Finding 1238132 (2025-002)

Criteria – When Formula Income was not prepopulated or the prepopulated amount was adjusted, the Authority shall ensure that the formula income input into Form 52723, or the adjustment to the prepopulated Formula Income, was done accurately pursuant to HUD's Formula Income Guidance. Condition – Testing identified the entire population of 13 Asset Management Projects (“AMPs”) for which Formula Income (“FI”) was not prepopulated and required manual data entry. In each instance, an incorrect FI inflation rate was used, and the rate was not appropriately adjusted using the applicable FI Inflation Factor. As a result, Formula Income was understated by $1,431,784 in aggregate across the 13 AMPs. Cause – The Authority misunderstood the inflation rate and did not appropriately apply the application FI inflation factor. Effect - As a result, FI was understated by $ 1,431,784 in aggregate across the 13 AMPs tested. The understatement resulted in inaccurate FI data and may have affected related HUD reporting, management analyses, and calculations that rely on FI. Questioned Costs – Not applicable Repeat Finding - No Recommendation- We recommend that the Authority establish documented procedures identifying the applicable FI inflation rate, FI Inflation Factor, and calculation methodology; provide periodic training to responsible personnel; and enhance its existing FI review to require sufficient supporting documentation to validate the calculation and evidence review. View of Responsible Official – See corrective action plan.