Newton Housing AuthorityLocal Government

2025-004. Tenant Files – Housing Choice Vouchers Criteria: HUD guidelines on tenant file documentation and maintenance must be followed at all times. Condition: During my review of five tenant files, I noted the following deficiencies:  One file did not contain proof of citizenship (Form 214), the lease agreement, HQS inspection, rent reasonableness, HUD form 50058 and signed release form.  PHA was unable to locate two tenant files requested for audit examination. Questioned Costs: None noted. Effect: Tenant files are incomplete and could have incorrect rent calculation. Cause: It appears that no supervisory reviews were performed to ensure completeness of the tenant files. Recommendation: I recommend that the Authority ensure that all tenant files are maintained properly, and supervisory reviews are performed to ensure completeness and accuracy. Management’s Response: NHA will conduct a comprehensive review of all tenant files to identify and address any missing or incomplete documentation. Missing documents will be obtained and filed appropriately. NHA will implement a standardized checklist for tenant file documentation to ensure all required forms, agreements, and inspections are included. Staff will be trained in HUD guidelines and the importance of maintaining complete and accurate tenant files. We are committed to improving our internal controls and document management processes to prevent similar findings in the future.

Finding 2024-002: Allowable Activities Public Housing - 14.850, Housing Choice Voucher – 14.871 Material Weakness/Noncompliance – Activities Allowed or Unallowed Repeat Finding: 2023-003. Criteria: In the Public Housing program, transfers out of the operating fund can only occur in very limited circumstances. This would preclude the Authority from using operating funds to provide temporary loans to programs with the Authority. Interfund transactions indicate the existence of temporary loans. In the Housing Choice Voucher program, the transfers of HAP, and associated administrative fees, even temporarily, to support another program or use are not allowed and could be considered a breach of the annual contributions contract. Condition: The Public Housing program pays all the bills and is to be reimbursed by the Voucher program for its portion. During our audit, we noted the Voucher program was not reimbursing timely or for the full amount. The balance Voucher owed Public Housing had increased from $11,648.18 at June 30, 2023 to $23,142.26 at June 30, 2024 and in reviewing the general ledger, the balance was not being paid back monthly and had remained consistent throughout the year. Further, we noted a lack of segregation of duties regarding allowable activities which could allow an unallowed activities to occur and not be identified in a timely fashion. The Authority indicated in the Summary Schedule of Prior Audit Findings this was corrected. Cause: The Authority indicated its monthly financial reports were significantly behind and it was unaware of the amount to reimburse. Effect or Potential Effect: Interprogram balances were not being repaid timely. Further, due to the lack of segregation of duties, the control deficiencies result in more than a reasonable possibility that material noncompliance with program requirements could occur and not be prevented or detected. Recommendation: The Authority should review its allocation system and document the justification for it. The justification should be relevant to the expense being allocated. View of the Responsible Officials of the Auditee: The auditee’s management agrees with the finding.

Finding 2024-003: Voucher Management System Reporting Housing Choice Voucher – 14.871 Material Weakness/Noncompliance – Reporting Repeat Finding 2023-006: Criteria: The Authority must report monthly in the Voucher Management System (VMS) information related to number of vouchers and the dollar amount of HAP payments made that month along with a variety of other information. The Authority should have procedures to ensure the accuracy of that information reported. Condition: During our audit, we noted the amount reported for HAP in the VMS system was higher than the amount reported on the general ledger. In reviewing the matter, we noted the Authority was including the “HAP after the first of the month” also in the “all other HAP” totals so those figures were reported twice. A similar issue occurred in the prior year with “tenant protection vouchers”. The responsibility for reporting this information is solely the responsibility of the Executive Director. The Authority indicated in the Summary Schedule of Prior Audit Findings this was corrected. Cause: The Authority did not have procedures in place to review information submitted to identify and correct errors in reporting in a timely fashion. Effect or Potential Effect: The Authority overreported HAP payments by $2,696 for the fiscal year ending June 30, 2024. Recommendation: The Authority should review its system for reporting VMS data. Based on the limited administrative staff the Authority has effective controls may not be reasonably achieved. View of the Responsible Officials of the Auditee: The auditee’s management agrees with the finding.

Finding 2024-004: Internal Control Structure Housing Choice Voucher, 14.871 Material Weakness – Eligibility, Reporting and Special Tests and Provisions Criteria: The Authority is responsible for establishing an effective internal control process to ensure the Authority complies with the requirements governing the Housing Choice Voucher program. Condition: The Authority has one employee that is responsible for the Housing Choice Voucher program tenant files which include income, deduction and HAP calculations, reporting and special tests and provisions such as rent reasonableness. The Authority has not established controls such as documented supervisory reviews which could be used to detect and prevent errors or noncompliance. Cause: The Authority has not evaluated the risks related to errors or noncompliance and established internal control procedures the would prevent and detect errors and noncompliance. Effect or Potential Effect: The control deficiencies are deficiencies that result in more than a reasonable possibility that material noncompliance with program requirements could occur and not be prevented or detected Recommendation: The Authority should review its procedures and establish control procedures to ensure compliance with Housing Choice Voucher rules and regulations. The control procedures should be documented. View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.

Finding 2024-005: Deposit Collateralization Housing Choice Voucher Program – 14.871 Material Weakness/Noncompliance – Special Tests and Provisions Criteria: The Authority is required to enter into a current depository agreement with its financial institutions in the form required by HUD. The agreements serve as safeguards for federal funds and provide third-party rights to HUD. Condition: The Authority did have the appropriate HUD depository agreement with its financial institutions but did not monitor to ensure the collateral pledged was an indefinable U.S. Government or Agency security prescribed by HUD in a notice and as a result, collateral that did not meet the terms above were pledged. Cause: The Authority was not monitoring to ensure the pledged collateral met the terms of the depository agreement. Effect or Potential Effect: The Authority was in noncompliance with HUD’s requirements. Recommendation: The Authority should review this situation with the bank in question and obtain appropriate collateral. View of the Responsible Officials of the Auditee: The auditee’s management agrees with the finding.

Finding 2023-003: Allowable Activities Public Housing - 14.850, Housing Choice Voucher – 14.871 Material Weakness/Noncompliance – Activities Allowed or Unallowed Repeat Finding: 2022-005. Criteria: In the Public Housing program, transfers out of the operating fund can only occur in very limited circumstances. This would preclude the Authority from using operating funds to provide temporary loans to programs with the Authority. Interfund transactions indicate the existence of temporary loans. In the Housing Choice Voucher program, the transfers of HAP, and associated administrative fees, even temporarily, to support another program or use are not allowed and could be considered a breach of the annual contributions contract. Further, the Authority should have a documented system to allocate costs equitably between programs. The Authority is responsible for establishing an effective internal control process to ensure the Authority complies with the requirements governing Public Housing and Housing Choice Voucher programs. Condition: The Authority has historically allocated shared costs between Public Housing and the Housing Choice Voucher program 65%/35%, respectively. The Executive Director indicated this was done based on a time study but the percentage also closely matches the unit percentage between programs. On the supporting documents for expenses during the year ended June 30, 2023, the Authority continued to document the 65%/35% split. For the year ended June 30, 2023, the Authority had switched fee accountants. The current fee accountant switched the allocation to 93%/7% which is not reasonable and the Executive Director was not aware of this allocation until well after the June 30, 2023 year end was closed. When we inquired for the justification for the new allocation, it was based on total salaries per program which included maintenance salaries. Further, the allocation of the Executive Director’s wages did not appear reasonable as the Executive Director has had to spend more time with the Voucher program due to staff turnover. Further, it appears the allocation of “overhead” time was all allocated to Public Housing. The new allocation system resulted in the Housing Choice Voucher program having administrative profits of $43,792 which is highly unusual for program that averages 78 vouchers per month. The Public Housing program pays all the bills and is to be reimbursed by the Voucher program for its portion. During our audit, we noted the Voucher program was not reimbursing timely or for the full amount. The balance Voucher owed Public Housing had increased from $10,780.32 at June 30, 2022 to $11,648.18 on June 30, 2023 and in reviewing the general ledger, the balance was not being paid back monthly and had remained consistent throughout the year. Further, this past year, the Authority only consistently had two full-time administrative employees and a third position had been inconsistent. As a result, it made it difficult for the Authority to have controls beyond the Authority staff knowledge and compensating controls were not development to overcome the lack of segregation of duties. Specifically, we noted a lack of segregation of duties over allowable activities as the Executive Director had to handle many of the duties by herself without compensating controls. Cause: The Authority was unaware of the allocation system being used to allocated shared expenses and the system used was not reasonable. Effect or Potential Effect: It appears Public Housing program was overallocated administrative expenses that should have been allocated the Housing Choice Voucher program. Interprogram balances were not being repaid timely. Further, due to the lack of segregation of duties, the control deficiencies result in more than a reasonable possibility that material noncompliance with program requirements could occur and not be prevented or detected. Recommendation: The Authority should review its allocation system and document the justification for it. The justification should be relevant to the expense being allocated. View of the Responsible Officials of the Auditee: The auditee’s management agrees with the finding.

Finding 2023-004: Capital Fund Grant Administration Capital Funds 14.872 Material Weakness/Noncompliance – Activities Allowed or Unallowed, Period of Performance, Special Tests and Provisions Questioned Costs: $206,189.50 Criteria: The Authority is awarded an annual Capital Fund grant each year. The Authority prepares a five-year plan which indicates improvements the grants will be used for and the dollar amount. This annual budget is modified upon the grant award to match the grant amount. Only items included within the budget are allowable costs. Unless an extension is approved by HUD, the Authority must obligate at least 90 percent of each Capital Fund grant within 24 months of the funds becoming available to the Authority for obligation. The Authority is required to self-report obligations and expenditures in the Line of Credit Control (LOCCS) monthly. Condition: During our audit, we tested $240,034.30 of the $252,818.56 of Capital Fund grant transactions. Of the $240,034.30 tested, $173,832.14 of expenditures were not included as work items in the applicable grant budget and therefore not allowable. The Authority was required to meet the 90% obligation threshold by May 28, 2022 for the 2018 Capital Fund grant. The Authority had reported either 100% or 98% obligation since the Authority began reporting in LOCCS for the period of May, 2018. We noted $32,357.36 of expenditures related to the 2018 Capital Fund grant that were associated with a contract signed on July 1, 2022 which is after the obligation deadline. Based on the actual obligation occurring after the obligation deadline and the fact the Authority reported the grant fully obligated since May, 2018, these expenditures are also not allowable. We further noted a variety of issues with the Authority’s reporting of funds obligated and expended in LOCCS. Specifically, we noted the following: • As noted above, the Authority reported the 2018 grant as fully obligated when it had signed a contract for the work after the obligation deadline. • The Authority entered into a contract on January 11, 2022 for work related to the 2019 Capital Fund grant. The Authority did not adjust the obligation amount in LOCCS for this until October, 2022. The Authority had expended $160,055.23 of the grant as of June 30, 2023 but the Authority was still reporting the balance at $108,517.03 reported for the June, 2022 period in ELOCCS on in the November, 2023 report as the report had not been updated. The $108,517.03 reconciled to the June 30, 2022 general ledger balance. • Related to the 2021 Capital Fund grant, the Authority entered into a contract on January 11, 2022, however, the amount reported as obligated in LOCCS did not change until the January, 2023 reporting period. • Related to the 2022 Capital Fund grant, the Authority reported a $57,030.14 increase in the amount reported obligated for the period ending October, 2022. We inquired of the Executive Director of what made up the obligation and she was unable to identify the obligation. It should be noted that due to the limited staff, compliance with the Capital Fund grant requirements was solely with responsibility of the Executive Director without compensating controls. Cause: The responsibility to administer Capital Fund grant was the responsibility of one individual and the staff did not have a proper understanding of how the Capital Fund grant was to operate and was unaware of the various rules and regulations. The Executive Director was under the assumption that as long as a cost was in the five-year plan, the Authority could spend any of its grants on the item. Further, the Authority had gotten away from maintaining subsidy recorded to support grant funds obligated and expended by grant. Effect or Potential Effect: $206,189.50, or 82%, of capital fund grant expenditures during the year are being questioned as unallowed activities. Further, the reporting of funds obligated and expended were materially in error. Based on the level of noncompliance noted, we have issued an adverse opinion of Capital Fund grant compliance. Recommendation: During our audit fieldwork, the Executive Director indicated she had recently received Capital Fund grant training and had realized she had not administered the grant correctly. The Authority should establish procedures to report at board meetings the status of the grants including the grant award, obligation and expenditure deadlines, funds obligated, funds advanced and funds expended. All obligations should be supported by signed contracts or invoices/billings. The Authority should review this situation with HUD to determine how to remedy it. View of the Responsible Officials of the Auditee: The auditee’s management agrees with the finding.

Finding 2023-005: Utility Allowance Review Housing Choice Voucher – 14.871 Material Weakness/Noncompliance – Special Tests and Provisions Criteria: The Authority must maintain an up-to-date utility allowance schedule. The Authority must review utility rate data for each utility category each year and must adjust its utility allowance schedule if there has been a rate change of 10 percent or more for a utility category or fuel type since the last time the utility allowance schedule was revised (24 CFR section 982.517). Condition: During our audit, the Authority indicated it had contacted the utility companies and rates had not changed so the utility allowances were not updated, however, the Authority was unable to provide any documentation that these procedures were done. Cause: The Authority did not document the utility allowance review. Effect or Potential Effect: The Authority was unable to document it complied with the utility allowance review requirement. Recommendation: The Authority should document all future reviews including its calculations to show if the change was more or less than 10%. View of the Responsible Officials of the Auditee: The auditee’s management agrees with the finding.

Finding 2023-006: Voucher Management System Reporting Housing Choice Voucher – 14.871 Material Weakness/Noncompliance – Reporting Criteria: The Authority must report monthly in the Voucher Management System (VMS) information related to number of vouchers and the dollar amount of HAP payments made that month along with a variety of other information. The Authority should have procedures to ensure the accuracy of that information reported. Condition: During our audit, we noted the amount reported for HAP in the VMS system was higher than the amount reported on the general ledger. In reviewing the matter, we noted the amounts reported for the month of June, 2023 were not correct. The responsibility for reporting this information is solely the responsibility of the Executive Director so we inquired for her to review this. She indicated she had incorrectly reported the HAP dollar amount for tenant protection vouchers in both that category and also in the “All Others” category. Cause: The Authority did not have procedures in place to review information submitted to identify and correct errors in reporting in a timely fashion. Effect or Potential Effect: The Authority overreported HAP payments by $5,310 for the fiscal year ending June 30, 2023. Recommendation: The Authority should review its system for reporting VMS data. Based on the limited administrative staff the Authority has, effective controls may not be reasonably achieved. View of the Responsible Officials of the Auditee: The auditee’s management agrees with the finding.

Finding 2022-005: Internal Control Structure Public Housing - 14.850, Housing Choice Voucher ? 14.871 Material Weakness - Allowable Costs Repeat Finding: 2021-005. Criteria: The Authority is responsible for establishing an effective internal control process to ensure the Authority complies with the requirements governing Public Housing program. Condition: This past year, the Authority only consistently had two full-time administrative employees and a third position had been inconsistent. As a result, it made it difficult for the Authority to have controls beyond the Authority staff knowledge and compensating controls were not development to overcome the lack of segregation of duties. Specifically we noted a lack of segregation of duties over allowable costs as the Executive Director had to handle many of the duties by herself without compensating controls. Cause: The Authority had limited resources and staffing issues impacted the Authority during the year. Effect or Potential Effect: The control deficiencies are deficiencies that result in more than a reasonable possibility that material noncompliance with program requirements could occur and not be prevented or detected. Recommendation: The Authority should review how it could feasibly design and implement controls over these areas. View of the Responsible Officials of the Auditee: The auditee?s management agrees with the finding.

Finding 2021-005: Internal Control Structure Public Housing, 14.850 Material Weakness - Allowable Costs, Special Tests and Provisions Criteria: The Authority is responsible for establishing an effective internal control process to ensure the Authority complies with the requirements governing Public Housing program. Condition: This past year, the Authority only consistently had two full-time administrative employees and a third position had been inconsistent. As a result, it made it difficult for the Authority to have controls beyond the Authority staff knowledge and compensating controls were not development to overcome the lack of segregation of duties. Specifically we noted a lack of segregation of duties over allowable costs and special tests and provision as it relates to the waiting list. Cause: The Authority had limited resources and staffing issues impacted the Authority during the year. Effect or Potential Effect: The control deficiencies are deficiencies that result in more than a reasonable possibility that material noncompliance with program requirements could occur and not be prevented or detected. Recommendation: The Authority should review how it could feasibly design and implement controls over these areas. View of the Responsible Officials of the Auditee: The auditee?s management agrees with the finding.

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