Menard County Housing AuthorityLocal Government

Program Name Housing Choice Vouchers Internal Control Significant Deficiency N Special Testing CFDA Number 14.871 2024-001 Housing Quality Standards Inspection/HQS Enforcement Criteria The PHA must inspect the unit leased to a family at least bi-annually to determine if the unit meets Housing Quality Standards (HQS). Additionally, for units under HAP contract that fail to meet HQS, the PHA must require the owner to correct any life threatening HQS deficiencies within 24 hours after the inspections and all other HQS deficiencies within 30 calendar days or within a specified PHA‐approved extension. If the owner does not correct the cited HQS deficiencies within the specified correction period, the PHA must stop (abate) HAPs beginning no later than the first of the month following the specified correction period or must terminate the HAP contract. The owner is not responsible for a breach of HQS as a result of the family’s failure to pay for utilities for which the family is responsible under the lease or for tenant damage. For family‐caused defects, if the family does not correct the cited HQS deficiencies within the specified correction period, the PHA must take prompt and vigorous action to enforce the family obligations (24 CFR sections 982.158(d) and 982.404). Condition During our audit, the Authority was unable to provide us with reliable support that the failed HQS inspections had been properly handled according the guidelines. Context We selected a sample of 40 out of 7,948 HAP vouchers that occurred during the fiscal year. Out of the 40 samples selected, 2 (5%) of those lacked the proper documentation of a follow up for the failed inspection or abatement process. Cause Controls over compliance associated with the Authority's HQS inspections are inadequate. Effect The Authority is non‐compliant with the federal regulations over this federal program. Recommendations We suggest the Authority structure a system capable of properly overseeing compliance with regulations relative to the HQS inspections as well as maintaining more accurate and complete documentation of adherence to compliance. Management Views Management agrees with finding and recommendation above.

The PHA must inspect the unit leased to a family at least bi-annually to determine if the unit meets Housing Quality Standards (HQS). Additionally, for units under HAP contract that fail to meet HQS, the PHA must require the owner to correct any life threatening HQS deficiencies within 24 hours after the inspections and all other HQS deficiencies within 30 calendar days or within a specified PHA-approved extension. If the owner does not correct the cited HQS deficiencies within the specified correction period, the PHA must stop (abate) HAPs beginning no later than the first of the month following the specified correction period or must terminate the HAP contract. The owner is not responsible for a breach of HQS as a result of the family’s failure to pay for utilities for which the family is responsible under the lease or for tenant damage. For family-caused defects, if the family does not correct the cited HQS deficiencies within the specified correction period, the PHA must take prompt and vigorous action to enforce the family obligations (24 CFR sections 982.158(d) and 982.404). Type of Finding: Effect: The Authority is non-compliant with the federal regulations over this federal program. Recommendations: We suggest the Authority structure a system capable of properly overseeing compliance with regulations relative to the HQS inspections as well as maintaining more accurate and complete documentation of adherence to compliance. Management Views: Management agrees with finding and recommendation above. Condition: During our audit, the Authority was unable to provide us with reliable support that the failed HQS inspections had been properly handled according the guidelines. Context: We selected a sample of 24 out of 240 failed inspections that occurred during the fiscal year. Out of the 24 samples selected, 6 (25%) of those lacked the proper documentation of a follow up for the failed inspection. Cause: Controls over compliance associated with the Authority's HQS inspections are inadequate. Effect: The Authority is non-compliant with the federal regulations over this federal program. Recommendations: We suggest the Authority structure a system capable of properly overseeing compliance with regulations relative to the HQS inspections as well as maintaining more accurate and complete documentation of adherence to compliance. Management Views: Management agrees with finding and recommendation above.

AL No.: 14.871 2022-001 Federal Program: Housing Choice Vouchers Compliance Requirement: Housing Quality Standards Inspection/HQS Enforcement Type of Finding: Significant Deficiency Criteria The PHA must inspect the unit leased to a family at least bi-annually to determine if the unit meets Housing Quality Standards (HQS) and the PHA must conduct quality Additionally, for units under HAP contract that fail to meet HQS, the PHA must require the owner to correct any life threatening HQS deficiencies within 24 hours after the inspections and all other HQS deficiencies within 30 calendar days or within a specified PHA-approved extension. If the owner does not correct the cited HQS deficiencies within the specified correction period, the PHA must stop (abate) HAPs beginning no later than the first of the month following the specified correction period or must terminate the HAP contract. The owner is not responsible for a breach of HQS as a result of the family?s failure to pay for utilities for which the family is responsible under the lease or for tenant damage. For family-caused defects, if the family does not correct the cited HQS deficiencies within the specified correction period, the PHA must take prompt and vigorous action to enforce the family obligations (24 CFR sections 982.158(d) and 982.404). Condition During our audit, the Authority was unable to provide us with reliable support that the failed HQS inspections had been properly handled according the the guidelines. Context We selected a sample of 14 out of 135 failed inspections that occurred during the fiscal year. Out of the 14 samples selected, 6 (43%) of those lacked the proper documentation of a follow up for the failed inspection. Cause Controls over compliance associated with the Authority's HQS inspections are inadequate Effect The Authority is non-compliant with the federal regulations over this federal program. Recommendations We suggest the Authority structure a system capable of properly overseeing compliance with regulations relative to the HQS inspections as well as maintaining more accurate and complete documentation of adherence to compliance. Management Views Management agrees with finding and recommendation above.

Finding Reference No.: 2020-001 CFDA No.: 14.871 Federal Program: Housing Choice Vouchers Compliance Requirement: Reporting Type of Finding: Significant Deficiency Criteria: Regulations at 24 CFR Part 85.20 outline the internal control requirements for recipients of federal grant funds. "Effective control and accountability must be maintained for all grant and subgrant cash, real and personal property, and other assets." In addition to this, good internal controls dictate that the financial statements be stated materially accurate and that controls be in place to insure the proper statement of accounts. The failure to properly reconcile general ledger accounts on a regular basis can result in material misstatements of the account balances and Net Position. Condition: The general ledger improperly stated amounts and our audit shows that there will need to be significant revisions made to reflect an accurate financial condition at year end. Context: The December 31, 2019 audit was not completed until March 2021. The Housing Authority had no time to implement the corrective action plan from the prior audit before year end December 31, 2020. The issue is a repeat finding however there was no way to correct the issue since the finding was not reported until after the fiscal year end of 2020. Cause: The Authority failed to properly maintain the records of account on the general ledger system to provide for tracking of consolidated agency-wide expenditures . In addition to this, the PHA failed set up COVID-19 expense tracking of revenues and expense as required by HUD. Effect: Non-compliance Recommendations: We recommend the general ledger track each funding sources separately to identify assets, liabilities, revenues and expenses of each grant. Allowing the Housing Authority to identify over and under expensed grant activity. Management Views: The Menard County Housing Authority, Executive Director, Brad Ames, agrees with the findings and the recommended corrective actions.

Finding Reference No.: 2020-002 CFDA No.: 14.871 Federal Program: Housing Choice Vouchers Compliance Requirement: Reporting Type of Finding: Significant Deficiency Criteria: Regulations at 24 CFR Part 5 Subpart H, require that the PHA must submit separate unaudited financial information for each multi-family project via Financial Assessment Subsystem - Multifamily Housing (FASSUB) or Financial Assessment Subsystem - PHA (FASPHA), no later than 60 days after the end of the fiscal year of the reporting period. Condition: The Authority did not submit the unaudited financial information to the Financial Assessment Subsystem - Multifamily Housing (FASSUB) or Financial Assessment Subsystem - PHA (FASPHA). Context: The December 31, 2019 audit was not completed until March 2021. The Housing Authority had no time to implement the corrective action plan from the prior audit before year end December 31, 2020. The issue is a repeat finding however there was no way to correct the issue since the finding was not reported until after the fiscal year end of 2020. Cause: The Authority did not follow the reporting requirements for this program. Effect: Non-compliance Recommendations: We recommend that the Authority implement internal controls to ensure that all of the reporting requirements will be met in future years. Management Views: The Menard County Housing Authority, Executive Director, Brad Ames, agrees with the findings and the recommended corrective actions.

Finding 2019-001 - Inadequate Accounting Controls ? Financial Statement Preparation Housing Choice Voucher ? CFDA 14.871; period ending December 31, 2019 Noncompliance & Material Weakness Criteria: Regulations at 24 CFR Part 85.20 outline the internal control requirements for recipients of federal grant funds. "Effective control and accountability must be maintained for all grant and subgrant cash, real and personal property, and other assets." In addition to this, good internal controls dictate that the financial statements be stated materially accurate and that controls be in place to insure the proper statement of accounts. The failure to properly reconcile general ledger accounts on a regular basis can result in material misstatements of the account balances and Net Position. Condition: The unaudited financial data schedule improperly stated amounts and our audit shows that there will need to be significant revisions made to reflect an accurate financial condition at year end Additionally, we noted the following deficiencies related to the maintenance of accounting records and the underlying internal controls: 1. Controls over reporting - During our review, we noted the Authority does not close out their ledgers from year-to-year which makes the reconciliation process and year-end closeout that much more difficult. Due to this situation, we noted the following errors in reporting on the unaudited Financial Data Schedule (FDS): a. An over reporting of $90,185 in accounts receivables and revenues in Housing Choice Voucher Program activity was noted. b. There was a repayment agreement liability payable to HUD in the amount of $861,818 that was not recorded as of 12/31/2019. c. A confirmation of public housing awards revealed that subsidy earned in the amount of $36,799 was not properly record as HUD PHA Operating Grants as of 12/31/2019. 2. Maintenance of General Ledger - A review of financial statements revealed that equity amounts on the general ledger did not agree with amounts included on the unaudited FDS. Additionally, we noted that not all of the prior year audit adjustments had been posted which led to the following related errors: a. Housing Choice Voucher Program - Failure to properly record these adjustments led to an overstatement of accrued compensated absences in the amount of $25,583. b. Inter-program balances ? An inspection of inter-fund activity revealed an imbalance of $12,976. These amounts should be reconciled on a monthly basis. In the future, these adjustments should be made in a timely manner so that management has the most up to date financial schedules with which to base decisions.3. Accounting for Federal Awards - Our review of the unaudited FDS revealed that not all Federal Programs were reported on the Schedule of Federal Awards and for programs that were recorded, material errors existed on their financial statement presentation. Specific instances include: Program Per Actual Per FDS Variance 14.871 Section 8 Housing Choice Vouchers $ 4,256,188 $ 4,242,392 $ (13,796) 14.872 Public Housing Capital Fund 221,845 (221,845) 14.850 Public and Indian Housing 155,035 (155,035) 14.195 Section 8 Housing Assistance Payments 433,706 790,013 356,307 14.169 Housing Counseling Assistance Program 34,934 34,934 14.870 Resident Opportunity and Supportive Services 46,656 46,656 Totals $ 5,148,364 $ 5,113,995 $ (34,369) Additionally, each federal program grant should be included in its own column of the FDS and the appropriate transfers to other program areas included on the income statement portion of the FDS. Cause: The Authority failed to properly maintain the records of account on the general ledger system to provide for tracking of consolidated agency-wide expenditures . In addition to this, the PHA failed to properly record prior audit adjustments that led to misstatements in cash balances as of December 31, 2019. Effect: Non-compliance.Recommendation: We recommend that the Authority properly reconcile all trial balance accounts and ensure that beginning ledger balances do not include any prior year amounts. Additionally, all accounts should be reconciled on a regular basis and salary expenses reconciled to the IRS 941's on a quarterly basis to prevent recurrence of the above deficiencies. Questioned Costs: None Repeat Finding: Yes View of responsible officials: The Menard County Housing Authority, Executive Director, Brad Ames, agrees with the findings and the recommended corrective actions.

Finding 2019-002 Reporting Section 8 Housing Assistance Payments Program ? CFDA 14.195 Period ending December 31, 2019 Significant Deficiency Criteria: Regulations at 24 CFR Part 5 Subpart H, require that the PHA must submit separate unaudited financial information for each multi-family project via Financial Management Assessment System ? Federal Housing Agency (FASS-MF), no later than 60 days after the end of the fiscal year of the reporting period. Condition: The Authority did not submit the unaudited financial information to the Financial Management Assessment System ? Federal Housing Agency (FASS-MF).Cause: The Authority did not follow the reporting requirements for this program. Effect: Non-compliance Recommendation: We recommend that the Authority implement internal controls to ensure that all of the reporting requirements will be met in future years. Questioned Costs: None Repeat Finding: No View of Responsible Officials: The Menard County Housing Authority, Executive Director, Brad Ames, agrees with the findings and the recommended corrective actions.

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