HOUSING AUTHORITY OF THE CITY OF MERIDENLocal Government

Finding No. 2022-001 Low Rent Public Housing, CFDA #14.850 Compliance Requirement: Activities Allowed or Unallowed Type of Finding: Noncompliance, Significant Deficiency Condition Testing of interfund receivable balances owed to the Low Rent Public Housing (LRPH) program from the State and Local program indicated potential unallowable uses of LRPH grant funds. Criteria The Operating Fund is designed to make financial assistance available to PHA's for the operation and management of public housing. The use of a centralized revolving fund allows the use of one program's cash to cover expenses of another program which is subsequently reimbursed within a reasonable amount of time. Inter-program due to and due from balances, not reconciled on a timely basis, indicate the existence of temporary loans and are unallowable. Cause The State and Local and Business Activities programs have not generated sufficient cash required to reimburse the revolving fund for expenses incurred on its behalf before the end of the operating cycle. Effect It appears LRPH funds in the amount of $4,187,205 were used to cover development costs of nonfederal programs. This is considered an unallowable use of grant funds and may be subject to repayment. Context The Authority is not in compliance regarding loaning federal funds to nonfederal programs. Questioned Costs N/A Recommendation We recommend the Authority reconcile and settle interfund balances on a monthly basis. In addition, we recommend the Authority establish controls to restrict interfund transactions for which there is no certainty of reimbursement before the accounting period cut-off.

Finding No. 2022-002 Low Rent Public Housing, CFDA #14.850 Compliance Requirement: Procurement, Suspension & Debarment Type of Finding: Noncompliance, Material Weakness Condition During a HUD Compliance review, it was noted that the Authority did not adhere to sealed bid requirements and does not maintain required documentation for Sealed Bids in accordance with the below regulatory citations; the Authority signed and authorized a change order in the amount of $149,500 dated March 3, 2022; however, the contract end date was October 27, 2021; and the Authority did not follow emergency procurement rules. MHA failed to complete the emergency work that it received clearance for by the Meriden Fire Marshall. A contract to complete the work was not signed until November 5, 2022, while the Fire Marshall?s letter was dated October 25, 2021. Criteria The Authority must adhere to sealed bid requirements and maintain the required documentation for Sealed Bids. Sealed Bid procurement requires a public solicitation where a notice is published in a newspaper and/or on website that are generally used by the industry. Submissions must be sealed and received at a specified date and time and a published date and time for opening the sealed bids. The agency then awards the contract to the lowest responsible bidder for a firm, fixed price. The Authority must include a change order justification in the procurement file for any change orders awarded. The Authority took over a year to sign a contract to complete emergency work from the date it received clearance from the fire marshal. Cause The Authority was not properly following the Authority Procurement Policy or the HUD Procurement Handbook for PHAs. Effect A change order for $149,500 was signed on March 3, 2022, after the contract end date of October 27, 2021. The file did not contain a change order justification. Given that there was no documentation of a contract extension, the cost associated with the change order is not an eligible expense. Context A review of three contracts revealed the issues with the procurement policy. Questioned Costs $149,500 Recommendation We recommend the Authority design a system of internal controls to ensure that all procurement standards are followed in accordance with Authority procurement policy as well as the HUD Procurement Handbook for PHAs

Finding No. 2022-003 Housing Choice Voucher Cluster, CFDA #14.871 and #14.879 Compliance Requirement: Special Tests and Provisions Type of Finding: Noncompliance, Significant Deficiency Condition The Authority?s Section 8 Housing Choice Vouchers program does not have an updated board adopted Administrative Plan that reflects the order of preference of selecting applicants off the waiting list. Additionally, the Authority is not managing its waiting list in accordance with HUD rules and regulations. Criteria When the Authority is awarded Mainstream vouchers, these vouchers must be used for new admissions to the program from the waiting list. The Authority must lease these vouchers by pulling the first Mainstream-eligible family from its tenant-based waiting list. The Authority is not permitted to reassign existing participants to the program in order to make regular tenant-based vouchers available. Further, the Authority may not skip over Mainstream-eligible families on the waiting list because the Authority is serving the required number of Mainstream families. Cause The overall cause was a lack of quality control in understanding the importance of waiting list selections in accordance with HUD rules and regulations. Effect The Housing Authority could be admitting applicants not in the preferred order. Context A review of the Authority?s Administrative Plan revealed it has not been updated to reflect how Mainstream applicants are selected from the waiting list and at what preference. Additionally, the waiting list is not being managed in accordance with HUD rules and regulations. Questioned Costs N/A Recommendation The Housing Authority should adopt a board-approved Administrative Plan that properly defines how applicants are selected from the waiting list. 59

Finding No. 2022-004 Housing Choice Voucher Cluster, CFDA #14.871 and #14.879 Compliance Requirement: Reporting Type of Finding: Noncompliance, Significant Deficiency Condition During a HUD Compliance Review, the results of several indicators of the Section 8 Management Assessment Program (SEMAP) were changed resulting in the Authority being designated as a Troubled Performer. Criteria When the Authority conducts its SEMAP, it should be properly documented how they selected sample sizes and the methods that were used to ensure that the items being tested were properly calculated. Cause The overall cause was a lack of quality control in performing the SEMAP. Effect By not properly conducting and documenting the SEMAP, the Housing Authority is labeled as a Troubled Performer. Additionally, the SEMAP is a good control tool to ensure that the HCV program is being conducted in accordance with HUD regulations. Context Indicator #3: The Authority was unable to provide any documentation of how it selected the sample size or what methods they used to ensure that rents were properly calculated. Indicator #5: The Authority could not provide a log or documents that showed how sample size was selected, the Authority chose a cross sectional area of units to inspect and that the inspected units were for the fiscal period. Indicator #6: No documentation provided. Indicator #8: No documentation provided. Questioned Costs N/A Recommendation The Housing Authority should develop better internal controls over the performance and documentation of SEMAP or consider outsourcing this to a reputable third party. 60

Ill. Federal Award Findings and Questioned Costs Finding No. 2021-001 Compliance Requirement: Type of Finding: Condition Low Rent Public Housing, CFDA #14.850 Activities Allowed or Unallowed Noncompliance, Significant Deficiency Testing of interfund receivable balances owed to the Low Rent Pubic Housing (LRPH) program from the State and Local program indicated potential unallowable uses of LRPH grant funds. Criteria The Operating Fund is designed to make financial assistance available to PHA's for the operation and management of public housing. The use of a centralized revolving fund allows the use of one program's cash to cover expenses of another program which is subsequently reimbursed within a reasonable amount of time. Inter-program due to and due from balances, not reconciled on a timely basis, indicate the existence of temporary loans and are unallowable. Cause The State and Local program had not generated sufficient cash required to reimburse the revolving fund for expenses incurred on its behalf before the end of the operating cycle. Effect It appears LRPH funds in the amount of $3,972,778 were used to cover development costs of nonfederal programs. This is considered an unallowable use of grant funds and may be subject to repayment. Questioned Costs N/A Recommendation We recommend the Authority reconcile and settle interfund balances on a monthly basis. In addition, we recommend the Authority establish controls to restrict interfund transactions for which there is no certainty of reimbursement before the accounting period cut-off.

Condition: Testing of interfund receivable balances owed to the Low Rent Pubic Housing (LRPH) program from the State and Local program indicated potential unallowable uses of LRPH grant funds. Criteria The Operating Fund is designed to make financial assistance available to PHA's for the operation and management of public housing. The use of a centralized revolving fund allows the use of one program's cash to cover expenses of another program which is subsequently reimbursed within a reasonable amount of time. Inter-program due to and due from balances, not reconciled on a timely basis, indicate the existence of temporary loans and are unallowable. Cause The State and Local program had not generated sufficient cash required to reimburse the revolving fund for expenses incurred on its behalf before the end of the operating cycle. Effect It appears LRPH funds in the amount of $1,577,609 were used to cover development costs of nonfederal programs. This is considered an unallowable use of grant funds and may be subject to repayment. Questioned Costs N/A Recommendation We recommend the Authority reconcile and settle interfund balances on a monthly basis. In addition, we recommend the Authority establish controls to restrict interfund transactions for which there is no certainty of reimbursement before the accounting period cut-off.

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