CITY OF ALBEMARLE

Finding: 2025‐002 U.S. Department of Housing & Urban Development Program Name: Section 8 Housing Voucher Cluster AL Number: 14.871 Material Non‐Compliance Material Weakness Eligibility, Reporting, Special Tests and Provisions Criteria: In accordance with 2 CFR 200, management should have an adequate system of internal control procedures in place to ensure that applicants have all required documentation in their file. In accordance with 24 CFR Part 5 Subpart F, the City must maintain documentation to support tenant eligibility. In accordance with 24 CFR section 982.516, the City must reexamine family income and composition at least once every 12 months and adjust the tenant rent and housing assistance payment as necessary using the documentation from third party verification. In accordance with 24 CFR section 5.233, the Public Housing Agencies must use the Enterprise Income Verification (EIV) system in its entirety to verify tenant employment and income information during mandatory reexaminations of family composition and income and reduce administrative and subsidy payment errors in accordance with 24 CFR 5.236 and other administrative guidance issued by HUD. In accordance with 24 CFR Part 908 and 24 CFR section 982.158, the Public Housing Agencies (PHA) is required to submit form HUD-50058, Family Report, electronically to HUD each time the PHA completes an issuance, admission, annual reexamination, interim reexamination, portability move-in, expiration, or other change of unit for a family. In accordance with 24 CFR sections 960.202 through 960.208, the City must establish, adopt, and follow policies for admission of tenants as it relates to the Public Housing waiting list. All families admitted to the program must be selected from the waiting list. In accordance with 24 CFR sections 982.4, 982.54(d)(15), 982.158(f)(7), and 982.507, the PHA must determine that the rent to the owner is reasonable at the time of initial leasing. Also, the PHA must determine reasonable rent during the term of the contract. The PHA must maintain records to document the basis for the determination that rent to owner is a reasonable rent. In accordance with 24 CFR section 982.158 and 24 CFR Part 982, Subpart K, the PHA must pay a monthly Housing Assistance Payment (HAP) on behalf of the family that corresponds with the amount on the HUD-50058. This HAP amount must be reflected on the HAP contract and HAP register. Condition: The Public Housing Department did not follow procedures to ensure the proper eligibility determination, reexaminations, waiting lists, reasonable rent, reporting, and housing assistance payments were made and documented. Context: Of the 1,764 housing assistance payments during the current year valued at $903,155, we examined 60 (valued at $36,324) and determined that 51 (85% valued at $31,680) housing assistance payments were not supported with case documentation to confirm eligibility. Reexaminations were not completed timely to allow adjustments to housing assistance payments as necessary. No EIV in case file to support the calculation for the HAP payment. Therefore, the housing assistance payments made during fiscal year 2025 were not supported by accurate information. Of the 60 housing assistance payments we examined, we determined that 60 applicants (100%) did not have documentation to ascertain that the public housing authority documented and determined reasonable rent. Upon further review, the City was able to provide verification of reasonable rent. Of the 60 housing assistance payments we examined, we determined that 60 applicants (100%) did not have proper documentation on file to ascertain that applicants were added and selected from the waiting list. Of the 60 housing assistance payments we examined, we determined that 24 applicants (40%) did not have proper documentation on file to support the amounts on the HAP contract or did not have the form HUD-50058, Family Report. Effect: Owners could receive benefits for which they are not eligible. Cause: Weakness in implementation of controls over eligibility, reporting, and special tests and provisions procedures. Due to the turnover in the housing department, the City failed to obtain or retain the completed documentations required. Identification of a Repeat Finding: This is modified and a repeat Finding of 2024-001 from the immediate previous audit. Questioned Cost: In accordance with 2 CFR 200, auditors are required to report known questioned costs when likely questioned costs are greater than $25,000. The sample results identified $31,680 in known questioned costs. Recommendation: Management should adhere to the program’s policy and maintain proper eligibility documentation in the applicant’s file. Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding. Please refer to the Corrective Action Plan section of this report.

Finding: 2025‐003 U.S. Department of Housing & Urban Development Program Name: Section 8 Housing Voucher Cluster AL Number: 14.871 Material Non‐Compliance Material Weakness Special Tests and Provisions Criteria: In accordance with 2 CFR 200, management should have an adequate system of internal control procedures in place to ensure that applicants have all required documentation in their file. In accordance with 24 CFR Part 5 Subpart F, the City must maintain documentation to support tenant eligibility. In accordance with 24 CFR sections 960.202 through 960.208, the City must establish, adopt, and follow policies for admission of tenants as it relates to the Public Housing waiting list. All families admitted to the program must be selected from the waiting list. In accordance with 24 CFR sections 982.4, 982.54(d)(15), 982.158(f)(7), and 982.507, the PHA must determine that the rent to the owner is reasonable at the time of initial leasing. Also, the PHA must determine reasonable rent during the term of the contract. The PHA must maintain records to document the basis for the determination that rent to owner is a reasonable rent. Condition: The Public Housing Department did not follow procedures to ensure the waiting lists and reasonable rent were made and documented. Context: Of the 6 new participants during the current year valued at $33,340, we examined 2 (valued at $13,590) and determined that 2 (100%) that the case file was missing documentation to support that the rent to the owners were reasonable and that the tenant was selected from the waiting list. Effect: Owners could receive benefits for which they are not eligible. Cause: Weakness in implementation of controls over special tests and provisions procedures. Due to the turnover in the housing department, the City failed to obtain or retain the completed documentations required. Identification of a Repeat Finding: This is modified and a repeat Finding of 2024-002 from the immediate previous audit. Questioned Cost: The finding represented an internal control weakness; therefore, no questioned costs are applicable. Recommendation: Management should adhere to the program’s policy and maintain proper eligibility documentation in the applicant’s file. Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding. Please refer to the Corrective Action Plan section of this report.

Finding: 2025‐004 U.S. Department of Housing & Urban Development Program Name: Section 8 Housing Voucher Cluster AL Number: 14.871 Material Non‐Compliance Material Weakness Special Tests and Provisions Criteria: In accordance with 24 CFR sections 982.158(d) and 982.405(b), the Public Housing Agencies (PHA) must inspect the unit leased to a family at least biennially to determine if the unit meets Housing Quality Standards (HQS) and the PHA must conduct quality control re-inspections. The PHA must prepare a unit inspection report. Condition: The City did not follow procedures to ensure compliance of housing quality standards inspections. Context: Of the 1,764 applicants during the current year valued at $903,155, we examined 60 and determined that 4 (7% valued at $1,933) did not have a unit inspection report to verify that the unit was inspected. Effect: Units leased to a family could not meet the housing quality standards necessary for the health and safety of program participants. Cause: Lack of proper internal control over housing quality standards inspections. Identification of a Repeat Finding: This is modified and a repeat Finding of 2024-003 from the immediate previous audit. Questioned Cost: The finding represented an internal control weakness; therefore, no questioned costs are applicable. Recommendation: Management should implement controls to ensure that housing quality standards inspections are completed at lease biennially and documented on a unit inspection report. Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding. Please refer to the Corrective Action Plan section of this report.

Finding: 2024‐001 U.S. Department of Housing & Urban Development Program Name: Housing Voucher Cluster AL Number: 14.871 Material Non‐Compliance Material Weakness Eligibility, Reporting, Special Tests and Provisions Criteria: In accordance with 2 CFR 200, management should have an adequate system of internal control procedures in place to ensure that applicants have all required documentation in their file. In accordance with 24 CFR Part 5 Subpart F, the City must maintain documentation to support tenant eligibility. In accordance with 24 CFR section 982.516, the City must reexamine family income and composition at least once every 12 months and adjust the tenant rent and housing assistance payment as necessary using the documentation from third party verification. In accordance with 24 CFR Part 908 and 24 CFR section 982.158, the Public Housing Agencies (PHA) are required to submit form HUD-50058, Family Report, electronically to HUD each time the PHA completes an issuance, admission, annual reexamination, interim reexamination, portability move-in, expiration, or other change of unit for a family. In accordance with 24 CFR sections 960.202 through 960.208, the City must establish, adopt, and follow policies for admission of tenants as it relates to the Public Housing waiting list. All families admitted to the program must be selected from the waiting list. In accordance with 24 CFR sections 982.4, 982.54(d)(15), 982.158(f)(7), and 982.507, the PHA must determine that the rent to the owner is reasonable at the time of initial leasing. Also, the PHA must determine reasonable rent during the term of the contract. The PHA must maintain records to document the basis for the determination that rent to owner is a reasonable rent. In accordance with 24 CFR section 982.158 and 24 CFR Part 982, Subpart K, the PHA must pay a monthly Housing Assistance Payment (HAP) on behalf of the family that corresponds with the amount on the HUD-50058. This HAP amount must be reflected on the HAP contract and HAP register. Condition: The Public Housing Department did not follow procedures to ensure the proper eligibility determination, reexaminations, waiting lists, reasonable rent, reporting, and housing assistance payments were made and documented. Context: Of the 1,598 housing assistance payments during the current year valued at $771,603, we examined 60 (valued at $33,835) and determined that 60 (100% valued at $33,835) housing assistance payments were not supported with case documentation to confirm eligibility. Reexaminations were not completed timely to allow adjustments to housing assistance payments as necessary. Therefore, the housing assistance payments made during fiscal year 2024 were not supported by accurate information. Case files were missing documentation to support that the rent to the owners were reasonable and that the tenants were selected from the waiting list. Of the 60 housing assistance payments we examined, we determined that 12 applicants (20%) did not have proper documentation on file to support the amounts on the HAP contract or did not have the form HUD-50058, Family Report. Effect: Owners could receive benefits for which they are not eligible. Cause: Weakness in implementation of controls over eligibility, reporting, and special tests procedures. Due to the turnover in the housing department, the City failed to obtain or retain the completed documentations required. Questioned Cost: In accordance with 2 CFR 200, auditors are required to report known questioned costs when likely questioned costs are greater than $25,000. The sample results identified $771,603 in known questioned costs. Recommendation: Management should adhere to the program’s policy and maintain proper eligibility documentation in the applicant’s file. Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding. Please refer to the Corrective Action Plan section of this report.

Finding: 2024‐002 U.S. Department of Housing & Urban Development Program Name: Housing Voucher Cluster AL Number: 14.871 Material Non‐Compliance Material Weakness Reporting, Special Tests and Provisions Criteria: In accordance with 2 CFR 200, management should have an adequate system of internal control procedures in place to ensure that applicants have all required documentation in their file. In accordance with 24 CFR Part 5 Subpart F, the City must maintain documentation to support tenant eligibility. In accordance with 24 CFR Part 908 and 24 CFR section 982.158, the Public Housing Agencies (PHA) are required to submit form HUD-50058, Family Report, electronically to HUD each time the PHA completes an issuance, admission, annual reexamination, interim reexamination, portability move-in, expiration, or other change of unit for a family. In accordance with 24 CFR sections 960.202 through 960.208, the City must establish, adopt, and follow policies for admission of tenants as it relates to the Public Housing waiting list. All families admitted to the program must be selected from the waiting list. In accordance with 24 CFR sections 982.4, 982.54(d)(15), 982.158(f)(7), and 982.507, the PHA must determine that the rent to the owner is reasonable at the time of initial leasing. Also, the PHA must determine reasonable rent during the term of the contract. The PHA must maintain records to document the basis for the determination that rent to owner is a reasonable rent. In accordance with 24 CFR section 982.158 and 24 CFR Part 982, Subpart K, the PHA must pay a monthly Housing Assistance Payment (HAP) on behalf of the family that corresponds with the amount on the HUD-50058. This HAP amount must be reflected on the HAP contract and HAP register. Condition: The Public Housing Department did not follow procedures to ensure the proper eligibility determination, waiting lists, reasonable rent and housing assistance payments were made and documented. Context: Of the 1 new participant during the current year valued at $11,200, we examined 1 (valued at $11,200) and determined that 1 (100% valued at $11,200) was not supported with case documentation to confirm eligibility. The case file was missing documentation to support that the rent to the owners were reasonable and that the tenant was selected from the waiting list. The case file did not have proper documentation on file to support the amount on the HAP contract and did not have the form HUD-50058, Family Report. Effect: Owners could receive benefits for which they are not eligible. Cause: Weakness in implementation of controls over eligibility, reporting, and special tests procedures. Due to the turnover in the housing department, the City failed to obtain or retain the completed documentations required. Questioned Cost: In accordance with 2 CFR 200, auditors are required to report known questioned costs when likely questioned costs are greater than $25,000. Likely questioned costs do not exceed $25,000. Recommendation: Management should adhere to the program’s policy and maintain proper eligibility documentation in the applicant’s file. Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding. Please refer to the Corrective Action Plan section of this report.

Finding: 2024‐003 U.S. Department of Housing & Urban Development Program Name: Housing Voucher Cluster AL Number: 14.871 Material Non‐Compliance Material Weakness, Special Tests and Provisions Criteria: In accordance with 24 CFR sections 982.158(d) and 982.405(b), the Public Housing Agencies (PHA) must inspect the unit leased to a family at least biennially to determine if the unit meets Housing Quality Standards (HQS) and the PHA must conduct quality control re-inspections. The PHA must prepare a unit inspection report. Condition: The City did not follow procedures to ensure compliance of housing quality standards inspections. Context: Of the 1,598 applicants during the current year valued at $771,603, we examined 60 and determined that 9 (15% valued at $5,400) did not have a unit inspection report to verify that the unit was inspected. Effect: Units leased to a family could not meet the housing quality standards necessary for the health and safety of program participants. Cause: Lack of proper internal control over housing quality standards inspections. Questioned Cost: The finding represented an internal control weakness; therefore, no questioned costs are applicable. Recommendation: Management should implement controls to ensure that housing quality standards inspections are completed at lease biennially and documented on a unit inspection report. Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding. Please refer to the Corrective Action Plan section of this report.

Finding: 2024‐004 U.S. Department of Housing & Urban Development Program Name: Housing Voucher Cluster AL Number: 14.871 Material Non‐Compliance Material Weakness, Special Tests and Provisions Criteria: In accordance with 24 CFR sections 982.158(d) and 982.404, units under housing assistance payment (HAP) contract that fail to meet Housing Quality Standards (HQS), the Public Housing Agencies (PHA) must require the owner to correct any life threatening HQS deficiencies within 24 hours after the inspections and all other HQS deficiencies within 30 calendar days or within a specified PHA-approved extension. If the owner does not correct the cited HQS deficiencies within the specified correction period, the PHA must stop HAPs beginning no later than the first of the month following the specified correction period or must terminate the HAP contract. Condition: The City did not follow procedures to ensure that the HQS were corrected or subsequent procedures to stop HAP were not enforced. Context: Of the 16 failed inspections valued at $35,151 during the current year, we examined 4 valued at $8,104 and determined that 1 (25% valued at $5,649) failed inspections was not corrected and the HAP were not stopped timely. Effect: Owner could receive benefits for which they are not eligible. Cause: Lack of proper internal control over HQS enforcement. Questioned Cost: In accordance with 2 CFR 200, auditors are required to report known questioned costs when likely questioned costs are greater than $25,000. Likely questioned costs do not exceed $25,000. Recommendation: Management should implement controls to ensure that HQS enforcement procedures are followed timely. Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding. Please refer to the Corrective Action Plan section of this report.

Findings and Questioned Costs Related to the Audit of Federal Awards Finding: 2023‐002 U.S. Department of Housing & Urban Development Program Name: Public Housing Operating Fund AL Number: 14.850 Material Weakness, Procurement and Suspension and Debarment Criteria: In accordance with 2 CFR 200, management should have an adequate system of internal control procedures in place to ensure that procurement policies are implemented and functioning as intended. Management must monitor activities under federal awards to assure compliance with federal requirements. Condition: The City implemented procurement policies that conforms with applicable federal and state laws. However, the City’s internal controls over micro-purchases were not functioning as intended. Context: During our testing, we examined 9 purchases and determined that 7 purchases in the micro-purchases threshold did not follow the City’s policy. Expenditures were pre-audited prior to payment; however purchase orders were not completed as required by the City’s policy. Effect: Purchases may be made without the proper procurement approvals. Cause: Due to the turnover in the housing department, there were instances where a proper purchase order was not created for approval. Identification of a Repeat Finding: This is a modified, repeat finding from the immediate previous audit, 2022-003. Questioned Cost: None. This finding represents an internal control issue; therefore, questioned costs are not applicable. Recommendation: The City should have a system in place to ensure that the procurement policies are implemented and functioning as intended. Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding. Please refer to the Corrective Action Plan section of this report.

Findings and Questioned Costs Related to the Audit of Federal Awards (continued) Finding: 2023‐003 U.S. Department of Housing & Urban Development Program Name: Public Housing Operating Fund AL Number: 14.850 Non-Material Non‐Compliance Material Weakness, Eligibility Criteria: In accordance with 2 CFR 200, management should have an adequate system of internal control procedures in place to ensure that applicants have all required documentation in their file. In accordance with 24 CFR Part 5 Subpart F, the City must maintain documentation to support tenant eligibility. Condition: The Public Housing Department did not follow procedures to ensure the proper eligibility determination were made and documented. Context: Of the 185 applicants during the current year valued at $749,487, we examined 37 (valued at $133,566) and determined that 1 (1% valued at $3,610) applicant was not supported with case documentation to confirm eligibility. We also determined that two applicants (6% valued at $7,220) had inconsistent documentation supporting eligibility determination in the case file. Upon further review, these two applicants were deemed eligible. Effect: Participants could receive benefits for which they are not eligible. Cause: Weakness in implementation of controls over eligibility procedures. Due to the turnover in the housing department, the City failed to obtain or retain the completed eligibility documentation. Identification of a Repeat Finding: This is a modified, repeat finding from the immediate previous audit, 2022-004. Questioned Cost: In accordance with 2 CFR 200, auditors are required to report known questioned costs when likely questioned costs are greater than $25,000. Even though the sample results only identified $3,610 in questioned costs, if tests were extended to the entire population, questioned costs could exceed $25,000. Recommendation: Management should adhere to the program’s policy and maintain proper eligibility documentation in the applicant’s file. Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding. Please refer to the Corrective Action Plan section of this report.

Findings and Questioned Costs Related to the Audit of Federal Awards (continued) Finding: 2023‐004 U.S. Department of Housing & Urban Development Program Name: Public Housing Operating Fund AL Number: 14.850 Material Non-Compliance Material Weakness, Activities Allowed or Unallowed, Allowable Costs/Cost Principles Criteria: In accordance with 2 CFR 200, management should have an adequate system of internal control procedures in place to ensure that activities allowed and allowable cost policies are implemented and functioning as intended. Management must monitor activities under federal awards to assure compliance with federal requirements. Management should have an adequate system of internal control procedures in place to properly review and assess the eligibility of payroll costs to ensure the accuracy of the payroll costs charged is within program requirements. In accordance with 24 CRF section 990, verification of accuracy of information used in determining payroll costs to be charged to the program should be maintained. Condition: Due to a network event, the disaster recovery plan was not sufficient to recover documents on a timely manner. As a result, the approved payroll time sheets were not recovered. Context: Of the 1,540 expenditures during the current year valued at $749,487, we examined 40 (valued at $134,796) and determined that 7 (18% valued at $13,369) expenditures did not have proper documentation to support accuracy of payroll costs. Effect: Salaries allocated to the program did not have approved time sheets to verify the accuracy of the hours charged. Cause: Due to the network event, the timesheets were not recovered. Questioned Cost: In accordance with 2 CFR 200, auditors are required to report known questioned costs when likely questioned costs are greater than $25,000. Even though the sample results only identified $13,369 in known questioned costs, if tests were extended to the entire population, questioned costs could exceed $25,000. Recommendation: Management should strengthen internal control procedures over activities allowed and allowable costs and strengthen the disaster recovery plan. Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding. Please refer to the Corrective Action Plan section of this report.

U.S. Department of Housing & Urban Development Program Name: Public and Indian Housing AL Number: 14.850 Material Weakness, Procurement and Suspension and Debarment Criteria: In accordance with 2 CFR 200, management should have an adequate system of internal control procedures in place to ensure that procurement policies are implemented and functioning as intended. Management must monitor activities under federal awards to assure compliance with federal requirements. Condition: The City implemented procurement policies that conforms with applicable federal and state laws. However, the City?s internal controls over micro-purchases were not functioning as intended. Context: During our testing, we examined 40 purchases and determined that 10 purchases in the micro-purchases threshold did not follow the City?s policy. Expenditures were pre-audited prior to payment, however purchase orders were not completed as required by the City?s policy. Effect: Purchases may be made without the proper procurement approvals. Cause: Due to the turnover in the housing department, there were instances where a proper purchase order was not created for approval. Questioned Cost: None. This finding represents an internal control issue; therefore, questioned costs are not applicable. Recommendation: The City should have a system in place to ensure that the procurement policies are implemented and functioning as intended. Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding. Please refer to the Corrective Action Plan section of this report.

U.S. Department of Housing & Urban Development Program Name: Public and Indian Housing AL Number: 14.850 Material Non-Compliance Material Weakness, Eligibility Special Tests and Provisions Criteria: In accordance with 2 CFR 200, management should have an adequate system of internal control procedures in place to ensure that applicants have all required documentation in their file. In accordance with 24 CFR sections 960.202 through 960.208, the City must establish, adopt, and follow policies for admission of tenants as it relates to the Public Housing waiting list. In accordance with 24 CFR Part 5 Subpart F, the City must maintain documentation to support tenant eligibility. Condition: The Public Housing Department did not follow procedures to ensure the proper eligibility determination were made and documented. Context: Of the 319 applicants during the current year valued at $768,137, we examined 60 (valued at $220,760) and determined that 45 (75% valued at $165,570) applicants were not supported with case documentation to confirm eligibility. We also determined that three applicants (5% valued at $11,038) had inconsistent documentation supporting eligibility determination in the case file. There were four applicants (7% valued at $14,718) missing documentation to support that the tenants were selected from the public housing waiting list. Upon further review, these seven applicants were deemed eligible. Effect: Participants could receive benefits for which they are not eligible. Cause: Weakness in implementation of controls over eligibility procedures. Due to the turnover in the housing department, the City failed to obtain or retain the completed eligibility documentation. Questioned Cost: In accordance with 2 CFR 200, auditors are required to report known questioned costs when likely questioned costs are greater than $25,000. The sample results identified $165,570 in known questioned costs. Recommendation: Management should adhere to the program?s policy and maintain proper eligibility documentation in the applicant?s file. Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding. Please refer to the Corrective Action Plan section of this report.