TOWN OF HEMPSTEAD HOUSING AUTHORITYLocal Government

2022-001 COCC U.S Department of Housing and Urban Development 14.850 Public and Indian Housing Condition: The Authority continues to run a deficit in the Central Office Cost Center (COCC) primarily because of legacy costs (Health Insurance and Pension costs) associated with former employees, as required by long term state contracts. COCC has expended Low Income Public Housing (LIPH) funds to support the COCC operations in violation of Federal Rules and Regulations. Through the year ended December 31, 2022, the Authority has accumulated in excess of $5,487,478, in COCC administrative operating costs above those normally covered by management fees, capital asset fees ad bookkeeping fees. Though it appears that overall the Authority does not have a Going Concern issue as a result of HUD s commitment in accordance with the Annual Contributions Contract (ACC) with housing authorities for the subsequent twelve (12) months, by continuing to operate the COCC with negative cash flow over an extended period of time, the COCC will continue to use LIPH funds in violation of HUD rules. It was noted that the amount owed to the LIPH program decreased in the current year. This is a repeat of finding 2021-001. Criteria: OMB-87 regarding eligible and ineligible costs. Cause: The Authority has not established controls to ensure proper accounting for cash balances pertaining to Asset Management Projects and continues to use a central checking system to disburse funds. There is also a lack of oversight and long-range planning in accordance with HUD s requirements. Effect: The Authority was not in compliance with the allowable costs criteria for the federal program. Questioned Costs: $0 Recommendation: We recommend that the Authority establish internal control procedures over the budgeting process sufficient to ensure that each program operates both in accordance with its budget and within its means, and for the Authority to provide a work-out plan for the COCC to substantially reduce its costs or to generate additional revenue. PHA Response and Corrective Action Plan: See corrective action plan.

2022-002 Project-Based Budgeting and Accounting U.S Department of Housing and Urban Development 14.850 Public and Indian Housing Condition: During review of the Authority s budgeting process, it was noted that the Board did not approve the 2022 fiscal year budget until March 2022. The Authority is required to complete and approve the budget before the start of the fiscal year. Criteria: PHAs implementing asset management shall develop and maintain a system of budgeting and accounting for each project in a manner that allows for analysis of actual revenues and expenses. Prior to the beginning of the fiscal year, a PHA is required to prepare an operating budget and the PHA s Board of Commissioners is required to review and approve the budget by resolution. Cause: The Authority was transitioning between accountant s during the budgetary process. Effect: The Authority was not in compliance with the project-based budgeting and accounting requirement. Questioned Costs: $0 Recommendation: We recommend that the Authority establish internal control procedures over the budgeting process sufficient to ensure that the budget is prepared and approved timely. PHA Response and Corrective Action Plan: See corrective action plan.

2021-001 Finding ? (Public and Indian Housing ? (14.850a)) The Authority continues to run a deficit in the COCC primarily because of legacy costs (Health Insurance and Pension costs) associated with former employees, as required by long term state contracts. COCC has expended LIPH funds to support the COCC operations in violation of Federal Rules and Regulations. Through the year ended December 31, 2021, the Authority has accumulated in excess of $6,264,308, in COCC administrative operating costs above those normally covered by management fees, capital asset fees and bookkeeping fees. Though it appears that overall the Authority does not have a Going Concern issue as a result of HUD's commitment in accordance with the ACC with housing authorities for the subsequent twelve (12) months, by continuing to operate the COCC with a negative cash flow over an extended period of time, the COCC will continue to use LIPH funds in violation of HUD rules. Questioned Costs ? $0 Criteria ? OMB-87 regarding eligible and ineligible costs. Effect of Condition ? Lack of oversight and long-range planning in accordance with HUD?s requirements. Cause of Condition ? The Authority has not properly accounted for cash balance pertaining to project AMPs and continues to use a central checking system to disburse funds. Recommendation ? We recommend that the Authority establish internal control procedures over the budgeting process sufficient to ensure that each program operates both in accordance with its budget and within its means, and for the Authority to provide a work-out plan for the COCC to substantially reduce its costs or to generate additional revenue. PHA Response and Corrective Action Plan ? The Authority believes it has implemented a management strategy to not only respond to the above finding but to eliminate it with both short- and long-term strategies. As of January 1, 2019, management and the board decided to regroup the public housing AMPs in hope the effect will allow for more self-sustaining AMPS. By doing this it will improve the central office cost center by allocating the costs to the appropriate AMP, and not be absorbed by the COCC. In addition to the reorganization, the Authority is in the process of converting public housing units to project-based voucher units under the RAD program. As all units are converted this will alleviate the Authority of maintenance costs and other administrative costs that are currently absorbed by the COCC. PHA Contact and Resolution Date William Scheibeler, Interim Executive Director, December 31, 2022

Finding ? (Low Rent ? (14.850a)) The Authority continues to run a deficit in the COCC primarily because of legacy costs (Health Insurance and Pension costs) associated with former employees, as required by long term state contracts. COCC has expended LIPH funds to support the COCC operations in violation of Federal Rules and Regulations. Through the year ended December 31,2020, the Authority has accumulated in excess of $5,637,791, in COCC administrative operating costs above those normally covered by management fees, capital asset fees and bookkeeping fees. Though it appears that overall the Authority does not have a Going Concern issue as a result of HUD's commitment in accordance with the ACC with housing authorities for the subsequent twelve (12) months, by continuing to operate the COCC with a negative cash flow over an extended period of time, the COCC will continue to use LIPH funds in violation of HUD rules. Questioned Costs ? $0 Criteria ? OMB-87 regarding eligible and ineligible costs. Effect of Condition ? Lack of oversight and long-range planning in accordance with HUD?s requirements. Cause of Condition ? The Authority has not properly accounted for cash balance pertaining to project AMPs and continues to use a central checking system to disburse funds. Recommendation ? We recommend that the Authority establish internal control procedures over the budgeting process sufficient to ensure that each program operates both in accordance with its budget and within its means, and for the Authority to provide a work-out plan for the COCC to substantially reduce its costs or to generate additional revenue. PHA Response and Corrective Action Plan ? The Authority believes it has implemented a management strategy to not only respond to the above finding but to eliminate it with both short- and long-term strategies. As of January 1, 2019, management and the board decided to regroup the public housing AMPs in hope the effect will allow for more self-sustaining AMPS. By doing this it will improve the central office cost center by allocating the costs to the appropriate AMP, and not be absorbed by the COCC. In addition to the reorganization, the Authority is in the process of converting public housing units to project-based voucher units under the RAD program. As all units are converted this will alleviate the Authority of maintenance costs and other administrative costs that are currently absorbed by the COCC. PHA Contact and Resolution Date William Scheibeler, Interim Executive Director, June 30, 2022

Finding ? (Low Rent ? (14.850a)) The Authority continues to run a deficit in the COCC primarily because of legacy costs (Health Insurance and Pension costs) associated with former employees, as required by long term state contracts. COCC has expended LIPH funds to support the COCC operations in violation of Federal Rules and Regulations. Through the year ended December 31,2019, the Authority has accumulated in excess of $4,506,730, in COCC administrative operating costs above those normally covered by management fees, capital asset fees and bookkeeping fees. Though it appears that overall the Authority does not have a Going Concern issue as a result of HUD's commitment in accordance with the ACC with housing authorities for the subsequent twelve (12) months, by continuing to operate the COCC with a negative cash flow over an extended period of time, the COCC will continue to use LIPH funds in violation of HUD rules. Questioned Costs ? $0 Criteria ? OMB-87 regarding eligible and ineligible costs. Effect of Condition ? Lack of oversight and long-range planning in accordance with HUD?s requirements. Cause of Condition ? The Authority has not properly accounted for cash balance pertaining to project AMPs and continues to use a central checking system to disburse funds. Recommendation ? We recommend that the Authority establish internal control procedures over the budgeting process sufficient to ensure that each program operates both in accordance with its budget and within its means, and for the Authority to provide a work-out plan for the COCC to substantially reduce its costs or to generate additional revenue. PHA Response and Corrective Action Plan ? The Authority believes it has implemented a management strategy to not only respond to the above finding but to eliminate it with both short- and long-term strategies. As of January 1, 2019, management and the board decided to regroup the public housing AMPs in hope the effect will allow for more self-sustaining AMPS. By doing this it will improve the central office cost center by allocating the costs to the appropriate AMP, and not be absorbed by the COCC. In addition to the reorganization, the Authority is in the process of converting public housing units to project-based voucher units under the RAD program. As all units are converted this will alleviate the Authority of maintenance costs and other administrative costs that are currently absorbed by the COCC. PHA Contact and Resolution Date William Scheibeler, Interim Executive Director, June 30, 2021

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