HOUSING AUTHORITY OF THE CITY OF RICHMONDLocal Government

Subject: Allowable Costs Cost Principles Federal Agency: Housing and Urban Development Federal Program: Public and Indiana Housing Assistance Listing Number: 14.850 Compliance Requirements: Allowable Costs Cost Principles Audit Findings: Significant Deficiency Finding Number: 2023-001 Criteria: Internal controls preventing unallowable costs must support a low assessed level of control risk as required by 2 CFR § 200.514 as a lack of internal controls could lead to unallowable cost under 2 CFR 200. Also, in accordance with 2 CFR 200 Subpart E - Cost Principles, costs must be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity. Condition: During our audit, we identified deficiencies in internal controls where the Authority was not following its Board approved check signing policy. The Housing Authority of the City of Richmond's Board approved policy determined that all checks, regardless of the amount, must be signed by the Executive Director or designee and a Board member. Amount of Questioned Costs: None noted. Context: Per the Authorities Board-approved check signing policy, all checks must be signed by 2 individuals (ED or other designee, and a Board Member). Of the 25 checks tested, all of them only had one signature, which goes against this policy. Cause: The Authority's internal controls over the accounts payables and check signing processes were inadequate in monitoring and identifying where disbursements failed to adhere to the corresponding policies, allowing checks with one signature to be processed. The Authority requires all checks to be signed by the Executive Director or a designee, as well as a Board Member, all of whom are approved as a bank signatory. The Authority printed the checks for payment without having an approved board member review over the checks and supporting backup prior to making the payments. Effect: A lack of internal controls could lead to unallowable costs under 24 CFR 200. During our audit we did not identify any unallowable cost; however, the Authority could have incurred unallowable costs related to the checks that were paid during the year because of this lack of adequate internal controls over the monitoring of check disbursements. Auditor’s Recommendation: The Authority should review board approved policies to ensure that segregation of duties are adequately performed. We recommend the Authority and the Board of Commissioners review the Check Signing Policy and make the necessary amendments to this Policy to allow for this Policy to be more effective and efficient. Subsequent to year end, the Authority made the appropriate changes and implementation to its check signing policy that checks under $10,000 require one signature for approval and all non recurring monthly expenses over $10,000 require two signatures for approval. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation. The Authority requires all checks to be signed by the Executive Director as primary signer or Financial Operations manager / Director of Finance as secondary signer as well as chairman of Board in emergency role if primary or secondary is unavailable, all of whom are approved as a bank signatory. All checks under $10,000 require one signature from primary check signer (Executive Director / President-CEO) and All non-recurring monthly expenses over $10,000 require two signatures for approval consisting of any combination Executive Director as primary signer or Financial Operations manager / Director of Finance as secondary signer, or as chairman of Board in emergency role if primary or secondary is unavailable.

2021-001 CFDA#14.872 Public Housing Capital Funds Program - Procurement and Suspension and Debarment Condition and Criteria: During our audit, it was determined that internal control deficiencies over compliance existed related to the Authority?s compliance with the Capital Funds Program?s procurement and suspension and debarment compliance provisions. It was determined that these internal controls were likely ineffective as current management explained that they were unable to locate necessary documents maintained by previous management. This included procurement files and supporting documentation to support procurement actions during the fiscal year ended June 30, 2021. In accordance with 2 CFR part 215.40 through 215.48, all procurement transactions should be conducted in a manner in which to provide, to the maximum extent practical, open and free competition. It also states that some form of cost or price analysis shall be made and documented in the procurement files in connection with every procurement action. Lastly, in accordance with the Authority?s Procurement Policy, small purchase procedures for purchases or procurements of goods and services in excess of $3,000, or $2,000 for construction services, but not exceeding $75,000 requires documentation of at least three quotes that must be maintained in the procurement file. Contracts in excess of $75,000 require sealed bidding procedures and is also required to be maintained in the procurement file. Amount of Questioned Costs: None Context: As a result of the determination that the internal controls over procurement and suspension and debarment were ineffective, and due to the fact that the Authority explained that they could not locate all of the procurement documentation that was necessary in the procurement files for our audit, exceptions were noted. There were three contracts selected for testing. For one contract, there was no bidding process and the necessary quotes were not obtained. While testing one of the other contracts for proper procurement compliance, the Authority was unable to provide the actual bids received for this contract. For two of the contracts tested, the authority was unable to provide the actual signed contract for these contracts. Cause: The Authority?s previous management?s internal controls over the Capital Funds Program?s procurement and suspension and debarment compliance provision that were in place were deficient. Authority employees with the ability to procure goods and services were not complying with Federal procurement regulations or the Board-approved Procurement Policy as adequate documentation of all procurement actions was not being maintained on file, including documentation of bids or quotes. Effect: As a result of a lack of supporting procurement documentation on file, the Authority may have procured goods and services that did not provide for open and free competition, or that were not reasonably priced, which could have led to Federal funding waste. Auditor?s Recommendation: The Authority has had a change in management that has already begun to implement newly designed internal controls to address the outlined internal control deficiencies. We recommend that the Authority review over all of their ongoing contracts and, for those contracts that are either missing or expired, perform the necessary procurement actions and ensure that all procurement actions are adequately documented and maintained on file in accordance with the Authority's Board-approved Procurement Policy. Grantee Response: Management acknowledges the finding and will follow the auditor?s recommendation.

2021-002 CFDA#14.872 Public Housing Capital Funds Program - Special Tests & Provisions- Wage Rate Requirements Condition and Criteria: During our audit, it was determined that the Authority failed to obtain certified payrolls for construction contracts ongoing during the year that were in excess of $2,000 for all contracts selected for testing. The Authority was unable to provide any documentation evidencing that the required prevailing wage rate clauses were included in the contract or subcontract and that for each week in which work was performed under the contract or subcontract, the contractor or subcontractor submitted the required certified payrolls. In accordance with 29 CFR Part 5, Section 5.5 (a)(3)(ii), ?Contract provisions and related matters,? the contractor shall submit weekly for each week in which any contract work is performed a copy of all payrolls to the agency. Each payroll submitted shall be accompanied by a ?Statement of Compliance,? signed by the contractor or subcontractor who pays or supervises the payment of the persons employed under the contract and shall certify the following: that all applicable information provided under Section 5.5 (a)(3)(ii) of 29 CFR part 5, that each laborer or mechanic employed during the payroll period has been paid the full weekly wages earned, and that each laborer or mechanic has been paid not less than the applicable wage rates for the classification of work performed. Documentation must be maintained in order to evidence whether or not that the required prevailing wage rate clauses were included in the contract or subcontract. Amount of Questioned Costs: None Context: Out of the three contracts selected for testing, the Authority was not able to provide any documentation evidencing that the required prevailing wage rate clauses were included in the contract or subcontract and that for each week in which work was performed under the contract or subcontract, the contractor or subcontractor submitted the required certified payrolls. Cause: Due to a change in management from the prior year, the Authority failed to comply with existing procedures for the Capital Fund Program requiring contractors to submit weekly wage reports with all applicable information in accordance with Davis Bacon requirements as they were unable to locate any of this documentation. Effect: As a result of being unable to provide documentation of obtaining weekly wage reports from the contractors and that the prevailing wage rate clauses were included in the contract, laborers or mechanics employed on the contract may not have been paid the full weekly wages earned or could have been paid less than the applicable wages rates for the classification of work performed. Auditor?s Recommendation: We recommend the Authority review the internal controls over Davis Bacon compliance requirements and restore applicable procedures to maintain documentation that the prevailing wage rates were included in the contract and to follow up on the obligations of contractors to produce weekly wage reports to ensure compliance with applicable wage rates. Grantee Response: Management acknowledges the finding and will follow the auditor?s recommendation.

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