HOUSING AUTHORITY OF THE COUNTY OF JACKSON

2022-005 ? REPORTING Other Matter/Significant Deficiency U.S. Department of Housing and Urban Development ALN 14.850 ? Public and Indian Housing Program CRITERIA Financial Reports (0MB No. 2535-0107) - Financial Assessment Sub- system, FASS-PH. The Uniform Financial Reporting Standards (24 CFR section 5.801) require PHAs to submit timely GAAP-based unaudited and audited financial information electronically to HUD. The FASSPH system is one of HUD's main monitoring and oversight systems for the Public and Indian Housing Program. CONDITION The unaudited FDS was required to be submitted to HUD by September 15, 2022. The Authority submitted the FDS on September 30, 2022. CAUSE The Authority?s internal control processes were not sufficient to ensure the timely filing of the unaudited FDS. EFFECT As a result of not submitting the FDS timely, HUD was limited in its ability to conduct monitoring and oversight of federal programs. QUESTIONED COSTS None identified. CONTEXT The Authority submits the unaudited FDS annually. Our testing of the reporting requirement was limited to the single occurrence of the annual filing. REPEAT FINDING This is a repeat of finding 2021-001 from the prior year. RECOMMENDATION We recommend that the Authority ensure its year-end closing process is sufficient to allow for the timely filing of the unaudited FDS. AUDITEE?S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.

2022-005 ? Reporting Auditee?s Response and Planned Corrective Action JCHA has procured the services of Bedrock Housing Consultants who will prepare the unaudited FDS for the Authority to review and submit timely. Planned Implementation Date of Corrective Action: After year end and by September 15, 2023. Person Responsible for Corrective Action: Bedrock Housing Consultants.

2021-001

Finding 2021-001 ? Accounting Controls ? Internal Controls over Financial Statement Preparation CFDA 14.850, 14.872 ? Noncompliance and Material Weakness Criteria: Regulations at 2 CFR Part 200, Uniform Administrative Requirements, outline the internal control requirements for recipients of federal grant funds. Non-Federal entities must demonstrate, ?Effective control over, and accountability for, all funds, property, and other assets.? A deficiency in internal control exists when the design or operation of a control does not allow management or its employees, in the normal course of operation, to detect or correct errors, fraud, or misstatements in a timely manner. The failure to properly implement internal control procedures can result in material misstatements of the account balances and noncompliance with grant oversight provisions. Condition: We noted the following deficiencies related to the maintenance of accounting records and the underlying internal controls: 1) Cash and Investments - We encountered difficulty in reconciling to the general ledger cash and investment balances. This was largely due to the client not tracking CFP costs and related activity in the Public Housing general ledger which resulted in a material imbalance in Public Housing cash at year end. This was known by management and disclosed to us in the pre-audit process. We have proposed audit adjustments to correct this which are included in the audited financial statements. 2) CFP Accounting ? We noted that CFP activity was not adequately tracked and accounted for in the general ledgers. This resulted in material errors in both CFP revenue and expense tracking. Client tracked CFP activity in the COCC and attempted to reconcile CFP to AMPs at year end which resulted in overstated cash balances. Unknown values were ?plugged? by management into a casualty loss account which can be seen on the unaudited FDS which is grossly overstated. 3) Capital Asset Accounting ? Client created a depreciation schedule which was a recommendation from the previous audit. This was vastly improved in the current year. We did note, however, assets placed onto the depreciation schedule that were still in WIP on the GL. Vice versa we also noted assets not on the depreciation schedule which were capitalized on the GL. We have proposed audit adjustments to correct this. 4) Unaudited FDS submission ? We noted that the unaudited submission was submitted late. Upon further examination we noted that large adjustments in presentation would be required to accurately report the financials on the FDS. An example of this would be client inputted elimination entries which were entered in reverse. Cause: The Authority also failed to implement year end internal controls to reconcile general ledger account balances to supporting detail. Effect: Non-compliance with grant oversight provisions and material misstatements in the financial statements at year-end. Recommendation: We recommend that year end internal control procedures be put in place to demonstrate effective oversight over account balances and grant activity. We noted that subsequent to the field date of the audit that the Authority has employed the use of a fee accountant. Questioned Costs: None Repeat Finding: No Views of responsible officials: The Housing Authority of Jackson County agrees with the findings and the recommended corrective actions.

Finding 2021-001 ? Accounting Controls ? Internal Controls over Financial Statement Preparation CFDA 14.850, 14.872 ? Noncompliance and Material Weakness Corrective Action Plan: JCHA will continue to utilize its contracted fee accountant to consult on the related issues of noncompliance and material weaknesses. July 1, 2021, JCHA introduced advanced financial software on the advice of our consultant to assist in the restructuring of financial processes in our efforts to become compliant. Our consultant is continuing to expand internal controls over financial reporting, rearrange staff responsibilities to maximize segregation of duties, train accounting employees on best practices and efficient use of technology, and assist staff with issues encountered in daily work processes . The Executive Director has committed to providing additional staff education to assist in these efforts. Anticipated Completion Date: The contract with Lucas Accounting Solutions LLC was signed December 23, 2020, and Melissa Lucas began an operational assessment on December 29, 2020. The engagement is ongoing. Person Responsible: Melissa Lucas, CPA is responsible for strengthening the accounting function of Jackson County Housing Authority and reports to Brigitta Mac-Rizzo, Executive Director.

2020-001

Finding 2020-001 ? Accounting Controls ? Internal Controls over Financial Statement Preparation CFDA 14.850, 14.872 ? Noncompliance and Significant Deficiency Criteria: Regulations at 2 CFR Part 200, Uniform Administrative Requirements, outline the internal control requirements for recipients of federal grant funds. Non-Federal entities must demonstrate, ?Effective control over, and accountability for, all funds, property, and other assets.? A deficiency in internal control exists when the design or operation of a control does not allow management or its employees, in the normal course of operation, to detect or correct errors, fraud, or misstatements in a timely manner. The failure to properly implement internal control procedures can result in material misstatements of the account balances and noncompliance with grant oversight provisions. Condition: We noted the following deficiencies related to the maintenance of accounting records and the underlying internal controls: 1) Cash and Investments - We encountered difficulty in reconciling to the general ledger cash and investment balances. We noted that investment account activity was not being properly accounted for in the general ledger. This resulted in audit adjustments being proposed in the amount of $66,041. 2) CFP Accounting - When reconciling the asserted general ledger costs for CFP with supporting grant draws from HUD, we noted that the costs per the general ledger did not correctly align with offsetting CFP revenues. As such, we have proposed audit adjustments to both AR HUD and CFP revenues in the amount of $31,740. 3) Capital Asset Accounting - As noted in the prior audit period, all CFP hard costs continue to be placed into WIP regardless of actual completion or usage status. As a result of this accounting practice, WIP has increased to $3,885,111, or an increase of $2,285,379 from the prior audit. In addition to this we also noted that the Authority does not break out these capital additions on the depreciation schedule. We also noted large write offs of capital assets from the prior audit period. This is due to the client recreating its depreciation schedule which to this point had existed in extremely limited fashion. While the schedules do not entirely agree to the general ledger, this is a step in the correct direction for the Authority. 4) Inventory Accounting - We experienced difficulties in reconciling the general ledger balance for inventory to supporting schedules. We noted that some client adjustments were double counted which resulted in inventory balances being reported in error. We also noted that some inventory balances per the general ledger were not supported by any inventory count. We have proposed audit adjustments in the amount of $103,967 to correct these misstatements. 5) CARES Reporting - Our review of the Unaudited Financial Data Schedule and related general ledger accounts revealed that CARES grant activity was not properly being presented or accounted for. We have proposed adjustments in the financial statements to properly reflect this grant activity. Cause: The Authority also failed to implement year end internal controls to reconcile general ledger account balances to supporting detail. Effect: Non-compliance with grant oversight provisions and material misstatements in the financial statements at year-end. Recommendation: We recommend that year end internal control procedures be put in place to demonstrate effective oversight over account balances and grant activity. We noted that subsequent to the field date of the audit that the Authority has employed the use of a fee accountant. Questioned Costs: None Repeat Finding: No Views of responsible officials: The Housing Authority of Jackson County agrees with the findings and the recommended corrective actions.

Finding 2020-001 ? Accounting Controls ? Internal Controls over Financial Statement Preparation CFDA 14.850, 14.872 ? Noncompliance and Significant Deficiency Corrective Action Plan: Jackson County Housing Authority has engaged Lucas Accounting Solutions LLC to act as a fee accountant for the Authority. Lucas Accounting Solutions LLC is owned by Melissa Lucas, CPA, a seasoned accountant with substantial experience in managing accounting departments and issuing GAAP-compliant financial statements. Ms. Lucas will supervise the accounting staff of the Authority, review all month-end journal entries, and perform a top-down review of financials every month before distribution to the board. She will also expand internal controls over financial reporting, rearrange staff responsibilities to maximize segregation of duties, and train accounting employees on best practices and efficient use of technology. Ms. Lucas will also act as the primary audit contact, advise the Board and Management about financially relevant issues, and will assist the staff with issues encountered in their daily work. Anticipated Completion Date: The contract with Lucas Accounting Solutions LLC was signed December 23, 2020 and Melissa Lucas began on operational assessment on December 29, 2020. The engagement will be ongoing. Person Responsible: Melissa Lucas, CPA is responsible for accounting function of Jackson County Housing Authority and reports to Brigitta Mac-Rizzo, Executive Director.