Finding 2025-004 N. Special Tests and Provisions: H6. Housing Assistance Payment Identification of the Federal Programs: Federal Agency: U.S. Department of Housing and Urban Development (HUD) Federal Assistance Listing Number: 14.881 Federal Program Name: Moving to Work (MTW) Demonstration Program Section 8 – Housing Choice Vouchers (HCV) and Rental Assistance Demonstration (RAD) Program Year: January 1, 2025 through December 31, 2025 Program No.: Multiple Federal Assistance Listing Numbers: 14.871 and 14.879 Federal Program Name: Housing Voucher Cluster Section 8 – Housing Choice Vouchers (HCV) – Veterans Affairs Supporting Housing and Emergency Housing Vouchers Mainstream Vouchers Program Year: January 1, 2025 through December 31, 2025 Program No.: Multiple Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): The Uniform Guidance 2 CFR section 200.303 states, “The recipient and subrecipient must: (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” “The PHA must pay a monthly HAP on behalf of the family that corresponds with the amount on line 12u of the HUD-50058. This HAP amount must be reflected on the HAP contract and HAP register (24 CFR section 982.158 and 24 CFR Part 982, Subpart K).” A “fully executed HAP” for the HCV Program means that the Housing Assistance Payments contract between the landlord (owner) and the Public Housing Agency (PHA) has been signed by both parties, signifying that the landlord has agreed to lease a unit to a voucher holder and the PHA has approved the unit and will provide housing assistance payments to the landlord on behalf of the tenant, with all necessary documents and conditions met according to HUD regulations. Similarly, a “tenancy addendum” is considered fully executed when both the landlord and tenant have signed the document, signifying their agreement to the additional terms and conditions outlined within it, which are now legally binding and part of the overall lease agreement; essentially, all parties involved have completed their required actions by signing the addendum. The PHA is required to accurately determine family income, adjusted income, tenant rent, and housing assistance payments (HAP) in accordance with HUD Housing Choice Voucher (HCV) Program requirements. Housing assistance payments must be disbursed in the proper amount based on the family’s eligibility, income determination, utility allowance, and approved contract rent. 24 CFR Part 982, Subpart K, section 982.516 (f) states “Accuracy of family income data. The PHA must establish procedures that are appropriate and necessary to assure that income data provided by applicant or participant families is complete and accurate. The PHA will not be considered out of compliance with the requirements in this section solely due to de minimis errors in calculating family income but is still obligated to correct errors once the PHA becomes aware of the errors. A de minimis error is an error where the PHA determination of family income deviates from the correct income determination by no more than $30 per month in monthly adjusted income ($360 in annual adjusted income).” Condition: MTW Demonstration Program – For 34 of 40 (85%) participants with a corresponding housing assistance payment (HAP) paid to the landlord during fiscal year 2025, we noted compliance exceptions of the following nature: • For one (RAD) of the 34, the HAP Register was not updated to reflect the correct HAP in a timely manner. • For 29 (HCV) of the 34, while the lease was executed between the landlord and the tenant, the Tenancy Addendum (HUD-52641-A) was not attached to the lease, and therefore not fully executed. • For one (RAD) of the 34, the “Amendment to the HAP Contract – Owner” with the updated HAP was not completed or on file. • For seven (one RAD and six HCV) of the 34, there was a missed reexamination date and therefore the HAP determination used outdated income. Adequate support was not provided for the missed reexamination date to evidence that the Authority was following its policies and procedures when a participant fails to comply with the Housing Choice Voucher program family obligations. Housing Voucher Cluster – For 28 of 40 (70%) participants with a corresponding housing assistance payment (HAP) paid to the landlord during fiscal year 2025, we noted compliance exceptions of the following nature: • For all 28, while the lease was executed between the landlord and the tenant, the Tenancy Addendum (HUD-52641-A) was not attached to the lease, and therefore not fully executed. Cause: MTW Demonstration Program – The Authority lacked an adequate internal control to ensure HAP Tenancy Addendums were completed, signed, and fully executed. In addition, the Authority’s internal control over HAP determination was not operating effectively during the fiscal year. Specifically, the HAP Register was not updated timely, and reexaminations were not completed by the required anniversary date and as a result, HAP continued to be calculated using income information that was no longer current. Housing Voucher Cluster – The Authority lacked an adequate internal control to ensure HAP Tenancy Addendums were signed and fully executed. Effect or Potential Effect: MTW Demonstration Program – The HAP Tenancy Addendums may not be completed or fully executed. The HAP Register may not properly reflect HAP. HAP may not be calculated using updated income. Housing Voucher Cluster – HAP Tenancy Addendums may not be completed or fully executed. Questioned Costs: MTW Demonstration Program – A total of $76,616 related to Assistance Listing No. 14.881, representing the seven participant files with HAP that used outdated income. The questioned costs were calculated using the monthly HAP paid the landlord during fiscal year 2025 multiplied by the number of months for which the HAP determination was based on outdated income. Housing Voucher Cluster – None. Context: HAP reported in the schedule of expenditures of federal awards totaled $762,336,909 for the year ended December 31, 2025, for the MTW Demonstration Program. HAP reported in the schedule of expenditures of federal awards totaled $37,392,356 for the year ended December 31, 2025, for the Housing Voucher Cluster. Identification as a Repeat Finding, if Applicable: MTW Demonstration Program and Housing Voucher Cluster – This finding is not a repeat finding from the prior year. Recommendation: MTW Demonstration Program and Housing Voucher Cluster – The Authority should implement internal controls over the execution of HAP Tenancy Addendums. The Authority should follow its established policies, procedures and internal controls over HAP determinations. Views of Responsible Officials: CHA Management asserts its position that the agency is in compliance with the instructions provided by HUD, noting that participant signatures are not required for the HUD 52641A Tenancy Addendum to be executed. That guidance states that the signature on the HAP contract is sufficient to execute the Tenancy Addendum. However, CHA also recognizes that the auditors’ position is based on the explicit text documented on page 4-14.871-22 in the 2025 OMB Compliance Supplement (2 CFR Part 200, Appendix XI Compliance Supplement), which states that signatures are required on the Addendum itself to be properly executed. Nevertheless, according to the HUD instructions provided to the CHA, all HAP contracts were properly executed, and no further action is deemed necessary in that regard. The CHA will seek clarification from HUD and the authors of the 2025 OMB Compliance Supplement to resolve this apparent discrepancy in guidance.