Finding 501980 (2023-002)

Criteria: HUD requires Authority employees, the Authority Board, and public officials that exercise authority over the Authority to perform their duties in an ethical manner. As such, HUD's programs contain specific prohibitions with respect to conflicts of interest. Per Section 19 of the Annual Contributions Contract ("ACC") for the Public and Indian Housing program, neither the Authority nor any of its contractors or their subcontractors may enter into any contract subcontract, or arrangement in connection with a project under this ACC in which any of the following classes of people have an interest, direct or indirect, during his or her tenure or for one year thereafter: 1. Any present or former member or office of the governing body of the Authority, or any member of the officer's immediate family. 2. Any employee of the Authority who formulates policy or who influences decisions with respect to the projects, or any member of the employee's immediate family, or the employee's partner. 3. Any public official, member of the local governing body, or State or local legislator, who exercises functions or responsibilities with respect to the projects or the HA. In addition, any member of these classes of persons must disclose the member's interest or prospective interest to the Authority and HUD. The term "immediate family" means the spouse, mother, father, brother, sister, or child of a covered class member. Condition: Based upon discussions with management and review of invoices selected for cash disbursement testing, there were three (3) vendors in which there was a conflict of interest violating Section 19 of the ACC. Context: As part of the cash disbursements testing, we selected a sample of invoices that were paid during the audit period. Based on review of those invoices, there were three (3) vendors in which there was a conflict of interest violating Section 19 of the ACC. Known Questioned Costs: $333,390 Cause: The Authority did not comply with Section 19 of the ACC as it relates to conflicts of interest for the Public and Indian Housing program. Effect: The Authority's non-compliance with Section 19 of the ACC as it relates to conflicts of interest for the Public and Indian Housing program. Recommendation: We recommend the Authority update their Personnel Policy to include conflicts of interest as described in Section 19 of the ACC and design and implement internal control procedures that will reasonably assure compliance with Section 19 of the ACC as it related to conflicts of interest.