HRA OF ELY MINNESOTALocal Government

2020-001 ? Lack of Segregation of Duties Criteria: Internal control is a process, affected by the Ely Housing and Redevelopment Authority's (the Authority) board of commissioners, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations. A good system of internal control provides for an adequate segregation of duties so that no one individual handles a transaction from its inception to completion. Condition: Due to the limited employees and resources available to the Authority, many aspects of the internal control structure that rely on segregation of duties are missing. Specific accounting processes noted that are affected by the lack of segregation of duties include cash disbursements, payroll disbursements, cash receipting, and specific reporting functions required for the Authority. Cause: Due to the limited number of personnel within the Authority, segregation of the accounting functions necessary to ensure adequate internal accounting control is not possible. This is not unusual in operations the size of the Authority; however, management should constantly be aware of this condition and realize that the concentration of duties and responsibilities in a limited number of individuals is not desirable from an accounting point of view. Effect: Inadequate segregation of duties could adversely affect the Authority?s ability to detect misstatements in amounts that would be material in relation to the financial statements in a timely period by personnel in the normal course of performing their assigned functions. Recommendation: We recommend that the Authority?s board of commissioners and management be aware of the lack of segregation of the accounting functions and, where possible, implement oversight procedures to ensure the internal control policies and procedures are being implemented by personnel to the extent possible. View of Responsible Officials: Management agrees with the finding.

2020-002 ? Review of Tenant Files Criteria: HUD requires that certain criteria be met when determining tenant eligibility, maintaining supporting documentation, and calculating tenant payments. Condition: Tenant files were not in compliance with HUD regulations. For Low Rent Public Housing, we sampled and examined 12 tenant files for the year ended December 31, 2020. Cause: We noted the Authority had outdated policies in place that contained language to conform to the latest HUD regulations, but the applicable policies and procedures were not all followed in regard to tenant leasing processes. Effect: We noted in all 12 tenant files documentation was inadequate in several areas: e.g., initial application, verification of age, social security number and disability, EIV reports, income documentation, family composition, sex offender verification and documentation, criminal background check on recertification, timeliness of annual recertification, and flat rent or income-based selection. We are unable to determine if these instances resulted in any tenant rent calculation errors. Recommendation: Policies and procedures surrounding tenant leasing processes should be updated to current standards and followed. The Authority?s tenant files should be brought into compliance with HUD regulations. Questioned Costs: None View of Responsible Officials: Management agrees with the finding.

2020-003 ? Flat Rent Requirements Criteria: HUD requires that certain criteria be met when determining flat rent rates as determined in PIH 2017-23. In general, this requires flat rents to be set at no lower than either 80% of the applicable Fair Market Rent (FMR) or 80% of the Small Area Fair Market Rent (SAFMR). From the effective date of the current fiscal year?s FMR or SAFMR, PHAs have 90 days to either update flat rents or submit an exception request. In a typical year, this would mean that a PHA will have until December 31 to either update its flat rents based on the new FMR or SAFMR or submit an exception request. Condition: For the Low Rent Public Housing, flat rent rates were last updated in 2016. Cause: We noted the Authority had outdated Fair Market Rent analysis that it was using and may not have been charging the appropriate flat rent rate. Effect: We are unable to determine if these instances resulted in any tenants paying an improper rent amount. Recommendation: The Authority should annually verify they are charging the appropriate flat rent, and the calculation should be brought into compliance with HUD regulations. Questioned Costs: None View of Responsible Officials: Management agrees with the finding.

2020-004 ? Declarations of Trust or Declaration of Restrictive Covenants Criteria: As noted in PIH 2019-14, Public Housing Agencies must maintain valid Declarations of Trust or Declaration of Restrictive Covenants on all public housing property so HUD can ensure public housing projects (as defined at 24 CFR 905.108) are used for public housing purposes. Public housing property is any real property acquired, developed, modernized, maintained, or operated with the United States Housing Act of 1937. Condition: The Authority?s public housing properties do not have a Declarations of Trust or Declaration of Restrictive Covenant filed against their properties. Cause: The Authority does not have the proper declarations in place as required by HUD. Effect: There are no restrictions on the titles of the Authority?s public housing properties. Recommendation: The Authority should put the declarations in place to bring the Authority into compliance with HUD regulations. Questioned Costs: None View of Responsible Officials: Management agrees with the finding.