Finding 26116 (2022-003)

Significant Deficiency

Requirement

Questioned Costs

Year

2022

Accepted

2023-07-13

Audit: 23692

Organization: Housing Authority of the City of Beaumont (TX)

Auditor: Novogradac & Company LLP

AI Summary

Core Issue: Two out of six public housing properties lack required Declarations of Trust (DOTs), violating HUD regulations.
Impacted Requirements: Compliance with the recording of DOTs is essential for properties funded under the US Housing Act of 1937.
Recommended Follow-Up: The Authority should create and implement a corrective action plan to ensure all DOTs are properly filed and internal controls are strengthened.

Finding Text

Federal Program Titles: Public and Indian Housing Program Federal Catalog Numbers: 14.850 Noncompliance ? N. Special Tests and Provisions - Recording of Declarations of Trust/Declaration of Restrictive Covenants Against Public Housing Property Non Compliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Special Tests and Provisions Criteria: A current Declaration of Trust ("DOT"), in a form acceptable to HUD, must be recorded against all public housing property owned by PHAs (or private entities for public housing developed under 24 CFR Part 905, Subpart F) that has been acquired, developed, maintained, or assisted with funds from the US Housing Act of 1937. A DOT is a legal instrument that grants HUD an interest in public housing property. Condition: Based upon inspection of the Authority?s files and on discussion with management, there were properties that the Authority owns and insures that did not have DOTs on file during the time of audit. Context: The Authority owns six (6) public housing properties. During the audit, it was noted that two (2) out of six (6) public housing properties did not have DOTs on file. Cause: There is a significant deficiency in internal controls over the compliance for the special tests and provisions type of compliance related to the recording of DOTs against public housing property. The Authority has not properly filed DOTs in compliance with program requirements. Effect: The Public and Indian Housing Program is in non-compliance with the special tests and provisions type of compliance related to the recording of DOTs against public housing property. Recommendation: We recommend the Authority design and implement a corrective action plan that will assure compliance with the Uniform Guidance and the compliance supplement. Authority Response: The Authority accepts the recommendation of the auditor, and will design and implement internal controls over compliance in order to ensure all necessary DOTs are recorded.

Corrective Action Plan

Finding 2022-003 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Public and Indian Housing Program Federal Catalog Numbers: 14.850 Noncompliance ? N. Special Tests and Provisions - Recording of Declarations of Trust/Declaration of Restrictive Covenants Against Public Housing Property Non Compliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Special Tests and Provisions Criteria: A current Declaration of Trust ("DOT"), in a form acceptable to HUD, must be recorded against all public housing property owned by PHAs (or private entities for public housing developed under 24 CFR Part 905, Subpart F) that has been acquired, developed, maintained, or assisted with funds from the US Housing Act of 1937. A DOT is a legal instrument that grants HUD an interest in public housing property. Condition: Based upon inspection of the Authority?s files and on discussion with management, there were properties that the Authority owns and insures that did not have DOTs on file during the time of audit. Context: The Authority owns six (6) public housing properties. During the audit, it was noted that two (2) out of six (6) public housing properties did not have DOTs on file. Cause: There is a significant deficiency in internal controls over the compliance for the special tests and provisions type of compliance related to the recording of DOTs against public housing property. The Authority has not properly filed DOTs in compliance with program requirements. Effect: The Public and Indian Housing Program is in non-compliance with the special tests and provisions type of compliance related to the recording of DOTs against public housing property. Recommendation: We recommend the Authority design and implement a corrective action plan that will assure compliance with the Uniform Guidance and the compliance supplement. Views of responsible officials and planned corrective action: The Authority accepts the recommendation of the auditor and will design and implement internal controls over compliance in order to ensure all necessary DOTs are recorded. Allison Landrum, Chief Executive Officer, is responsible for implementing this corrective action by September 30, 2023.

Other Findings in this Audit

26114 2022-001

Significant Deficiency
26115 2022-002

Significant Deficiency
602556 2022-001

Significant Deficiency
602557 2022-002

Significant Deficiency
602558 2022-003

Significant Deficiency

Programs in Audit

ALN	Program Name	Expenditures
14.871	Section 8 Housing Choice Vouchers	$14.68M
14.850	Public and Indian Housing	$1.74M
14.182	Section 8 New Construction and Substantial Rehabilitation	$1.34M
14.872	Public Housing Capital Fund	$712,945
14.896	Family Self-Sufficiency Program	$120,820
14.870	Resident Opportunity and Supportive Services - Service Coordinators	$85,688