant’s rent payment using the documentation from third party verification. Condition: During our testing, we noted instances where the Authority did not follow the internal controls in place to ensure all necessary documentation was acquired and maintained to accurately calculate the tenants’ rent payment. Questioned Costs: None Content: In 5 of 40 files tested, we noted the following: - 3 of 40 samples did not have proper support for income - 2 of 40 samples did not have proper support for assets - As a result of missing or incorrect support, 3 of 40 samples had incorrectly calculated rent Cause: The Authority did not consistently maintain sufficient documentation to support tenant income and asset determinations during the audit period. During this time, the Authority was continuing to recover from the operational impacts of the COVID-19 public health emergency. Extended periods of modified operations, increased workloads, and significant staff turnover created challenges in completing certifications and maintaining supporting documentation while simultaneously addressing a backlog of work that accumulated during the pandemic. Three of the exceptions involved missing or insufficient third-party income documentation that should have been maintained in the tenant files. The remaining two exceptions involved jointly owned bank accounts where the full account balance was entered for each account holder rather than allocating each individual's ownership interest. Although the asset balances were overstated, they remained below HUD's threshold for counting asset income and did not affect the tenants' rent calculations. The Authority acknowledges that its internal review procedures were not sufficient to identify these documentation and data entry errors before certifications were finalized. Effect: The Authority is not in compliance with HUD regulations regarding tenant rent calculations. Repeat Finding: No Recommendation: We recommend that management review their procedures to ensure that all required documentation is maintained in the file. Views of Responsible Officials: The Authority concurs with this finding and acknowledges that required documentation was not consistently maintained to support certain income and asset determinations during the audit period. During 2022, the Authority was continuing to recover from the significant operational disruptions caused by the COVID-19 public health emergency. As normal operations resumed, staff were working to address a backlog of certifications and file processing that had accumulated during the pandemic while also managing substantial staff turnover. These circumstances placed increased demands on remaining personnel and contributed to weaknesses in file documentation and quality control. Three of the exceptions involved supporting income documentation that was not adequately maintained in the tenant files. The remaining two exceptions involved jointly owned bank accounts where the full account balance was entered for both account holders instead of allocating each participant's ownership interest. Although these asset balances were overstated, they remained below HUD's threshold for counting asset income and did not impact the tenants' rent calculations. Nevertheless, the Authority recognizes that these errors should have been identified through its established review process. The Authority accepts responsibility for these deficiencies and has taken corrective action to strengthen its internal controls. Management has reinforced staff training on HUD documentation and verification requirements, enhanced supervisory reviews of tenant files, and implemented additional quality control procedures to ensure that required third-party documentation is obtained, retained, and reviewed before certifications are finalized. These measures are intended to improve the accuracy and completeness of tenant files and ensure continued compliance with HUD requirements going forward.