Illinois Housing Development AuthorityState Government

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Section 811 - Project Rental Assistance Program Assistance Listing Number: 14.326 Federal Award Identification Number and Year: IL06RDD1201 - 2012; IL06RDD1301 - 2013; IL06RDD1901 - 2019 Pass-Through Agency: State of Illinois Pass-Through Number: IL902 Award Period: July 1, 2024 to June 30, 2025 Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2025-001 Failure to Adequately Monitor Subrecipients CONDITION The Illinois Housing Development Authority (Authority) did not follow its established policies and procedures for monitoring subrecipients of the Section 811 Project Rental Assistance (Section 811) program. The Authority has implemented procedures whereby program staff perform property inspections over subrecipient compliance with regulations applicable to the Section 811 program. The Authority’s policies require the subrecipient to have an inspection every three years. During our testing of the monitoring of subrecipients, we noted one of eight (13%) subrecipients (with expenditures of $319,404 during the year ended June 30, 2025) had not received an inspection within the required three-year period in accordance with Authority policy. The most recent inspection for this subrecipient was conducted in fiscal year 2019. This sample was not intended to be, and was not, a statistically valid sample. CRITERIA OR SPECIFIC REQUIREMENT According to 2 CFR 200.332(e), a pass-through entity is required to monitor the activities of subrecipients as necessary to ensure that federal awards are used for authorized purposes in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. In addition, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include ensuring inspections are performed in a timely manner. CAUSE Authority management indicated there are three underlying causes for this audit finding: 1) Increased volume in required inspections - the annual volume of required inspections in fiscal year 2025 was 56% higher than the annual required inspections in fiscal year 2020 while staffing remained constant. 2) COVID-19 Waivers - In 2020, the Internal Revenue Service issued COVID-19 waivers that eliminated physical inspection requirements and allowed a calendar “reset” for Low Income Housing Tax Credit transactions until 2023. The result of the increased volume and calendar “reset” created a significant backlog of physical inspections due. 3) Inadequate controls – lack of quality control procedures to ensure the inspection reports were completed and filed appropriately. EFFECT Failure to adequately perform inspections of subrecipients may result in subrecipients not properly administering the Federal programs in accordance with laws, regulations, and the grant agreement. (Finding Code No. 2025-001) RECOMMENDATION We recommend the Authority improve its internal controls to ensure inspections are completed in accordance with established policies and procedures. AUTHORITY RESPONSE The Authority agrees with the finding. The Authority will implement additional internal controls, including quality control of completed inspection, documentation, and inspection scheduling. Additionally, the Authority recognizes that the volume of required annual inspections has increased beyond existing Full Time Equivalent (FTE) capacity; therefore, an RFP for the third-party inspection vendor has been issued to supplement internal resources and support timely completion of inspections.

Finding 2022-003 ? Failure to Follow Established Subrecipient Monitoring Procedures for the Section 8 Project Based Cluster Program Federal Agency: U.S. Department of Housing and Urban Development (USHUD) Federal Program Name: Section 8 Project-Based Cluster (Section 8) Assistance Listing Numbers: 14.182/14.856 Federal Award Identification Number and Year: IL901 (2022) Award Period: July 1, 2021 to June 30, 2022 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters CRITERIA OR SPECIFIC REQUIREMENT A pass-through entity must monitor the activities of its subrecipients to ensure subawards are used for authorized purposes, comply with the terms and conditions of the subaward, and achieve performance goals (2 CFR sections 200.332(d) through (f)). Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving federal awards establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effective internal controls should include ensuring on-site review procedures are performed in a timely manner, are designed to monitor fiscal controls, and are performed to ensure compliance with program regulations. CONDITION The Illinois Housing Development Authority (the Authority) did not follow its established policies and procedures for monitoring subrecipients of the Section 8 Project-Based (Section 8) program. The Authority has implemented procedures whereby program staff perform periodic on-site inspections and desk reviews of subrecipients? compliance with regulations applicable to the Section 8 Cluster program. These reviews are formally documented and include the issuance of a report documenting the results of the review to the subrecipient summarizing the procedures performed, results of the procedures, and any findings or performance improvement observations noted. The Authority?s policies require the subrecipient file to be closed within 90 days of the subrecipient being notified of any findings. QUESTIONED COSTS: None CONTEXT During our test work over monitoring review procedures performed for five subrecipients (with expenditures of $3,420,351) of the Section 8 Cluster program, we noted the Authority has not established adequate control activities to ensure its monitoring procedures were followed in communicating the results of its monitoring reviews. We noted the Authority did not send the findings of the Management and Occupancy Reviews (MORs) to two subrecipients (with expenditures totaling $1,799,238) in a timely manner (within 30 days of onsite inspection). Specifically, one MOR was sent 33 days after the onsite inspection and the other MOR was not sent until 41 days after the onsite inspection. CAUSE Authority officials stated staff members responsible for completing the Management and Occupancy Review (MOR) procedure within the 30-day period were not following the prescribed program regulations as documented in both Authority training and staff performance materials. EFFECT Failure to adequately follow on-site monitoring procedures may result in subrecipients not properly administering the Section 8 Cluster program in accordance with statutes, regulations, and the grant agreement. REPEAT FINDING A similar finding was reported in the prior year audit as finding 2021-003. (Finding Code No. 2022-003, 2021-003, 2020-002, 2019-006, 2018-007, 2017-004, 2016-007, 2015-007, 2014-003, 2013-005, 12-05, 11-11) RECOMMENDATION We recommend the Authority ensure monitoring files are completed and closed in accordance with established policies and procedures. AUTHORITY RESPONSE The Authority agrees with the finding and has implemented several new policies and procedures to strengthen controls surrounding the sub monitoring process. All staff are scheduled to complete a full monitoring cycle and have been scheduled for additional trainings. Additionally, weekly team meetings are conducted, and the Authority has updated its written procedures to address the sub monitoring deficiencies. Management and Supervisors will be responsible for weekly quality control tasks that include, reviewing system reports, weekly one on one meetings with the Assistant Director and any staff. The quality control and one on one meetings will be used to reduce and eliminate delayed submissions, closeouts, and notification letters. The Supervisors will run internal reports weekly to identify what inspections are due and ensure they are submitted timely.

Finding 2022-004 ? Failure to Execute Intergovernmental Agreements Federal Agency: U.S. Department of the Treasury (Passed through the State of Illinois) Federal Program Name: COVID-19 Homeowner Assistance Fund (HAF) / COVID-19 State and Local Fiscal Recovery Funds (SLFRF) Assistance Listing Numbers: 21.026 / 21.027 Federal Award Information Number and Year: None Award Period: July 1, 2021, to June 30, 2022 Type of Finding: Significant Deficiency in Internal Control over Compliance CRITERIA OR SPECIFIC REQUIREMENT Uniform Guidance (2 CFR section 200.1) defines a subrecipient as `an entity, usually but not limited to nonfederal entities, that receives a subaward from a pass-through entity to carry out part of a federal award.? This relationship between pass-through entity and subrecipient must be formalized in a written agreement communicating the identification of the federal award, as well as all requirements imposed by the pass-through entity. The Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving federal awards to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effective internal control should include procedures to ensure agreements are in place between pass-through entity?s and subrecipients before funding is received and programs carried out. CONDITION The Illinois Housing Development Authority (IHDA, or the Authority) did not execute an intergovernmental agreement with other State of Illinois agencies before being subgranted funding for the Coronavirus State and Local Fiscal Recovery Funds (SLFRF) and Housing Assistance Fund (HAF) programs. QUESTIONED COSTS: None CONTEXT During our testwork over the SLFRF and HAF programs, we requested IHDA provide us with the grant agreement / subrecipient agreements between IHDA and other State of Illinois agencies who passed through SLFRF and HAF funding to the Authority during fiscal year 2022. After discussion with Authority management, we learned that no such subrecipient agreements / intergovernmental agreements were executed for the SLFRF and HAF funding IHDA received. CAUSE Authority?s management stated during fiscal year 2022, at the height of the COVID-19 pandemic and in order to disburse emergency funding as quickly as possible, the Authority and the Illinois Department of Revenue followed the existing written internal control processes and procedures in place between the agencies with respect to drawing HAF and SLFRF money from Fund 286 in order to operate the programs. EFFECT Failure to notify subrecipients of all required federal award information could result in subrecipients improperly omitting expenditures from their schedules of expenditures of federal awards, expending federal funds for unallowable purposes, or not receiving a single audit in accordance with Uniform Grant Guidance. Additionally, failure to formalize agreements between entities could lead to disputes as to who was responsible for carrying out federal programs. (Finding Code No. 2022-004) RECOMMENDATION We recommend the Authority obtain intergovernmental agreements with other State of Illinois agencies before being subgranted funding. AUTHORITY RESPONSE The Authority is in the process of working with Illinois Department of Revenue to obtain an agreement for fiscal year 2023. Unless extraneous circumstances prevent the Authority from obtaining an agreement in a timely manner, the Authority will ensure intergovernmental agreements exist before commencing new program administration. The Authority will implement new policies and procedures to strengthen control.

Finding 2021-003 ? Failure to Follow Established Subrecipient Monitoring Procedures for the Section 8 Project Based Cluster Program Federal Agency: U.S. Department of Housing and Urban Development (USHUD) Program Name: Section 8 Project-Based Cluster (Section 8) Assistance Listing Numbers: 14.182/14.856 Award Numbers: IL901MR0001; IL901MR0003; IL901MR0004; IL901MR0006; IL901MR0007; IL901MR0008 Program Expenditures: $39,040,915 Questioned Costs: None CONDITION FOUND The Illinois Housing Development Authority (the Authority) did not follow its established policies and procedures for monitoring subrecipients of the Section 8 Project-Based (Section 8) program. The Authority has implemented procedures whereby program staff perform periodic on-site inspections and desk reviews of subrecipients? compliance with regulations applicable to the Section 8 Cluster program. These reviews are formally documented and include the issuance of a report documenting the results of the review to the subrecipient summarizing the procedures performed, results of the procedures, and any findings or performance improvement observations noted. The Authority?s policies require the subrecipient file to be closed within 90 days of the subrecipient being notified of any findings. During our test work over monitoring review procedures performed for 8 subrecipients (with expenditures of $12,670,919) of the Section 8 Cluster program, we noted the Authority has not established adequate control activities to ensure its monitoring procedures were followed in communicating the results of its monitoring reviews. Specifically, we noted the Authority did not receive adequate responses to the findings of two subrecipients (with expenditures totaling $1,560,425) in a timely manner. One response was received 32 days after receiving results and review, and for the second exception the subrecipient did not provide a response and was closed out with open findings at 57 days (30 day requirement). CRITERIA OR REQUIREMENT A pass-through entity must monitor the activities of its subrecipients to ensure subawards are used for authorized purposes, comply with the terms and conditions of the subaward, and achieve performance goals (2 CFR sections 200.332(d) through (f)). The Uniform Grant Guidance (2 CFR 200.303) requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include ensuring on-site review procedures are performed in a timely manner, are designed to monitor fiscal controls, and are performed to ensure compliance with program regulations. CAUSE: Authority officials stated due to staff changes during the fiscal year, certain staff were not familiar with required processes and timeline requirements. POSSIBLE ASSERTED EFFECT Failure to adequately follow on-site monitoring procedures may result in subrecipients not properly administering the Section 8 Cluster program in accordance with statutes, regulations, and the grant agreement. REPEAT FINDING A similar finding was reported in the prior year audit as finding 2020-002. (Finding Code No. 2021-003, 2020-002, 2019-006, 2018-007, 2017-004, 2016-007, 2015-007, 2014-003, 2013-005, 12-05, 11-11) STATISTICAL SAMPLING This sample was not intended to be, and was not, a statistically valid sample. RECOMMENDATION We recommend the Authority ensure monitoring files are completed and closed in accordance with established policies and procedures. AUTHORITY RESPONSE The Authority has implemented several new policies and procedures to strengthen controls surrounding the sub monitoring process. All staff are scheduled to complete a full monitoring cycle and have been scheduled for additional trainings. Additionally, weekly team meetings are conducted, and the Authority has updated its written procedures to address the sub monitoring deficiencies. Management and Supervisors will be responsible for weekly quality control tasks that include, reviewing system reports, weekly one on one meetings with the Assistant Director and any staff. The quality control and one on one meetings will be used to reduce and eliminate delayed submissions, closeouts, and notification letters. The Supervisors will run internal reports weekly to identify what inspections are due and ensure they are submitted timely.

Finding 2021-004 ? Failure to Obtain Proper Support for Landlord Payments Federal Agency: U.S. Department of the Treasury (Passed through the State of Illinois) Program Name: Coronavirus Relief Fund (CRF) Assistance Listing Number: 21.019 Award Number: SLT0042 Program Expenditures: $330,621,446 Questioned Costs: $5,000 CONDITION FOUND The Illinois Housing Development Authority (the Authority) did not follow its established policies and procedures for rental assistance payments under the Coronavirus Relief Fund (CRF). The Authority has implemented procedures whereby program staff perform eligibility reviews of applications for rental assistance provided via the Authority hosted, web-based portal. The tenant fills out their responses in the portal including an email for the landlord which then prompts a link for the landlord to fill out their portion of the application. During our test work over procedures performed for 30 renters (for a total sample of $150,000 in disbursements) of the Coronavirus Relief Fund, we noted the Authority has not established adequate control activities to ensure its review procedures were followed. We noted the Authority did not receive adequate documentation for unpaid rent in one instance (with a disbursement of $5,000). Specifically, rent was current per the rent roll, the landlord indicated there was no unpaid rent, but a payment was made to the landlord for unpaid rent. CRITERIA OR REQUIREMENT The Federal Register (86 FR 4182) and its Frequently Asked Questions (FAQs) serve as the Department of the Treasury?s guidance to be used for payments from the Coronavirus Relief Fund. FAQ #23 in 86 FR 4182 states that CRF payments may be used to provide emergency financial assistance to individuals and families directly impacted by a loss of income due to the COVID-19 public health emergency, and that if a government determines such assistance to be a necessary expenditure, such assistance could include a program to assist individuals with payment of overdue rent. The Uniform Grant Guidance (2 CFR 200.303) requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure applications are reviewed, and past due / unpaid rent is verified and documented. CAUSE The Authority?s management stated exceptions were due to application reviewer oversight. POSSIBLE ASSERTED EFFECT Failure to adequately follow procedures for application review may result in the Authority not properly administering the Coronavirus Relief Fund in accordance with statutes, regulations, and the grant agreement and could lead to landlords receiving funds they are not entitled to resulting in questioned costs. (Finding Code No. 2021-004) STATISTICAL SAMPLING This sample was not intended to be, and was not, a statistically valid sample. RECOMMENDATION We recommend the Authority ensure the Coronavirus Relief Fund program is operated in accordance with statutes, regulations, and the grant agreement. AUTHORITY RESPONSE The Authority is in agreement. While the emergency rental assistance program funded with CRF dollars and has since concluded, IHDA will consider this finding in any future similar program design and implementation to ensure appropriate quality control practices are put in place. Further, the Authority will continue to provide training to employees and/or contractual workers who perform eligibility reviews of applications for rental assistance provided via the Authority to ensure consistency.

Finding 2021-005 ? Failure to Notify Timely Subrecipients of Federal Funding Federal Agency: U.S. Department of the Treasury (Passed through the State of Illinois) Program Name: Coronavirus Relief Fund (CRF) Assistance Listing Number: 21.019 Award Number: SLT0042 Program Expenditures: $330,621,446 Questioned Costs: None CONDITION FOUND The Illinois Housing Development Authority (the Authority) did not communicate timely all required federal program information to subrecipients of the Coronavirus Relief Fund (CRF). During our testwork over ten CRF subrecipients (with expenditures totaling $486,351), we noted the Authority did not communicate timely the Assistance Listing Number to the subrecipients. The Assistance Listing Number was communicated to subrecipients 266 days after the contract was awarded. CRITERIA OR REQUIREMENT The Uniform Guidance (2 CFR section 200.331 (a)) requires all pass through entities ensure that every subaward is clearly identified to the subrecipient as a subaward and include information to comply with Federal statutes, regulations, and the terms and conditions of the award. The required information includes the subrecipient?s DUNS number, Assistance Listing Number and name, federal award date, and further additional requirements. When some of this information is not available, the pass-through entity shall provide the best information available to describe the Federal award. Additionally, the Uniform Grant Guidance (2 CFR 200.303) requires nonfederal entities receiving awards to establish and maintain internal control designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Effective internal control should include procedures to ensure required information is communicated prior to the issuance of the subaward. CAUSE The Authority?s management stated these exceptions were due to operational oversight. POSSIBLE ASSERTED EFFECT Failure to notify subrecipients of all required federal award information could result in subrecipients improperly omitting expenditures from their schedules of expenditures of federal awards, expending federal funds for unallowable purposes, or not receiving a single audit in accordance with Uniform Grant Guidance. (Finding Code No. 2021-005) STATISTICAL SAMPLING This sample was not intended to be, and was not, a statistically valid sample. RECOMMENDATION We recommend the Authority ensure subrecipients of the Coronavirus Relief Fund (CRF) are notified the funds received are federally funded and the Assistance Listing Number is identified in accordance with statutes, regulations, and the grant agreement. AUTHORITY RESPONSE The Authority is in agreement. While the emergency rental assistance program funded with CRF dollars and has since concluded, IHDA will consider this finding in any future similar program design and implementation to ensure appropriate quality control practices are put in place. The Authority agrees and will ensure that all required federal program funding is consistently and clearly identified to all potential sub-recipient when a request for applications is released. The Authority has established an internal protocol to provide the best information, and this has been applied to subsequent similar federal programs.

Finding 2020-002 ? Failure to Follow Established Subrecipient Monitoring Procedures for the Section 8 Project Based Cluster Program Federal Agency: U.S. Department of Housing and Urban Development (USHUD) Program Name: Section 8 Project-Based Cluster (Section 8) CFDA Number: 14.182/14.856 Award Numbers: IL901MR0001; IL901MR0003; IL901MR0004; IL901MR0006; IL901MR0007; IL901MR0008 Program Expenditures: $58,982,046 Questioned Costs: None CONDITION FOUND The Illinois Housing Development Authority (the Authority) did not follow its established policies and procedures for monitoring subrecipients of the Section 8 Project-Based (Section 8) program. The Authority has implemented procedures whereby program staff perform periodic on-site inspections and desk reviews of subrecipients? compliance with regulations applicable to the Section 8 Cluster program administered by the Authority. These reviews are formally documented and include the issuance of a report of the review results to the subrecipient summarizing the procedures performed, results of the procedures, and any findings or observations for improvement noted. The Authority?s policies require the subrecipient file to be closed within 90 days of the subrecipient being notified of any findings. During our test work over monitoring review procedures performed for 8 subrecipients (with expenditures of $9,250,977) of the Section 8 Cluster program, we noted the Authority has not established adequate control activities to ensure its established monitoring procedures were followed in communicating the results of its monitoring reviews. We noted the following exceptions to the Authority?s monitoring procedures: ? The Authority did not receive adequate responses to the findings of four subrecipients (with expenditures totaling $5,440,236) in a timely manner. Specifically, the responses were received between 35 and 236 days after receiving results or review (30 day requirement). ? The Authority did not notify four subrecipients (with expenditures totaling $6,760,718) of findings from the monitoring review in a timely manner. Specifically, the findings notification was sent between 31 and 58 days after the review (30 day requirement).CRITERIA OR REQUIREMENT According to OMB Circular A-133 ? __.400(d), a pass-through entity is required to monitor the activities of subrecipients as necessary to ensure that federal awards are used for authorized purposes in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. Additionally, OMB Circular A-102, Grants and Cooperative Agreements with State and Local Governments, requires non-Federal entities receiving Federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include ensuring on-site review procedures are performed in a timely manner, are designed to monitor fiscal controls, and are performed to ensure compliance with program regulations. CAUSE Authority management stated due to staff changes during the fiscal year, certain staff were not familiar with required processes and timeline requirements. POSSIBLE ASSERTED EFFECT Failure to adequately follow on-site monitoring procedures may result in subrecipients not properly administering the Section 8 Cluster program in accordance with statutes, regulations, and the grant agreement. REPEAT FINDING A similar finding was reported in the prior year audit as finding 2019-006. (Finding Code No. 2020-002, 2019-006, 2018-007, 2017-004, 2016-007, 2015-007, 2014-003, 2013-005, 12-05, 11-11) STATISTICAL SAMPLING This sample was not intended to be, and was not, a statistically valid sample.RECOMMENDATION We recommend the Authority ensure monitoring files are completed and closed in accordance with established policies and procedures. AUTHORITY RESPONSE The Authority is in agreement. The Authority has implemented several new policies and procedures to strengthen controls surrounding the subrecipient monitoring process. All staff are scheduled to complete a full monitoring cycle and have been scheduled for additional training. Additionally, weekly team meetings are conducted, and the Authority has updated its written procedures to address the subrecipient monitoring deficiencies. Management and Supervisors will be responsible for weekly quality control tasks that include reviewing system reports, and weekly one on one meetings with the Assistant Director and any staff. The quality control and one on one meetings will be used to reduce and eliminate delayed submissions, closeouts, and notification letters. The Supervisors will run internal reports weekly to identify what inspections are due and ensure they are submitted timely.

Finding 2020-003 ? Failure to Approve Weekly Payroll Reports Federal Agency: U.S. Department of Housing and Urban Development (USHUD) Program Name: HOME Investment Partnerships Program (HOME) CFDA Number: 14.239 Award Numbers: M17-SG170100; M18-SG170100; M19-SG170100 Program Expenditures: $306,384,537 Questioned Costs: None CONDITION FOUND The Illinois Housing Development Authority (the Authority) did not approve Weekly Attendance Reports used to prepare payroll vouchers during the fiscal year ended June 30, 2020. IHDA employees are paid on the 15th and the last day of each month. At the end of each week, all information is compiled by a designated department timekeeper through the payroll service provider system Weekly Attendance Reports. Employees are required to promptly review their own time entries within the payroll service provider system to determine whether they accurately reflect time spent working on Authority business. Subsequently, the payroll service provider system Weekly Attendance Reports must be approved by the employee?s supervisor. Any HOME program hours are reviewed and approved by the supervisors on the Weekly Attendance Reports. During our testwork over 14 Weekly Attendance Reports prepared during the fiscal year ended June 30, 2020, we noted the following: Two (2) reports (14.3%) were not approved by the designated Department Timekeeper and Director. CRITERIA OR REQUIREMENT HUD regulations (24 CFR ? 92.354) require participating jurisdictions be responsible for ensuring compliance by contractors and subcontractors with labor standards described in this section. In accordance with procedures specified by HUD, participating jurisdictions are to collect and review certified weekly payroll reports. HUD regulations regarding record keeping require (24 CFR ? 92.508) each participating jurisdiction establish and maintain sufficient records to enable HUD to determine whether the participating jurisdiction has met the requirements of this part. At a minimum, records demonstrating compliance with the labor requirements of ?92.354, including contract provisions and payroll records must be maintained. CAUSE Authority management stated the untimely reviews of Weekly Attendance Reports were due to human error and ineffective employee oversight. POSSIBLE ASSERTED EFFECT Failure to ensure each Weekly Attendance Report is approved could result in unapproved payments to employees and incorrect payroll allocations to the HOME program. (Finding Code No. 2020-003) STATISTICAL SAMPLING This sample was not intended to be, and was not, a statistically valid sample. RECOMMENDATION We recommend the Authority enforce existing policies and procedures associated with the approval of Weekly Attendance Reports. AUTHORITY RESPONSE The Authority is in agreement. The Authority plans to implement a more robust training program for all department and executive assistants. The training program will extensively focus on timecard approvals and timecard accuracy.

Federal Agency: U.S. Department of Housing and Urban Development (USHUD) Program Name: Section 8 Project-Based Cluster (Section 8) Community Development Block Grants (CDBG) HOME Investment Partnerships Program (HOME) Housing Trust Fund (HTF) CFDA # and Program Expenditures: 14.182/14.856 ($59,604,043) 14.228 ($480,751) 14.239 ($302,585,550) 14.275 ($3,031,659) Award Numbers: IL901MR0001/IL901MR0003/IL901MR0004/ IL901MR0006/IL901MR0007/IL901MR0008 (14.182/14.856) B-11-DN-17-0001 (14.228) M15-SG-170100/M16-SG-170100/M17-SG-170100/M18-SG-170100 (14.239) F16SG170100 (14.275) Federal Award Year: 10/1/17-9/30/18; 10/1/18-9/30/19 (14.182/14.856) 3/11/11-3/15/14 (14.228) 11/4/15-9/1/23; 9/16/16-9/1/24; 10/19/17-9/1/25; 10/3/18-9/1/26 (14.239) 3/2/17-3/2/24 (14.275) Questioned Costs: None Finding 2019-004 ? Inaccurate Reporting of Federal Expenditures on the Schedule of Expenditures of Federal Awards Condition Found: The Authority does not have an adequate process in place to prepare its schedule of expenditures of federal awards (SEFA). During our testing of the SEFA and major program expenditures, we noted expenditures for the Section 8 Cluster and CDBG were overstated. Specifically, we noted the following errors: See Schedule of Findings and Questioned Costs for chart/table Items included in the table above have been corrected in the SEFA presented. In addition, we noted management has not established adequate control procedures to ensure the SEFA is complete, accurate, and properly presented in accordance with the Uniform Guidance. Specifically, management has not established management review controls at the level of precision to identify material misstatements. While specific exceptions were not found related to the HOME and HTF programs, we noted the control deficiencies identified in the preceding paragraph relative to the SEFA preparation process also apply to all major programs. Criteria or Requirement: According to 2 CFR 200.510(b), a recipient of federal awards is required to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the entity?s financial statements which must include the total Federal awards expended. At a minimum, the schedule must include (1) a list of individual Federal programs by Federal agency. For Federal programs included in a cluster of programs, list individual Federal programs within a cluster of programs; (2) for Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity shall be included; (3) provide total Federal awards expended for each individual Federal program and the CFDA number or other identifying number when the CFDA information is not available; (4) include total amount provided to subrecipient from each Federal Program; and (5) include notes that describe the significant accounting policies used in preparing the schedule. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure expenditures and amounts passed through to subrecipients are properly reported on the schedule of expenditures of Federal awards. Cause: In discussing these conditions with Authority officials, they stated staffing changes during the fiscal year resulted in a miscommunication of information because processes and procedures were not documented resulting in discrepancies when completing the SEFA. Possible Asserted Effect: Failure to accurately report federal expenditures and amounts passed through to subrecipients prohibits the completion of an audit in accordance with the Uniform Guidance, which may result in the suspension of federal funding. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2018-005. (Finding Code No. 2019-004, 2018-005, 2017-003, 2016-005, 2015-004) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend the Authority review its current process for preparing the SEFA and implement the necessary procedures to ensure the SEFA is prepared accurately and in accordance with the Uniform Guidance. Authority Response: The Authority concurs with the finding. The Authority has made several changes to its internal processes and procedures when compiling and reviewing the Schedule of Expenditures of Federal Awards. The Authority will implement a documented process that will allow staff to compile a supported SEFA effectively and accurately.

Federal Agency: U.S. Department of Housing and Urban Development (USHUD) Program Name: Community Development Block Grants (CDBG) Housing Trust Fund (HTF) CFDA # and Program Expenditures: 14.228 ($480,751) 14.275 ($3,031,659) Award Numbers: B-11-DN-17-0001 (14.228) F16SG170100 (14.275) Federal Award Year: 3/11/11-3/15/14 (14.228) 3/2/17-3/2/24 (14.275) Questioned Costs: None Finding 2019-005 ? Failure to Communicate Award Information to Subrecipients Condition Found: The Authority did not communicate required federal program information at the time of the award to subrecipients of the Neighborhood Stabilization Program (NSP) and Housing Trust Fund (HTF) programs. During our testwork over the one subrecipient of the NSP Program (with expenditures of $480,751) and one subrecipient of the HTF program (with expenditures of $2,883,686), we noted the Authority did not communicate the CFDA number, Federal Award Identification Number (FAIN), and Federal Award Date in the subaward agreement. We also noted the Authority has not established control activities to ensure award communications include all required information. Total expenditures passed through to subrecipients for the NSP and HTF programs totaled $480,751 and $2,883,686, respectively, for the year ended June 30, 2019. Criteria or Requirement: According to 2 CFR section 200.331(a)(1), a pass-through entity must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following required information at the time of the subaward: subrecipient name, subrecipient?s Dun and Bradstreet Numbering System (DUNS) number, Federal Award Identification Number (FAIN), Federal Award Date, subaward period of performance, amount of Federal funds obligated to the subrecipient, name of Federal awarding agency, identification of whether the award is R&D, and CFDA number. When some of this information is not available, the pass-through entity shall provide the best information available to describe the Federal award and subaward. Additionally, 2 CFR 200.303, requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure required information is properly communicated to each subrecipient at the time of the award. Cause: In discussing these conditions with Authority officials, they stated the required information was not fully communicated between relevant Authority departments resulting in closing documents not containing all required information. Possible Asserted Effect: Failure to properly communicate required federal award information to subrecipients can result in subrecipients reporting inaccurate information about their programs on their schedule of federal awards, expending federal funds for unallowable purposes, or not receiving a single audit in accordance with the Uniform Guidance. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2018-006. (Finding No. 2019-005, 2018-006) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend the Authority review its current process for preparing subrecipient funding notifications to ensure all required information is properly communicated to its subrecipients. Authority Response: The Authority concurs with the finding. The Authority has implemented several new processes and procedures in order to prevent future improper communication of federal awards to subrecipients. The Authority has taken a retrospective approach in reviewing all current federal subrecipient files, in order to ensure that award information was communicated properly. Going forward, the Authority is in the process of updating the boiler-plate subrecipient agreements, in order to ensure that all this information is communicated properly to each subrecipient of a Federal award.

Federal Agency: U.S. Department of Housing and Urban Development (USHUD) Program Name: Section 8 Project-Based Cluster (Section 8) CFDA # and Program Expenditures: 14.182/14.856 ($59,604,043) Award Numbers: IL901MR0001/IL901MR0003/IL901MR0004/ IL901MR0006/IL901MR0007/ IL901MR0008 Federal Award Year: 10/1/17-9/30/18; 10/1/18-9/30/19 Questioned Costs: None Finding 2019-006? Failure to Follow Established Subrecipient Monitoring Procedures for the Section 8 Project-Based Cluster Program Condition Found: The Authority did not follow its established policies and procedures for monitoring subrecipients of the Section 8 Project Based (Section 8) program. The Authority has implemented procedures whereby program staff perform periodic on-site and desk reviews of subrecipients? compliance with regulations applicable to the Section 8 Cluster program administered by the Authority. These reviews are formally documented and include the issuance of a report of the review results to the subrecipient summarizing the procedures performed, results of the procedures, and any findings or observations for improvement noted. The Authority?s policies require the subrecipient file to be closed within 90 days of the subrecipient being notified of any findings. During our testwork over monitoring review procedures performed for 8 subrecipients (with expenditures of $15,193,280) of the Section 8 Cluster program, we noted the Authority has not established adequate control activities to ensure its established monitoring procedures were followed in communicating the results of its monitoring reviews. We noted the following exceptions to the Authority?s monitoring procedures: ? The Authority did not notify three subrecipients (with expenditures totaling $2,503,884) of findings from the monitoring review in a timely manner. Specifically, the findings notification was sent between 63 and 102 days after the inspection was conducted (60 day requirement). ? The Authority did not receive written responses to the findings of the desk review for one subrecipient (with expenditures of $4,912,582 ). The Authority did not follow-up with the subrecipient to obtain the responses as of the date of our testing (March 11, 2020). ? The Authority did not close out the review file for one subrecipient (with expenditures of $2,103,009) in a timely manner as required by the Authority?s policies. Specifically, the review file was closed out 112 days after the subrecipient was notified of findings (90 day requirement). Amounts passed through to subrecipients under the Section 8 program during the year ended June 30, 2019 totaled $56,501,214. Criteria or Requirement: According to OMB Circular A-133 ? __.400(d), a pass-through entity is required to monitor the activities of subrecipients as necessary to ensure that federal awards are used for authorized purposes in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. Additionally, OMB Circular A 102, Grants and Cooperative Agreements with State and Local Governments, requires non-Federal entities receiving Federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include ensuring on-site review procedures are performed in a timely manner, are designed to monitor fiscal controls, and are performed to ensure compliance with program regulations. Cause: In discussing these conditions with Authority officials, they stated the exceptions were caused by changes in departmental staffing, as well as an organizational restructuring within the Asset Management department. This resulted in individuals not being familiar with required processes and timeline requirements. Possible Asserted Effect: Failure to adequately follow on-site monitoring procedures may result in subrecipients not properly administering the Section 8 Cluster program in accordance with statutes, regulations, and the grant agreement. Repeat Finding: A similar finding was reported in prior year audit as finding number 2018-007. (Finding Code No. 2019-006, 2018-007, 2017-004, 2016-007, 2015-007, 2014-003, 2013-005, 12-05, 11-11) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend the Authority ensure monitoring files are completed and closed in accordance with established policies and procedures. Authority Response: The Authority concurs with the finding. The Authority has implemented several new policies and procedures in order to strengthen controls surrounding the sub monitoring process. All staff are scheduled to complete a full monitoring cycle and have been scheduled for additional trainings. Additionally, weekly team meetings are conducted and the Authority has updated its written procedures to address the sub monitoring deficiencies. Management and Supervisors will be responsible for weekly quality control tasks that include, reviewing system reports, weekly one on one meetings with the Assistant Director and any staff. The quality control and one on one meetings will be used to reduce and eliminate delayed submissions, closeouts and notification letters. The Supervisors will run internal reports weekly to identify what inspections are due and ensure they are submitted timely.

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