LOW RENT HOUSING AGENCY BURLINGTON

Finding 2025-002: Allowable Costs/Cost Principles (Repeat Finding) Public Housing Program, Assistance Listing #14.850 Material Weakness Criteria: A properly designed internal control structure relies greatly on a proper segregation of duties between several individuals. The duties related to initiating, authorizing, recording, processing and reporting financial data would be segregated so there is less likelihood that a misstatement of the entity’s financial statements would occur. In addition, the controls over the significant areas should be documented in order to determine that the controls are functioning. In addition, duties related to program compliance should be segregated so that material noncompliance would be prevented or detected. Condition: The Agency consists of limited employees and as a result the Agency has not completed an internal control analysis to see where controls can be implemented and certain significant internal controls that have not been documented or performed to ensure there is a proper segregation of duties in the internal control process including compliance requirements. The controls relate to all significant processes but we noted the following areas of specific weakness: • Cash – During our audit of bank reconciliations and bank statements, we noted the Director prepares the monthly bank reconciliations; however, there is no documented review or approval of the reconciliations by another individual, such as a Board member or other independent reviewer. Without an independent review, errors, unauthorized transactions, or unusual reconciling items may not be identified and resolved timely. A documented review would help strengthen controls over cash and provide evidence that bank activity and reconciliations are being monitored. • Dual Signatures and Approval of Disbursements – The Agency’s control process over disbursements is not sufficient to ensure adequate review and approval of transactions. The Director approves invoices and reviews bank statements, and although the prior-year issue related to the Director being the sole check signer has been corrected by requiring a Board member to also sign checks, there is still no independent review of disbursements for allowability or consistency with Agency policy. Board members are provided a listing of disbursements at Board meetings; however, this review does not appear to include a documented review of supporting transactions or approval for compliance with Agency policy. Cause: The Agency has an “Internal Control Monetary Policy” but it merely described the processing of information with no controls to prevent errors or misuse of funds. The Agency has not formally performed a risk assessment to analyze the risks that are relevant to compliance requirements of federal programs. Effect or Potential Effect: The lack of controls over the categories above could result in questioned costs and misstatements in the financial statements in the future. Recommendation: The Agency needs to review and re-evaluate its internal control procedures over the significant areas of its internal control structure and make sure the controls are well documented to ensure the controls are identifiable and traceable during the audit process. View of Responsible Official: Management agrees with the Finding.

To properly ensure internal controls, all segregation of duties will be documented beyond what is currently being done. For additional oversight of monthly reconciliation, it will be documented that this has had a secondary review. Additionally, a board member or another individual will review monthly bank statements, invoices, and related documentation. The board will review policy and focus on stricter internal controls to prevent any form of fraud.

2024-004

Finding 2025-003: Eligibility Public Housing Program, Assistance Listing #14.850 Section 8 Housing Choice Voucher Program #14.871 Material Weakness Criteria – In accordance with Public Housing Program and Section 8 Housing Choice Voucher Program requirements, tenant eligibility, income and rent determinations, and leasing or continuing occupancy procedures should be completed in accordance with applicable HUD regulations and program guidance. Effective internal controls should include a documented supervisory or independent review of tenant files to help ensure required documentation is complete, determinations are accurate, and program compliance is maintained. Condition – During our audit of tenant participant files for the Public Housing Program and Section 8 Housing Choice Voucher Program, we noted there was no evidence that a documented supervisory review procedure had been implemented. The occupancy and eligibility procedures related to tenant files appear to be performed by one individual without a documented secondary review. As a result, the Agency does not have evidence that tenant file documentation, eligibility determinations, income and rent calculations, and related occupancy procedures are independently reviewed for accuracy and compliance. Cause – The Agency has not established or documented formal supervisory review procedures over tenant files. Effect or Potential Effect - Without a documented supervisory review process, errors or omissions in tenant files may not be identified and corrected timely. This could result in inaccurate eligibility determinations, incorrect income or rent calculations, incomplete documentation, or noncompliance with HUD eligibility and occupancy requirements. Recommendation - We recommend the Agency establish and document supervisory review procedures over tenant files for both the Public Housing Program and Section 8 Housing Choice Voucher Program. The review should include evidence of who performed the review, the date of review, and the specific items reviewed, such as eligibility documentation, income verification, rent calculations, and required occupancy forms. Implementing a documented review process would strengthen controls, support continued compliance with HUD requirements, and help ensure continuity if there is staff turnover or an employee responsible for tenant files is unavailable. View of Responsible Official: Management agrees with the Finding.

In the future all public housing files for both the Section 8 Voucher Program and Public Housing Program will have a checklist of required items. The checklist will be verified and documented by either the Executive Director or qualified employee. This will include who performed the review, the date, and items reviewed.

View of Responsible Official: Management agrees with the Finding.

The agency will use the previous month’s liability of the Voucher Financials to pay back any interagency funds in a timely manner and immediately pay the current balance.

View of Responsible Official: Management agrees with the Finding.

In the future all public housing files will have a checklist of required items. The checklist will be verified and documented by either the Executive Director or Director of Housing Operations.

View of Responsible Official: Management agrees with the Finding.

Depository Agreements have been signed with each individual banking institutions where accounts and certificates of deposit are held.