South Carolina Regional Housing Authority No. 3

Finding 2025-001 – Moving to Work Demonstration Tenant Files – Eligibility – Internal Control over Tenant Files – Noncompliance & Significant Deficiency – Moving to Work Demonstration - ALN 14.881 Condition & Cause: We reviewed a sample of sixty-five (65) tenant files, which included both Public Housing and Housing Choice Voucher participants. Of these, nine (9) files were found to be noncompliant, representing approximately 13% of the sample. Some files had multiple compliance issues. It should be noted that all errors were isolated to the Public Housing program. Specifically, we identified: • Seven (7) files where the annual reexamination was completed or made effective at least two months past the due date. • Three (3) files lack proper verification of income or deductions. • Two (2) files lacked the required Enterprise Income Verification (EIV) documentation. • One (1) file contained a miscalculation of annual income. • One (1) file lacked identification and citizenship documents. The cause of this noncompliance, as discussed with management, is attributed to staff vacancies and challenges in hiring and retaining qualified personnel as well as an ongoing software conversion. Criteria: The Code of Federal Regulations, the Housing Authority’s Administrative Plan, Admissions & Continued Occupancy Policy, and MTW Plan, and specific HUD guidelines in documenting and maintaining Public Housing and Housing Choice Voucher tenant files. Effect: Deficiencies in tenant files can result in lost rental income due to late re-examinations, along with potential overpayments or underpayments by tenants stemming from inaccurate or unsupported rent determinations. Ongoing non-compliance may also draw scrutiny from regulatory bodies, increasing the risk of financial penalties or loss of funding for the MTW programs. Recommendation: We recommend that the Agency strengthen their quality control review and oversight procedures to ensure timely and accurate completion of all required tenant file documentation and reexaminations. Furthermore, the Agency should take measures to address staffing shortages. Questioned Costs: None Repeat Finding: Yes Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.

Finding 2025-002 – Procurement – Noncompliance with Formal Competitive Requirements – Noncompliance & Significant Deficiency – Moving to Work Demonstration - ALN 14.881 Condition: We reviewed a sample of procurements across various price ranges, including contracts associated with the largest purchases of the fiscal year, to determine compliance with the Housing Authority’s Procurement Policy and applicable Federal Regulations. We found that large purchases of playground equipment and installation for several properties were improperly split into smaller purchases by individual property, and no formal contract was executed. The Authority obtained a single set of quotes, citing that these applied to all properties; however, the aggregate project cost exceeded the small purchase ceiling. Based on 2 CFR §200.320(b)(2), this project met the conditions that would have required a formal competitive process such as Request for Proposals (RFP). In addition, we identified instances where contemporaneous documentation was not maintained, no written justification was provided for selecting a vendor other than the lowest bidder, and fewer than the required number of quotes were obtained for purchases exceeding the micro-purchase threshold. Cause: The identified noncompliance may have been driven by a misunderstanding of requirements outlined in Federal Regulations and local policy along with unclear staff responsibilities regarding various procurement tasks. Criteria: The Code of Federal Regulations and the Housing Authority’s Procurement Policy. Effect: The practices described above may lead to higher costs, reduced transparency, and limited competition. Noncompliance in procurement undermines the integrity of the procurement process and may result in the inefficient use of federal funds, violating HUD’s procurement standards. Recommendation: The Housing Authority should review and amend operating practices to ensure alignment with Federal Regulations and its Procurement Policy, including implementing controls to properly identify and procure large purchases and prevent the improper splitting of contracts in the future. Management should strengthen oversight and accountability by clearly defining and documenting staff roles and responsibilities. Comprehensive training should be provided to all personnel involved in procurement. Questioned Costs: None Repeat Finding: Yes Was sampling statistically valid? No Views of responsible officials: The PHA agrees with the results of the audit and recommendations.

Finding 2024-001 - Moving to Work Demonstration ALN 14.881 - Income Verification Requirements, Eligibility - Noncompliance & Significant Deficiency Condition & Cause: We reviewed a sample of sixty-five (65) tenant files, which included both Public Housing and Housing Choice Voucher participants. Of these, eight (8) files were found to be noncompliant, representing approximately 12% of the sample. Specifically, three (3) files lacked the required Enterprise Income Verification (EIV) documentation, and five (5) files relied on tenant self-declarations for income verification without documenting efforts to obtain the preferred third-party verification. The cause of this noncompliance, as discussed with management, ls attributed to staff vacancies and challenges in hiring and retaining qualified personnel. This staffing issue has likely contributed to the oversight and failure to consistently adhere to income verification requirements. Criteria: The Code of Federal Regulations, the Housing Authority's Administrative Plan, Admissions & Continued Occupancy Policy, and MTW Plan, and specific HUD guidelines in documenting and maintaining Public Housing and Housing Choice Voucher tenant files. Effect: The absence of EIV documentation and reliance on tenant self-declaration without adequate third­ party verification efforts may result in inaccurate income assessments, potentially affecting eligibility and rent calculations. Recommendation: we recommend that the PHA enhance quality control review procedures to ensure all tenant files contain the required EIV documentation and that efforts to obtain third-party verification of income are consistently documented. Questioned Costs: None· Repeat Finding: No Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.

Finding 2024-002 - Moving to Work Demonstration ALN 14.881- Procurement - Formal Competitive Requirements - Noncompliance & Significant Deficiency Condition & Cause: We reviewed the contracts associated with the largest purchases of the fiscal year to determine if the procurement procedures followed the Housing Authority's Procurement Policy and Federal Regulations. We found that large PHA-wide purchases for roofing materials and labor were being Improperly split into smaller contracts by individual property. The Authority gathered quotes for all properties at the same time under small purchase procedures, though the aggregate contract costs exceeded the small purchase ceiling. We feel these projects met the conditions for sealed bidding to be feasible as outlined in 2 CFR §200.320(b){l). Additionally, the Procurement Policy was last updated and approved by the Board 1n 2003. Failure to consistently enforce the requirements for competitive procurement methods for larger contracts may have been driven by a lack of oversight or understanding of the regulatory requirements. Criteria: The Code of Federal Regulations and the Housing Authority's Procurement Policy. Effect: Circumventing the competitive procurement process potentially leads to higher costs, lack of transparency, and limited competition. This practice undermines the integrity of the procurement process and may result in the inefficient use of federal funds, violating HUD's procurement standards. Recommendation: We recommend that the PHA review its procurement policies and training to ensure that all large purchases are properly identified and handled through competitive procurement methods, In compliance with applicable regulations. The PHA should also implement controls to prevent the improper splitting of contracts in the future. Questioned Costs: None Repeat Finding: No Was sampling statistically valid? No Views of responsible officials: The PHA agrees with the results of the audit and recommendations.

Finding 2022-001 ? Internal Controls Governing the Public Housing Waiting List ? Noncompliance, Significant Deficiency ? CFDA #14.850 Criteria ? The Code of Federal Regulations Part 962 and the Public Housing Occupancy Guidebook contain specific guidelines and regulations governing the Low Income Public Housing occupancy process. Additionally each Authority adheres to internal policies contained in its Admissions and Continued Occupancy Policy. Housing Authority?s are required to maintain documentation of tenant movement on the waiting list to provide assertion of compliance with federal and internal guidelines. Condition ? We examined thirteen (13) separate waiting lists from AMPs 1-6 from the Public Housing program for compliance with federal and internal regulations governing the move-in process of applicants on the waiting list. We noted twenty-three (23) instances in which the audit trail of applicants on the waiting list was either nonexistent or insufficient. Per federal guidelines this is required documentation to provide affirmation that the Housing Authority is following correct waiting list procedures. As this is present across multiple AMPs the issue appears to be systemic in nature. Effect ? Noncompliance with federal and local regulations and policies can result in penalties and loss of funding. Recommendation ? It is our recommendation that the Authority train staff and streamline procedures of proper note taking in the system across properties to create an audit trail for applicant movement on the waiting list.

Finding 2019-001 ? Allowable Costs/Cost Principles ? Capital Fund Grant Disbursements - CFDA 14.872 Noncompliance & Significant Deficiency Condition: We examined the Capital Fund grant additions as part of our financial and internal control audit. We noted two instances of errors that we believe are ineligible Capital Fund grant costs. These are described in detail below: 1. We noted approximately $89,756 in grant costs attributed to maintenance vehicles for Public Housing sites. Maintenance is an operating expenditure and as such these vehicles should follow suit. This is described in more detail in the Capital Fund Guidebook in the Modernization and Physical Work Section on Eligible Costs. We noted that the Authority believes that at some point an exemption may have been granted to them to purchase vehicles with CFP funds, but they have been unable to provide appropriate documentation of this. 2. We also noted roughly $91,969 drawn from the grant line 1408 ? Management Improvements, for costs related to the operation of the Summer Program. This is an education program that the Authority provides to youth participants in the community. As these are resident service costs they should be paid with operating funds and not CFP funds. These costs are specifically labeled as ineligible CFP costs in the aforementioned guidebook as are most forms of supportive services. As mitigating factors we noted that the above costs are Allowable Costs per the Uniform Administrative Guidance. The Authority can continue to incur the above related costs, but the funding method should move to the operating fund. Criteria: Principles found in the Code of Federal Regulations Title 24 Part 905 and the Capital Fund Guidebook contain guidance on eligible uses of Capital Fund grant costs. Grant costs used for passenger vehicles are for vehicles which are solely used to implement the physical and management improvements laid out in the CFP budget. Supportive services for, ?Health and Wellness activities? educational enrichment and recreational activities,? are listed as ineligible soft costs. Cause: Improper training of eligible uses of Capital Fund grant awards. Effect: Failure to properly utilize grant costs can result in noncompliance with grant provisions and future penalties. Recommendation: We recommend that the Authority conduct additional training relating to eligible uses of Capital Fund grant awards to avoid future possible noncompliance. Questioned Costs: Yes - $181,725 Repeat Finding: No Views of Responsible Officials: The Housing Authority agrees with the finding and recommendations.