THE HOUSING AND REDEVELOPMENT AUTHORITY OF WORTHINGTON, MINNESOTALocal Government

Rent Reasonableness U.S Department of Housing and Urban Development Section 8 Housing Choice Voucher Program 14.871 Condition: During our audit, we noted the HRA did not have rent reasonableness documentation for multiple tenants. Criteria: Code of Federal Regulations § 982.4 requires the PHA to determine and keep documentation that the rent to owner is reasonable. Cause: The HRA did not have all necessary forms for single audit compliance. Effect: The HRA is not in compliance with Federal Award Programs. Recommendation: We recommend that the HRA develop a checklist of all required forms to be kept in all tenant files to ensure compliance. Management Response: The HRA’s management has taken steps to correct this finding and ensure that proper documentation is maintained in the future.

Control Finding Over Special Provisions U.S Department of Housing and Urban Development Section 8 Housing Choice Voucher Program 14.871 Condition: During our testing of compliance with special tests and provisions for the Housing Choice Voucher Program, we noted that the HRA did not have adequate internal controls designed and implemented to ensure compliance with certain program requirements. Specifically, controls were not consistently documented or performed to verify that required procedures (e.g., proper documentation of rent reasonableness) were completed in accordance with HUD requirements. Criteria: In accordance with the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR 200) and the applicable OMB Compliance Supplement for ALN 14.871, the auditee is required to establish and maintain effective internal controls to ensure compliance with program requirements. This includes controls over special tests and provisions, such as housing quality standards inspections, rent reasonableness determinations, income certifications, and other program-specific requirements. Additionally, Government Auditing Standards emphasize the need for controls to prevent or detect noncompliance with provisions of laws, regulations, and grant agreements. Cause: The deficiency appears to be due to a lack of formalized policies and procedures, as well as insufficient monitoring and review controls over program compliance. In addition, reliance on informal processes and staff knowledge resulted in inconsistent application of required procedures. Effect: The absence of effective internal controls over special tests and provisions increases the risk that noncompliance with HUD program requirements may occur and not be detected in a timely manner. This could result in questioned costs, potential repayment of funds, or other sanctions from the granting agency. Recommendation: We recommend that the HRA strengthen its internal control structure over compliance with special tests and provisions by: • Developing and implementing formal written policies and procedures addressing all applicable compliance requirements. • Establishing documented review and approval processes to ensure required procedures are consistently performed, and • Implementing monitoring controls (e.g., supervisory review or periodic internal audits) to ensure ongoing compliance with HUD requirements. Management Response: The HRA’s management has taken steps to correct this finding and ensure that proper review and controls are in place to review special tests and provisions to ensure that requirements are being met.

Signatures on Checks U.S Department of Housing and Urban Development Section 8 Housing Choice Voucher Program 14.871 Condition: During our audit, we noted several disbursement checks that contained only one authorized signature. The population tested included both transactions selected as part of the single audit compliance testing for the Housing Choice Voucher Program (ALN 14.871) and transactions selected as part of general disbursement testing. Criteria: Internal controls should be in place to provide reasonable assurance over disbursements. Cause: The Executive Director was the only person signing checks for the majority of the year. Effect: The HRA does not appear to have appropriate controls over the disbursement process. Recommendation: We recommend that a member of the Board sign each check in addition to the Executive Director’s signature. Management response: This has been brought to the HRA’s attention and appropriate action has been taken. The HRA has implemented multiple signatures on checks since May of 2025.

Uniform Guidance Written Policies and Procedures Condition: During our audit, we discovered that the HRA has not developed written procedures required by the Uniform Guidance. Criteria: The HRA must establish and maintain effective internal control over federal awards that provides reasonable assurance that the HRA is managing federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal Awards. Cause: The HRA did not have written policies and procedures in place sufficient to comply with the Uniform Guidance requirements. Effect: The HRA was out of compliance with this requirement. Recommendation: The HRA should implement written policies and procedures to adhere to the above-mentioned Uniform Guidance requirements. Management Response: The HRA will establish policies and procedures to ensure future compliance with the Uniform Guidance requirements.

Rent Reasonableness U.S Department of Housing and Urban Development Section 8 Housing Choice Voucher Program 14.871 Condition: During our audit, we noted the HRA did not have rent reasonableness documentation for multiple tenants. Criteria: Code of Federal Regulations § 982.4 requires the PHA to determine and keep documentation that the rent to owner is reasonable. Cause: The HRA did not have all necessary forms for single audit compliance. Effect: The HRA is not in compliance with Federal Award Programs. Recommendation: We recommend that the HRA develop a checklist of all required forms to be kept in all tenant files to ensure compliance.

Depository Agreements U.S. Department of Housing and Urban Development Section 8 Housing Voucher Program 14.871 Condition: During the audit we noted the HRA did not have depository agreements with the banks. Criteria: Code of Federal Regulations § 982.156 requires depository agreements to be deposited with a financial institution selected as depositary by the PHA in accordance with HUD requirements. Cause: The HRA did not have all necessary forms for single audit compliance. Effect: The HRA is not in compliance with Federal Award Programs. Recommendation: We recommend the HRA management complete the necessary forms with the bank to ensure compliance. Management Response: The HRA’s management has since completed these forms in 2025.

Claims Approval U.S. Department of Housing and Urban Development Section 8 Housing Voucher Program 14.871 Condition: During the audit we noted the HRA did not get Board approval for several Section 8 Housing Vouchers disbursements. Criteria: Minnesota Statute § 412.271, subd. 1 directs all claims be audited and allowed by the HRA Board. Meaning all claims paid by the HRA are required to be approved by the Board at the HRA’s monthly meetings. The HRA also relies on Board approval of expenditures as a key control over federal spending. We noted instances throughout the year where there were gaps in the check sequences that the HRA was approving, thereby not approving all claims. Cause: Section 8 Housing Voucher claims were not included in monthly Board meetings for approval. Effect: The HRA is not in compliance with Minnesota legal compliance and there were not proper internal controls over federal expenditures. Recommendation: We recommend the HRA include all claims paid by the HRA in monthly Board meetings for approval. Management Response: The HRA’s management will include all claims paid by the HRA in monthly Board meetings.

2023-001 Depository Agreements U.S. Department of Housing and Urban Development Section 8 Housing Voucher Program 14.871 Condition: During the audit we noted the HRA did not have depository agreements with the banks. Criteria: Code of Federal Regulations § 982.156 requires depository agreements to be deposited with a financial institution selected as depositary by the PHA in accordance with HUD requirements. Cause: The HRA did not have all necessary forms for single audit compliance. Effect: The HRA is not in compliance with Federal Award Programs. Recommendation: We recommend the HRA management complete the necessary forms with the bank to ensure compliance. Management Response: The HRA’s management will complete the depository agreement forms with the bank.

2023-002 Claims Approval U.S. Department of Housing and Urban Development Section 8 Housing Voucher Program 14.871 Condition: During the audit we noted the HRA did not get Board approval for several Section 8 Housing Vouchers disbursements. Criteria: Minnesota Statute § 412.271, subd. 1 directs all claims be audited and allowed by the HRA Board. Meaning all claims paid by the HRA are required to be approved by the Board at the HRA’s monthly meetings. The HRA also relies on Board approval of expenditures as a key control over federal spending. We noted instances throughout the year where there were gaps in the check sequences that the HRA was approving, thereby not approving all claims. Cause: Section 8 Housing Voucher claims were not included in monthly Board meetings for approval. Effect: The HRA is not in compliance with Minnesota legal compliance and there were not proper internal controls over federal expenditures. Recommendation: We recommend the HRA include all claims paid by the HRA in monthly Board meetings for approval. Management Response: The HRA’s management will include all claims paid by the HRA in monthly Board meetings.

Condition: During the audit we noted the HRA did not get Board approval for several Section 8 Housing Voucher and Public and Indian claims. Criteria: Minnesota Statute ? 412.271, subd. 1 directs all claims be audited and allowed by the HRA Board. Meaning all claims paid by the HRA are required to be approved by the Board at the HRA?s monthly meetings. The HRA also relies on Board approval of expenditures as a key control over federal spending. We noted instances throughout the year where there were gaps in the check sequences that the HRA was approving, thereby not approving all claims. Cause: Section 8 Housing Voucher and Public and Indian claims were not included in monthly Board meetings for approval. Effect: The HRA is not in compliance with Minnesota legal compliance and there were not proper internal controls over federal expenditures. Recommendation: We recommend the HRA include all claims paid by the HRA in monthly Board meetings for approval. Management Response: The HRA?s management will include all claims paid by the HRA in monthly Board meetings.

Condition: During the audit we noted the HRA did not have depository agreements with the banks. Criteria: Code of Federal Regulations ? 982.156 requires depository agreements to be deposited with a financial institution selected as depositary by the PHA in accordance with HUD requirements. Cause: The HRA did not have all necessary forms for single audit compliance. Effect: The HRA is not in compliance with Federal Award Programs. Recommendation: We recommend the HRA management complete the necessary forms with the bank to ensure compliance. Management Response: The HRA?s management will complete the depository agreement forms with the bank.

Condition: During the audit we noted the HRA did not perform a re-inspection of a failed inspection. Criteria: Code of Federal Regulations ? 982.405 requires all failed inspections to be re-inspected. Cause: The HRA did not have adequate internal controls over inspections for single audit compliance. Effect: The HRA is not in compliance with Federal Award Programs. Recommendation: We recommend the HRA management have controls in place to ensure all failed inspections are re-inspected. Management Response: The HRA?s management will ensure all failed inspections are re-inspected in the future.

2020-002 Depository Agreement Condition: During the audit we noted the HRA did not have depository agreements with the banks. Criteria: Depository agreements with the banks are required for recipients qualifying for a single audit. Cause: The HRA did not have all necessary forms for single audit compliance. Effect: The HRA is not in compliance with Federal Award Programs. Recommendation: We recommend the HRA management complete the necessary forms with the bank to ensure compliance.