SOUTH BEND HOUSING AUTHORITY

Eligibility Housing Voucher Cluster Material weakness in internal control over compliance Material noncompliance (Repeat of Finding 2024-001) Condition: Out of an approximate population of 2,154 Section 8 Housing Choice Voucher tenants the following deficiencies were noted: • Three files did not have support necessary to verify income, • Two files did not have quality control checklists for the current year recertification, • Two files did not have identification for an adult household member, • One file did not have a 9886 form, • One file used the incorrect utility allowance; and • One file did not use the correct income calculation. Criteria: The Authority’s Administrative Plan and 24 CFR 982.516 require the Authority to obtain and maintain documentation necessary to determine tenant eligibility, verify income and family composition, and calculate housing assistance payments accurately and timely. Context: The auditor randomly selected 40 tenant files out of the population, which we consider to be a statistically valid sample size. The auditor reviewed the tenant files and support to ensure that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Cause: The Authority experienced staffing and operational challenges and did not have the available staff to follow the established internal controls to ensure proper compliance with regards to the collection of required HUD documentation to verify eligibility and calculate accurate housing assistance payments. Effect: The Authority is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided. Questioned Costs: Unknown. Auditor Recommendations: The Authority should reevaluate their established procedures and controls in place to ensure full compliance in regards to eligibility. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor’s sample. Management Response: See Corrective Action Plan.

Action Taken: The Management of the Authority agrees with the findings. We will implement improved internal controls to ensure that all annual recertifications are performed in a timely manner and that all required documents are kept in an organized manner. The Compliance Specialist will perform monthly quality checks on the files and work with staff to eliminate errors. The HCV Director is the responsible party, and controls will be in place by the end of the September 30, 2026 fiscal year.

2024-001

Eligibility Low Rent Public Housing - AL No. 14.850 Other Matter to be Reported Under the Uniform Guidance (Repeat of Finding 2024-002) Condition: Out of an approximate population of 442 Low Rent Public Housing tenants the following deficiencies were noted: • Two files did not have support necessary to verify income; and • One file did not use the correct income calculation. Criteria: The Authority’s ACOP and 24 CFR 960.259 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding timely, complete and accurate tenant files. Context: The auditor randomly selected 40 tenant files out of the population, which we consider to be a statistically valid sample size. The auditor reviewed the tenant files and support to ensure that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Cause: The Authority experienced staffing and operational challenges and did not have the available staff to follow the established internal controls to ensure proper compliance regards to the collection of required HUD documentation to verify eligibility and calculate accurate rental income. Effect: The Authority is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided. Questioned Costs: Unknown. Auditor Recommendations: The Authority should reevaluate their established procedures and controls in place to ensure full compliance in regards to eligibility. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor’s sample. Management Response: See Corrective Action Plan.

Action Taken: The Management of the Authority agrees with the findings. We will implement improved internal controls to ensure that all annual recertifications are performed in a timely manner and that all required documents are kept in an organized manner. The Compliance Specialist will perform monthly quality checks on the files and work with staff to eliminate errors. The Director of Asset Management is the responsible party, and controls will be in place by the end of the September 30, 2026 fiscal year.

2024-002

Condition: Out of an approximate population of 2,280 Section 8 Housing Choice Voucher tenants the following deficiencies were noted: • One file did not have an annual recertification performed during the year available, • Four files did not have a 214 declaration for a member of the household, • Two files did not have 9886 release of information from within 15 months of the annual recertification, • Three files did not have identification or birth certificates for a household member, • One file did not use the correct utility allowance, • Two files did not use the correct income calculation, • One file did not have support necessary to verify income adjustments Criteria: The Authority’s Administrative Plan and 24 CFR 982.516 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding timely, complete and accurate tenant files. Context: The auditor randomly selected 40 tenant files out of the population, which we consider to be a statistically valid sample size. The auditor reviewed the tenant files and support to ensure that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Cause: The Authority experienced staffing and operational challenges and did not have the available staff to follow the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to verify eligibility and calculate accurate housing assistance payments. Effect: The Authority is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided. Questioned Costs: Unknown. Auditor Recommendations: The Authority should reevaluate their established procedures and controls in place to ensure full compliance in regards to eligibility and the timeliness of recertifications. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor’s sample. Management Response: See Corrective Action Plan.

The Management of the Authority agrees with the findings; we will implement improved internal controls to ensure that all annual recertifications are performed in a timely manner and that all required documents are kept in an organized manner. The Authority hired a Compliance Specialist in May 2025 to perform quality control checks on the files to eliminate errors. The HCV Program Director is the responsible party, and controls will be in place by the end of the September 30, 2025 fiscal year.

Condition: Out of an approximate population of 585 Low Rent Public Housing tenants the following deficiencies were noted: • One file did not have an annual recertification performed within twelve months, • One file did not have a flat rent option sheet, • One file did not have a birth certificate for a minor household member, • One file did not use the correct income calculation, and • Nine files did not contain evidence of timely unit inspections being performed. Criteria: The Authority’s ACOP and 24 CFR 960.259 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding timely, complete and accurate tenant files. In addition, 24 CFR 5.705 requires each unit be periodically inspected. Context: The auditor randomly selected 40 tenant files out of the population, which we consider to be a statistically valid sample size. The auditor reviewed the tenant files and support to ensure that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Cause: The Authority experienced staffing and operational challenges and did not have the available staff to follow the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to verify eligibility, calculate accurate tenant rent amounts and provide support for inspections performed. Effect: The Authority is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided. Questioned Costs: Unknown. Auditor Recommendations: The Authority should reevaluate their established procedures and controls in place to ensure full compliance in regards to eligibility, the timeliness of recertifications and inspections performed. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor’s sample. Management Response: See Corrective Action Plan.

The Management of the Authority agrees with the findings; we will implement improved internal controls to ensure that all annual recertifications are performed in a timely manner and that all required documents are kept in an organized manner. The Authority hired a Compliance Specialist in May 2025 to perform quality control checks on the files to eliminate errors. The Public Housing Director is the responsible party, and controls will be in place by the end of the September 30, 2025 fiscal year.

2021-001 Allowability - Cash Coverage Material Noncompliance Repeated in part from 2020 audit (see prior year Finding No. 2020-003)Condition: The Authority does not have sufficient cash in the HCV program to cover the HAP restricted net position (?RNP?) as well as an amount due to HUD for interest, which results in a shortfall of $697,607. Total cash in the HCV program of $895,080 is insufficient to cover the FSS escrow liability of $138,276, HAP RNP of $1,439,772 and accrued interest owed to HUD of $14,639 totaling $1,592,687. Criteria: HUD enters into Annual Contributions Contracts (ACCs) with PHAs under which the Department of Housing and Urban Development (HUD) provides funds to the PHAs to administer the HCV program locally. HUD provides funds both for administration of the program, which are unrestricted for use in the HCV program, and for the payments to landlords, which are restricted and classified as RNP. RNP is the balance of unspent HAP at any given point in time and cash should be sufficient to cover the RNP balance. HAP RNP monies may not be used to cover administrative expenses nor may HAP RNP be loaned, advanced, or transferred to other component units or other programs. Context: The auditor reviewed the Authority?s cash balances in comparison with their related restricted liabilities. Effect: The Authority is not in compliance with applicable regulations regarding eligible use of HCV reserves. Cause: The Authority either spent these funds on operations or allowed other programs to borrow from these funds. Questioned Costs: $697,607. Auditor Recommendations: The Authority should set aside enough cash to cover the HAP restricted net position. Management Response: See Corrective Action Plan.

2021-001 Allowability - Cash Coverage Material Noncompliance Condition: The Authority does not have sufficient cash in the HCV program to cover the HAP restricted net position (?RNP?) as well as an amount due to HUD for interest, which results in a shortfall of $697,607. Total cash in the HCV program of $895,080 is insufficient to cover the FSS escrow liability of $138,276, HAP RNP of $1,439,772 and accrued interest owed to HUD of $14,639 totaling $1,592,687. Auditor Recommendations: The Authority should set aside enough cash to cover the HAP restricted net position. Action Taken: The FSS escrow liability is currently funded as of September 30, 2021 and this part of the condition above has been remediated. The Authority will continue to designate these funds separate from other operations and programs, understanding that these funds are restricted to FSS only. The Chief Financial Officer and the finance department will continue to work to set aside enough cash to cover the HAP restricted net position. The process to remedy this shortfall is ongoing.

2020-003

2021-002 Eligibility Public and Indian Housing Program - CFDA 14.850 Significant Deficiency in Internal Control Other Matter to Reported Under the Uniform Guidance Repeated in part from 2020 audit (see prior year Finding No. 2020-005) Condition: Out of an approximate population of 650 tenants, 40 tenant files were tested and the following deficiencies were noted: ? One file had an late annual recertification, ? Two files were missing birth certificates for dependents, ? One file had income calculation errors, ? One recertification was missing all permanent documentation. Criteria: The Authority?s ACOP and 24 CFR 960.259 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding complete and accurate tenant files. Context: The auditor randomly selected 40 tenant files out of the population, which is considered to be a statistically valid sample. The auditor reviewed the tenant files and support to ensure that proper procedure are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Cause: The Authority experienced staffing turnover and did not have the available staff to fully implement the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to complete a tenants file. Effect: The Authority is not in full compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided. Questioned Costs: None. Auditor Recommendations: The Authority should continue to train staff on the established procedures and controls in place to ensure full compliance in regards to eligibility. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor?s sample. Management Response: See Corrective Action Plan.

2021-002 Eligibility Public and Indian Housing Program - CFDA 14.850 Significant Deficiency in Internal Control Other Matter to Reported Under the Uniform Guidance Condition: Out of an approximate population of 650 tenants, 40 tenant files were tested and the following deficiencies were noted: ? One file had an late annual recertification, ? Two files were missing birth certificates for dependents, ? One file had income calculation errors, ? One recertification was missing all permanent documentation. Auditor Recommendations: The Authority should continue to train staff on the established procedures and controls in place to ensure full compliance in regards to eligibility. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor?s sample. Action Taken: The Management of the Authority agrees with the findings; we will implement improved internal controls to ensure that all annual recertifications are performed in a timely manner and that all required documents are kept in an organized manner. The Authority will be performing a quality control check on the files to eliminate errors. The Public Housing Director is the responsible party and controls will be in place by the end of the September 30, 2022 fiscal year.

2020-005

2021-003 Special Tests and Provisions - Housing Quality Standard (HQS) Failed Inspections Housing Voucher Cluster Significant Deficiency in Internal Control Other Matter to Reported Under the Uniform Guidance Repeated in part from 2020 audit (see prior year Finding No. 2020-008) Condition: The Authority was not able to provide supporting documentation providing evidence that units which failed inspection were reinspected in a timely manner. Criteria: HUD regulations require that units leased to a family are inspected at least annually to determine if the unit meets Housing Quality Standards (HQS). In addition, inspections must be documented on a unit inspection report. For units that fail inspections, any life threatening deficiencies must be corrected within 24 hours and all other deficiencies must be corrected within 30 calendar days or within a specified PHAapproved extension. If the deficiency is not corrected, the HAP payment must be abated no later than the first of the following month. Context: The auditor tested failed inspections to compare to the reinspection dates of the unit and was unable to conclude that the reinspections were completed in a timely manner. We consider this a necessity to verify that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding HQS reinspections. Cause: Significant turnover and lack of proper oversight contributed to the errors noted. The Authority did not have adequate internal controls in place over failed inspections. Effect: The Authority is unable to provide the requested documentation for review. The Authority may not be in full compliance with applicable HUD regulations. Questioned Costs: None. Auditor Recommendations: The Authority should make sure that failed HQS inspections are properly documented on the inspection report, and done within the required time frame or are properly abated. If the Authority does not reperform the inspection within the required time frame and does not abate the HAP payment, the Authority should document the reason in order to determine if it was reasonable. Also, the Authority should assure that all critical repairs for life threatening deficiencies are completed within 24 hours. Management Response: See Corrective Action Plan.

2021-003 Special Tests and Provisions - Housing Quality Standard (HQS) Failed Inspections Housing Voucher Cluster Significant Deficiency in Internal Control Other Matter to Reported Under the Uniform Guidance Condition: The Authority was not able to provide supporting documentation providing evidence that units which failed inspection were reinspected in a timely manner. Auditor Recommendations: The Authority should make sure that failed HQS inspections are properly documented on the inspection report, and done within the required time frame or are properly abated. If the Authority does not reperform the inspection within the required time frame and does not abate the HAP payment, the Authority should document the reason in order to determine if it was reasonable. Also, the Authority should assure that all critical repairs for life threatening deficiencies are completed within 24 hours. Action Taken: The Management of the Authority agrees with the findings and will implement improved internal controls, including reviewing timeliness standards with a third-party contractor and working with our software vendor to create a simplified reporting process to report follow-up inspection dates and results. The HCV Program Director is the responsible party and we anticipate this process to be completed by the end of the September 30, 2022 fiscal year.

2020-008

Condition: Out of an approximate population of 2,045 tenants, 25 tenant files were tested and the following deficiencies were noted: ? Seven files were did not have the 50058 forms completed for recertifications performed over the phone, ? One file was missing the 214 declaration for all tenants in household, ? One file was missing the 9886 release of information form, and ? Two files had incorrect utility allowance calculations. Criteria: The Authority?s Administrative Plan and 24 CFR 982.516 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding complete and accurate tenant files. Context: The auditor randomly selected 25 tenant files out of the population, which we consider to be a statistically valid sample size. The auditor reviewed the tenant files and support to ensure that proper procedure are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Cause: The Authority experienced staffing turnover and did not have the available staff to fill implement the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to complete a tenants file. Effect: The Authority is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided. Questioned Costs: None. Auditor Recommendations: The Authority should consider reevaluating their established procedures and controls in place to ensure full compliance in regards to eligibility. It was noted during testing that although QC check lists were part of all tenant files, it appeared that they were not properly being enforced for accuracy thus leading the auditor?s to further investigate and confirm additional items were missing. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor?s sample. Management Response: See Corrective Action Plan.

Action Taken: The Authority will implement internal controls, including using the QC check lists, to ensure tenant files are maintained according to all HUD regulations. Training will be instituted for all HCV Staff regarding file content requirements. Internal QC checks will be performed monthly to ensure worker compliance with instruction. This process has begun and is ongoing. The responsible person is the HCV Program Director.

2019-003

Condition: Out of an approximate population of 770 tenants, 30 tenant files were tested and the following deficiencies were noted: ? Five files had annual recertification past the 12 month period, ? One file was missing a 214 declaration for all tenants in household, ? One file was missing 9886 release of information form, ? Five files were missing flat rent forms, and ? Three files had incorrect income calculations. Criteria: The Authority?s ACOP and 24 CFR 960.259 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding complete and accurate tenant files. Context: The auditor randomly selected 30 tenant files out of the population, which is considered to be a statistically valid sample. The auditor reviewed the tenant files and support to ensure that proper procedure are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Cause: The Authority experienced staffing turnover and did not have the available staff to fully implement the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to complete a tenants file. Effect: The Authority is not in full compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided. Questioned Costs: None. Auditor Recommendations: The Authority should consider reevaluating their established procedures and controls in place to ensure full compliance in regards to eligibility. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor?s sample. Management Response: See Corrective Action Plan.

Action Taken: The Authority?s management agrees with the findings and will implement internal controls to ensure that annual recertifications/reexaminations are being conducted in accordance with HUD guidance. We will implement more training with staff. The controls will be in place by the end of the 3rd quarter 2022. The responsible person is the Public Housing Director.

2019-007

Condition: The Authority was not able to provide supporting documentation providing evidence that units which failed inspection were reinspected in a timely manner. Criteria: HUD regulations require that units leased to a family are inspected at least annually to determine if the unit meets Housing Quality Standards (HQS). In addition, inspections must be documented on a unit inspection report. For units that fail inspections, any life threatening deficiencies must be corrected within 24 hours and all other deficiencies must be corrected within 30 calendar days or within a specified PHAapproved extension. If the deficiency is not corrected, the HAP payment must be abated no later than the first of the following month. Context: The auditor tested failed inspections to compare to the reinspection dates of the unit and was unable to conclude that the reinspections were completed in a timely manner. We consider this a necessity to verify that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding HQS reinspections. Cause: Significant turnover and lack of proper oversight contributed to the errors noted. The Authority did not have adequate internal controls in place over failed inspections. Effect: The Authority is unable to provide the requested documentation for review. The Authority may not be in full compliance with applicable HUD regulations. Questioned Costs: None. Auditor Recommendations: The Authority should make sure that failed HQS inspections are properly documented on the inspection report, and done within the required time frame or are properly abated. If the Authority does not reperform the inspection within the required time frame and does not abate the HAP payment, the Authority should document the reason in order to determine if it was reasonable. Also, the Authority should assure that all critical repairs for life threatening deficiencies are completed within 24 hours. Management Response: See Corrective Action Plan.

Action Taken: The Authority has hired a 3rd party vendor to perform initial and reinspections. Authority staff will perform the QC inspections and will verify that all units which fail inspection will be reinspected within the required timeframe and HAP will be abated as necessary. All critical repairs for life threatening deficiencies will be completed within the 24 hour requirement. This has been implemented as of September 30, 2021. The responsible person is the HCV Program Director.

2019-006

2019-003 Eligibility ? Tenant Files Section 8 Housing Choice Vouchers Program ? CFDA Number 14.871 Material Weakness in Internal Control Material Noncompliance This is a repeat finding of 2018-003 from September 30, 2018 (initially occurred as Finding 2012-5 from September 30, 2012) Condition: 25 tenant files were selected for testing (out of approximately 2000 vouchers) and the following was noted: ? 3 tenant files where a signed lead base paint form was missing from the tenant file for units that were built before 1978. ? 1 tenant file where the child care income of $7,203 was excluded from the tenant?s household income. This caused the HAP rent to change from $909 to $729, which is a $180 decrease As part of our new admissions testing (10 tested out of 100 new admissions), we also noted the following: ? 1 tenant file where there is no support of a signed HAP contract. ? 2 tenant files where two dependents in the tenants? household were missing a signed 214 affidavit Form. However, the dependents were U.S. citizens per review of their birth certificates. ? 1 tenant file where the head of household did not check the box on the 214 affidavit form indicating that they were a U.S. citizen or a permanent resident. However, per review of the birth certificate, the tenant was a U.S. citizen. ? 3 tenant files where there was no support of a criminal background check being performed on the tenant upon their admission into the Section 8 program. Criteria: 24 CFR 982.516 requires internal controls to be in place to ensure compliance with HUD requirements, as well as complete and accurate tenant files. In addition, the Authority?s administrative plan also requires following proper procedures for determination of HAP and documentation in the tenant files. Questioned Costs: None. Effect: The Authority is not in compliance with all of the HUD requirements regarding eligibility and tenant recertifications, which could result in incorrect total tenant payments for rent and HAP payment to landlords. Cause: The Authority had turnover in staff and staff may need more training. In addition, review procedures should be used to reduce errors. Recommendation: The Authority should improve review procedures and increase training to employees and reviewers to insure that the Authority is in compliance with HUD rules for verification of tenant information and calculation of tenant rents. Views of Responsible Officials of the Auditee: We concur with the recommendation. We are implementing review procedures and providing training to insure that the applicable HUD regulations are being followed for tenant certification.

2019-003 Eligibility ? Tenant Files Section 8 Housing Choice Vouchers Program ? CFDA Number 14.871 Material Weakness in Internal Control Material Noncompliance This is a repeat finding of 2018-003 from September 30, 2018 (initially occurred as Finding 2012-5 from September 30, 2012) Condition: 25 tenant files were selected for testing (out of approximately 2000 vouchers) and the following was noted: ? 3 tenant files where a signed lead base paint form was missing from the tenant file for units that were built before 1978. ? 1 tenant file where the child care income of $7,203 was excluded from the tenant?s household income. This caused the HAP rent to change from $909 to $729, which is a $180 decrease As part of our new admissions testing (10 tested out of 100 new admissions), we also noted the following: ? 1 tenant file where there is no support of a signed HAP contract. ? 2 tenant files where two dependents in the tenants? household were missing a signed 214 affidavit Form. However, the dependents were U.S. citizens per review of their birth certificates. ? 1 tenant file where the head of household did not check the box on the 214 affidavit form indicating that they were a U.S. citizen or a permanent resident. However, per review of the birth certificate, the tenant was a U.S. citizen. ? 3 tenant files where there was no support of a criminal background check being performed on the tenant upon their admission into the Section 8 program. Recommendation: The Authority should improve review procedures and increase training to employees and reviewers to insure that the Authority is in compliance with HUD rules for verification of tenant information and calculation of tenant rents. Action Taken: We concur with the recommendation. We are implementing review procedures and providing training to insure that the applicable HUD regulations are being followed for tenant certification.

2018-003

2019-004 Special Tests and Provisions ? Housing Quality Standards Inspections Section 8 Housing Choice Vouchers Program ? CFDA Number 14.871 Material Weakness in Internal Control Material Noncompliance Condition: There is no support that quality control inspections were performed for the 2019 fiscal year. Per 24 CFR 982.405(b), the Authority is required to perform 29 quality control inspections for the 2019 fiscal year. Criteria: The PHA must inspect the unit leased to a family at least annually to determine if the unit meets Housing Quality Standards (HQS) and the PHA must conduct quality control re-inspections. The PHA must prepare a unit inspection report (24 CFR sections 982.158(d) and 982.405(b)). Questioned Costs: None. Effect: The Authority is not in compliance with applicable regulations regarding quality control inspections and there is no assurance that inspectors are completing the inspections properly. Cause: The Authority had turnover in staff and staff may need more training. Recommendation: Quality control Inspectors should perform the required re-inspections throughout the year to assure that inspections are being properly performed. Views of Responsible Officials of the Auditee: We concur with the recommendation and will provide additional training to assure the required re-inspections are performed and documented.

2019-004 Special Tests and Provisions ? Housing Quality Standards Inspections Section 8 Housing Choice Vouchers Program ? CFDA Number 14.871 Material Weakness in Internal Control Material Noncompliance Condition: There is no support that quality control inspections were performed for the 2019 fiscal year. Per 24 CFR 982.405(b), the Authority is required to perform 29 quality control inspections for the 2019 fiscal year. Recommendation: Quality control Inspectors should perform the required re-inspections throughout the year to assure that inspections are being properly performed. Action Taken: We concur with the recommendation and will provide additional training to assure the required re-inspections are performed and documented.

2019-005 Activities Allowed or Unallowed ? Use of HCV FSS Escrow and HAP Monies Section 8 Housing Choice Vouchers Program ? CFDA Number 14.871 Material Weakness in Internal Control Material Noncompliance This is a repeat finding of 2018-004 from September 30, 2018 (initially occurred as Finding 2017-007 from September 30, 2017) Condition: The Authority does not have sufficient cash in the HCV program to cover the FSS escrow liability and the HAP restricted net position (RNP), as well as an amount due to HUD (for interest) and is short approximately $170,648. Total cash in the HCV program of $1,135,827 is insufficient to cover the FSS escrow liability ($118,244), HAP RNP ($1,182,007) and accrued interest owed to HUD ($6,224) totaling $1,306,475. Criteria: The FSS program is a program that enables HUD-assisted families to increase their earned income and reduce their dependency on welfare assistance and rental subsidies by setting aside monies for future use. An interest-bearing escrow account is established by the PHA for each participating family. Any increases in the family?s rent as a result of increased earned income during the family?s participation in the program result in a credit to the family?s escrow account and thus the monies are restricted. In addition, HUD enters into Annual Contributions Contracts (ACCs) with PHAs under which the Department of Housing and Urban Development (HUD) provides funds to the PHAs to administer the HCV program locally. HUD provides funds both for administration of the program (which are unrestricted for use in the HCV program) and for payments to landlords (which are restricted and classified as RNP). RNP is the balance of unspent HAP any given point in time and cash should be sufficient to cover the RNP balance. HAP RNP monies may not be used to cover administrative expenses nor may HAP RNP be loaned, advanced, or transferred to other component units or other programs such as Public and Indian Housing. Questioned Costs: $170,648. Effect: The Authority is not in compliance with applicable regulations regarding eligible use of HCV FSS escrow deposits and HCV RNP monies. Cause: The Authority either spent these funds on operations or allowed other programs to borrow these funds. Recommendation: The Authority should set aside enough cash to cover the FSS liability and HAP RNP once it has enough cash available. Views of Responsible Officials of the Auditee: We concur with the recommendation and will set aside enough cash to cover the FSS escrows and HCV NRP once the cash becomes available.

2019-005 Activities Allowed or Unallowed ? Use of HCV FSS Escrow and HAP Monies Section 8 Housing Choice Vouchers Program ? CFDA Number 14.871 Material Weakness in Internal Control Material Noncompliance This is a repeat finding of 2018-004 from September 30, 2018 (initially occurred as Finding 2017-007 from September 30, 2017) Condition: The Authority does not have sufficient cash in the HCV program to cover the FSS escrow liability and the HAP restricted net position (RNP), as well as an amount due to HUD (for interest) and is short approximately $170,648. Total cash in the HCV program of $1,135,827 is insufficient to cover the FSS escrow liability ($118,244), HAP RNP ($1,182,007) and accrued interest owed to HUD ($6,224) totaling $1,306,475. Recommendation: The Authority should set aside enough cash to cover the FSS liability and HAP RNP once it has enough cash available. Action Taken: We concur with the recommendation and will set aside enough cash to cover the FSS escrows and HCV NRP once the cash becomes available.

2018-004

2019-006 Special Tests and Provisions - Housing Quality Standard (HQS) Failed Inspections Section 8 Housing Choice Vouchers Program ? CFDA Number 14.871 Significant Deficiency in Internal Control Other Matter to Reported Under the Uniform Guidance Condition: In testing 25 failed HQS inspections, the following instance of noncompliance was noted: We noted 1 failed inspection issue (out of 25 tested in a population of 600 failed inspections) where a unit did not pass inspection 118 days passed the original inspection date, and the HAP rent was not abated for the months of June, July, and August. There is no support that an abatement letter was sent to the landlord. Criteria: HUD regulations require that units leased to a family are inspected at least annually to determine if the unit meets Housing Quality Standards (HQS). In addition, inspections must be documented on a unit inspection report. For units that fail inspections, any life threatening deficiencies must be corrected within 24 hours and all other deficiencies must be corrected within 30 calendar days or within a specified PHA-approved extension. If the deficiency is not corrected, the HAP payment must be abated no later than the first of the following month. Questioned Costs: None. Effect: The Authority is not in compliance with applicable HUD regulations. Cause: Significant turnover and lack of proper oversight contributed to the errors noted. The Authority did not have adequate internal controls in place over failed inspections. Recommendation: The Authority should make sure that failed HQS inspections are properly documented on the inspection report, and done within the required time frame or are properly abated. If the Authority doesn?t do the inspection within the required time frame and doesn?t abate the HAP payment, the Authority should document the reason in order to determine if it was reasonable. Also, the Authority should assure that all critical repairs for life threatening deficiencies are completed within 24 hours. Views of Responsible Officials of the Auditee: We concur with the recommendation. We will implement procedures to assure that failed HQS inspections are properly documented on the inspection report, performed during the required time frame or initiate abatement procedures, and document the reason for the result of failed inspections and assure that repairs are completed timely.

2019-006 Special Tests and Provisions - Housing Quality Standard (HQS) Failed Inspections Section 8 Housing Choice Vouchers Program ? CFDA Number 14.871 Significant Deficiency in Internal Control Other Matter to Reported Under the Uniform Guidance Condition: In testing 25 failed HQS inspections, the following instance of noncompliance was noted: We noted 1 failed inspection issue (out of 25 tested in a population of 600 failed inspections) where a unit did not pass inspection 118 days passed the original inspection date, and the HAP rent was not abated for the months of June, July, and August. There is no support that an abatement letter was sent to the landlord. Recommendation: The Authority should make sure that failed HQS inspections are properly documented on the inspection report, and done within the required time frame or are properly abated. If the Authority doesn?t do the inspection within the required time frame and doesn?t abate the HAP payment, the Authority should document the reason in order to determine if it was reasonable. Also, the Authority should assure that all critical repairs for life threatening deficiencies are completed within 24 hours. Action Taken: We concur with the recommendation. We will implement procedures to assure that failed HQS inspections are properly documented on the inspection report, performed during the required time frame or initiate abatement procedures, and document the reason for the result of failed inspections and assure that repairs are completed timely.

2019-007 Eligibility ? Tenant Files Public and Indian Housing Program ? CFDA 14.850 Material Weakness in Internal Control Material Noncompliance Condition: Out of 25 tenant files selected for testing (out of a population of approximately 800), we noted the following instances of noncompliance: ? 9 files having income calculation issues. ? 3 files missing asset support. ? 2 files missing support for medical and childcare cost. ? 2 files missing EIVs. ? 1 file having an incomplete personal declaration form. Criteria: HUD regulations require that the Authority perform certain prescribed verification procedures and obtain the required documentation to assure that tenants qualify for low income housing and that amounts submitted to HUD for tenant assistance are calculated according to HUD rules. Questioned Costs: None. Effect: The Authority is not in compliance with applicable HUD regulations. Cause: The Authority had turnover in staff and staff may need more training. In addition, review procedures should be used to reduce errors. Recommendation: The Authority should improve review procedures and increase training to employees and reviewers to insure that the Authority is in compliance with HUD rules for verification of tenant information and calculation of tenant rents. Views of Responsible Officials of the Auditee: We concur with the recommendation. We are implementing review procedures and providing training to insure that the applicable HUD regulations are being followed for tenant certification.

2019-007 Eligibility ? Tenant Files Public and Indian Housing Program ? CFDA 14.850 Material Weakness in Internal Control Material Noncompliance Condition: Out of 25 tenant files selected for testing (out of a population of approximately 800), we noted the following instances of noncompliance: ? 9 files having income calculation issues. ? 3 files missing asset support. ? 2 files missing support for medical and childcare cost. ? 2 files missing EIVs. ? 1 file having an incomplete personal declaration form. Recommendation: The Authority should improve review procedures and increase training to employees and reviewers to insure that the Authority is in compliance with HUD rules for verification of tenant information and calculation of tenant rents. Action Taken: We concur with the recommendation. We are implementing review procedures and providing training to insure that the applicable HUD regulations are being followed for tenant certification.

2019-008 Special Tests and Provisions ? Waiting List and New Admissions Public and Indian Housing Program ? CFDA 14.850 Material Weakness in Internal Control Material Noncompliance Condition: Out of 23 new admissions selected for testing (out of a population of 228), we stopped testing after 8 files and noted the following: ? 1 instance where a single person household was admitted into a three-bedroom unit. ? For the household above, the waiting list showed 4 points on admission. However, the correct preference points should have been 5 (so should have been admitted earlier). ? 1 instance where the application date and time didn?t agree to the amount listed on the waiting list and would have changed the order of selection. ? 1 instance where the tenant applicant was assigned incorrect preference points. At the time of admission, the tenant wasn't working but received 3 preference points (for the working preference) and therefore was selected improperly from the waiting list. In addition, the tenant was selected from an August 2018 waiting list but wasn't housed until June of 2019. In addition, 25 applicants were selected from the waiting list for testing (but stopped testing after testing 16 files) and the following was noted: ? 2 instances where applicants were assigned incorrect preference points on the waiting list. ? 1 instance where applicant showed an incorrect date on the waiting list. ? 1 instance where an applicant was missing from the waiting list. ? In addition, we noted an additional 13 applicants that were miss categorized in the system and were not included on the waiting list and would never have been selected for admission. As a result, applicants are not being selected for housing in the proper order. Criteria: The Authority is required to maintain a waiting list and admit tenants based on the waiting list in accordance with HUD requirements and the Authority?s policies as stated in the Admissions and Continued Occupancy Policy. In addition, only applicants who are eligible should be included on the waiting list and admitted to the program. Questioned Costs: None. Effect: The Authority is not in compliance with its waiting list and admission policies. Cause: The Authority did not have adequate internal controls in place over waiting lists and new admission. Recommendation: The Authority should improve review procedures and increase training to employees and reviewers to insure that the Authority is in compliance with HUD rules for waiting lists and new admissions including preferences. In addition, the Authority should implement a review procedure to make sure that all tenants are admitted in the proper order, and that all eligible applicants are included on the waiting list. Views of Responsible Officials of the Auditee: We concur with the recommendation. We are implementing review procedures and will provide proper training to insure that the applicable HUD regulations are being followed for waiting lists and new admissions.

2019-008 Special Tests and Provisions ? Waiting List and New Admissions Public and Indian Housing Program ? CFDA 14.850 Material Weakness in Internal Control Material Noncompliance Condition: Out of 23 new admissions selected for testing (out of a population of 228), we stopped testing after 8 files and noted the following: ? 1 instance where a single person household was admitted into a three-bedroom unit. ? For the household above, the waiting list showed 4 points on admission. However, the correct preference points should have been 5 (so should have been admitted earlier). ? 1 instance where the application date and time didn?t agree to the amount listed on the waiting list and would have changed the order of selection. ? 1 instance where the tenant applicant was assigned incorrect preference points. At the time of admission, the tenant wasn't working but received 3 preference points (for the working preference) and therefore was selected improperly from the waiting list. In addition, the tenant was selected from an August 2018 waiting list but wasn't housed until June of 2019. In addition, 25 applicants were selected from the waiting list for testing (but stopped testing after testing 16 files) and the following was noted: ? 2 instances where applicants were assigned incorrect preference points on the waiting list. ? 1 instance where applicant showed an incorrect date on the waiting list. ? 1 instance where an applicant was missing from the waiting list. ? In addition, we noted an additional 13 applicants that were miss categorized in the system and were not included on the waiting list and would never have been selected for admission. As a result, applicants are not being selected for housing in the proper order. Recommendation: The Authority should improve review procedures and increase training to employees and reviewers to insure that the Authority is in compliance with HUD rules for waiting lists and new admissions including preferences. In addition, the Authority should implement a review procedure to make sure that all tenants are admitted in the proper order, and that all eligible applicants are included on the waiting list. Action Taken: We concur with the recommendation. We are implementing review procedures and will provide proper training to insure that the applicable HUD regulations are being followed for waiting lists and new admissions.

2019-009 Special Tests and Provisions - Utility Allowance Rates Public and Indian Housing Program ? CFDA Number 14.850 Material Weakness in Internal Control Material Noncompliance Condition: A utility allowance study was conducted for the 2019 fiscal year. However, the utility allowance rates used by the Authority in its rent calculation for fiscal year 2019 were based on a study conducted in a previous year and the Authority did not implement the new rates that were based on the new study. Based on a comparison utility rate sheet the Authority should have used the updated rates for Water and Trash collection as the rates appeared to have changed by 10% or more. Criteria: The PHA must maintain an up-to-date utility allowance schedule. The PHA must review utility rate data for each utility category each year and must adjust its utility allowance schedule if there has been a rate change of 10 percent or more for a utility category or fuel type, since the last time the utility allowance schedule was revised. Questioned Costs: None. Effect: The Authority is not in compliance with HUD regulations regarding utility allowances and, as such, the tenant rents calculated may not be accurate. Cause: The Authority did not have adequate internal controls in place over the determination of utility allowance schedule amounts and the rates from the recent study were not used. Auditor?s Recommendation: The Authority should increase training to employees to insure that the Authority is in compliance with HUD rules for utility allowance determination. In addition, the Authority should assure that the utility allowance schedule is modified if a rate change of 10% or more for utilities. Views of Responsible Officials of the Auditee: The Authority concurs with the recommendation and are providing additional training to assure the correct utility rates are being used. This area will be monitored as a part of the ongoing quality control oversight in the departments.

2019-009 Special Tests and Provisions - Utility Allowance Rates Public and Indian Housing Program ? CFDA Number 14.850 Material Weakness in Internal Control Material Noncompliance Condition: A utility allowance study was conducted for the 2019 fiscal year. However, the utility allowance rates used by the Authority in its rent calculation for fiscal year 2019 were based on a study conducted in a previous year and the Authority did not implement the new rates that were based on the new study. Based on a comparison utility rate sheet the Authority should have used the updated rates for Water and Trash collection as the rates appeared to have changed by 10% or more. Auditor?s Recommendation: The Authority should increase training to employees to insure that the Authority is in compliance with HUD rules for utility allowance determination. In addition, the Authority should assure that the utility allowance schedule is modified if a rate change of 10% or more for utilities. Action Taken: The Authority concurs with the recommendation and are providing additional training to assure the correct utility rates are being used. This area will be monitored as a part of the ongoing quality control oversight in the departments.

2019-011 Special Tests and Provisions - Wage Rate Requirements Public Housing Capital Fund ? CFDA Number 14.872 Material Weakness in Internal Control Material Noncompliance Condition: We selected 3 contractor files funded by the Capital Fund Program. Of the 3 files requested, 1 file contained the required documentation and certified payrolls. However, 1 file did not contain the required certified payrolls and 1 file could not be located. Therefore, contractors were being paid without review of the certified payrolls. Criteria: All laborers and mechanics employed by contractors or subcontractors who work on construction contracts in excess of $2,000 financed by Federal assistance funds must be paid wages not less than those established for the locality of the project. Non-federal entities shall include in their construction contracts subject to the Wage Rate Requirements a provision that the contractor or subcontractor comply with those requirements. This includes a requirement for the contractor or subcontractor to submit to the non-Federal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance. The certified payrolls are then compared to employee interviews to assure employees are being paid not less than established area wages. Questioned Costs: None. Effect: The Authority is not in compliance with applicable HUD regulations. Cause: The Authority did not have adequate internal controls in place over wage rate requirements including documentation of obtaining certified payrolls. Auditor?s Recommendation: We recommend the Authority obtain certified payrolls for all construction type contracts and assure that employees are being paid not less than the established wages in the area. Views of Responsible Officials of the Auditee: The Authority recognizes its responsibility in administering contracts in accordance with HUD regulations, to include wage rate requirements and certified payrolls. The Authority will continue to monitor the implementation and outcomes of training to ensure that staff are correctly applying regulatory requirements.

2019-011 Special Tests and Provisions - Wage Rate Requirements Public Housing Capital Fund ? CFDA Number 14.872 Material Weakness in Internal Control Material Noncompliance Condition: We selected 3 contractor files funded by the Capital Fund Program. Of the 3 files requested, 1 file contained the required documentation and certified payrolls. However, 1 file did not contain the required certified payrolls and 1 file could not be located. Therefore, contractors were being paid without review of the certified payrolls. Auditor?s Recommendation: We recommend the Authority obtain certified payrolls for all construction type contracts and assure that employees are being paid not less than the established wages in the area. Action Taken: The Authority recognizes its responsibility in administering contracts in accordance with HUD regulations, to include wage rate requirements and certified payrolls. The Authority will continue to monitor the implementation and outcomes of training to ensure that staff are correctly applying regulatory requirements. Effective Date: December 15, 2020 Tia Cauley, Interim Executive Director Housing Authority of the City of South Bend 501 Alonzo Watson Drive South Bend, IN 46601 (574) 235-9346

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