HOUSING AUTHORITY OF CHERAWLocal Government

Improper Timing of MTW Capital Fund Program (CFP) Drawdowns (ALN 14.881) Condition: During testing of the Capital Fund Program (CFP) component of the Moving to Work (MTW) Demonstration Program, we determined that the Authority drew down CFP funds in advance of need. As of September 30, 2025, $1,891,326 of CFP funds drawn during the fiscal year remained unearned (undisbursed) and were carried as restricted/unearned amounts at year end. The drawdowns were not aligned with immediate, allowable obligations or expenditures at the time the funds were requested. This condition is a repeat of prior year finding 2024-002. Criteria: Under 2 CFR §200.305(b), non-Federal entities (other than states) must minimize the time elapsing between the transfer of funds from HUD and their disbursement; funds may be drawn only when needed for immediate disbursement (HUD’s “just-in-time” funding requirement). 2 CFR §200.302(b)(6) requires written procedures for payment consistent with §200.305. Under the MTW Demonstration Program (ALN 14.881), the Authority is subject to the financial management and cash management requirements applicable to non-MTW agencies; the 2025 Compliance Supplement (4- 14.881) states that “No flexibility under the MTW demonstration permits an agency to waive any requirements regarding cash management” and that MTW agencies “are subject to the same cash management requirements as non-MTW agencies.” HUD controlled-disbursement and eLOCCS drawdown requirements apply (Notice PIH 2017-06). Cause: The Authority lacked effective internal controls to ensure CFP drawdowns were tied to immediate, documented, and allowable obligations and expenditures at the time of request, and did not reconcile amounts drawn to amounts earned and expended during the year. Effect: Federal cash was drawn in advance of need, contrary to the cash management standards of 2 CFR §200.305(b), resulting in $1,891,326 of undisbursed federal funds held by the Authority at year end. Holding undisbursed federal funds increases the risk of improper use, may give rise to an interestremittance obligation under 2 CFR §200.305(b)(9) to the extent interest earned exceeds the $500 de minimis, and exposes the Authority to recapture or repayment. Questioned Costs: None. Recommendation: The Authority should (1) implement written drawdown procedures requiring each CFP request to be supported by immediate, documented, and eligible obligations or expenditures in accordance with HUD’s “just-in-time”/eLOCCS requirements; (2) perform periodic reconciliations of amounts drawn to amounts earned and expended, and promptly return or properly apply funds drawn but not needed; (3) monitor and remit any interest earned on undisbursed federal cash above the de minimis; and (4) provide staff training on federal cash management requirements under 2 CFR Part 200 and HUD guidance. Reply and Corrective Action Plan: The Authority concurs with the finding and acknowledges it is a repeat of finding 2024-002 involving cash management and drawdown procedures. Revise cash management procedures; require documented support and approval for drawdowns; perform monthly reconciliations; monitor interest earned on undisbursed federal cash; provide staff training; and report compliance status to the Board of Commissioners.

Inadequate Tenant File Documentation in MTW Housing Choice Vouchers (ALN 14.881) (Repeat of Finding 2024-005) Condition: During tenant file testing for the Housing Choice Voucher (HCV) component of the MTW Demonstration Program, we identified the following deficiencies. This condition is a repeat of prior year finding 2024-005: 1. For one port-out tenant, the tenant file did not contain the required HUD Form 50058 or the Enterprise Income Verification (EIV) documentation. As a result, the family’s eligibility, income determination, and assistance could not be substantiated from the file. 2. For one tenant, the Authority was unable to provide the HUD Form 50058; the form was not retained in the tenant file and only tenant balances from the Authority’s housing software were available. The data is reportedly retrievable from HUD’s IMS/PIC system but could not be reproduced from the Authority’s records. 3. For one tenant, the income determination was incorrect. Social Security income was not recalculated based on the prior-year recertification; although an updated Social Security benefit letter was received indicating a change in the monthly benefit, the income reported on the HUD Form 50058 was not updated accordingly, resulting in an inaccurate rent and housing assistance payment (HAP) calculation. Criteria: Under 2 CFR §200.302 and §200.303, the Authority must maintain financial management systems and internal controls sufficient to ensure that costs are allowable, supported, and compliant with program requirements. The 2025 Compliance Supplement (4-14.881) identifies Eligibility (Type E) as subject to audit and requires that the HUD Form 50058-MTW key line items be “documented in the recipient’s file.” HUD program rules require PHAs to complete and retain accurate HUD Forms 50058, to verify income through HUD’s EIV system, and to recalculate income upon receipt of updated benefit information. Records supporting federal program compliance must be retained and accessible (2 CFR §200.334). Cause: The Authority lacked effective internal controls over tenant file documentation, income verification (including use of EIV and updated benefit information), HUD Form 50058 completion and retention, and reexamination procedures. Effect: Missing Forms 50058 and EIV documentation leave family eligibility and assistance payments unsupported; the failure to recalculate income based on updated Social Security benefit information resulted in an inaccurate income determination and rent/HAP calculation. These deficiencies increase the risk of over- or under-payment of housing assistance and questioned costs under the MTW program. Questioned Costs: $395,581 Recommendation: The Authority should ensure the executed HUD Form 50058 (and supporting income/EIV documentation) is completed and retained in each tenant file; recalculate income promptly upon receipt of updated benefit information and reflect the change on the Form 50058; perform EIV verification and reconciliation at each admission and reexamination; conduct a file-completeness review before sign-off; provide staff training on income determination, EIV, and federal recordkeeping; and, where forms were not retained, download and refile them from IMS/PIC. Reply and Corrective Action Plan: The Authority concurs with the finding and questioned costs of $395,581 and acknowledges it is a repeat of finding 2024-005. Ensure Forms 50058 and supporting documentation are retained; recalculate household income when required; retrieve or reconstruct missing records; resolve questioned costs with HUD; conduct file reviews; and provide staff training.

Late Submission of Unaudited Financial Data Schedule (FDS) (ALN 14.881) Condition: The Authority’s fiscal year ended September 30, 2025. The unaudited Financial Data Schedule (FDS) was required to be submitted electronically to HUD’s Real Estate Assessment Center (REAC) through the Financial Assessment Subsystem (FASS-PH) no later than November 29, 2025 (60 days after fiscal year end). The Authority did not submit the unaudited FDS until May 29, 2026 —approximately six months after the required due date. Criteria: 24 CFR §5.801 (Uniform Financial Reporting Standards) requires PHAs to submit unaudited financial information (the FDS) to HUD via FASS-PH no later than 60 days after the fiscal year end, and audited financial information no later than 9 months after fiscal year end. The 2025 Compliance Supplement (4-14.881, §III.L.1.d) identifies the FASS-PH financial submission (OMB No. 2535-0107) as a Reporting requirement subject to audit and references Notice PIH 2012-21, Section 13, for MTW reporting to FASS-PH. Cause: The Authority did not have adequate procedures or a monitoring calendar to ensure regulatory financial reporting deadlines were met, contributed to by delays in completing the year-end close. Effect: Noncompliance with 24 CFR §5.801. Late submission of unaudited financial data impairs HUD/REAC’s ability to timely assess the Authority’s financial condition and may adversely affect the Authority’s financial assessment and PHAS score. Questioned Costs: None. Recommendation: The Authority should establish a regulatory reporting calendar with assigned responsibility and supervisory review to ensure the unaudited FDS is submitted to FASS-PH within 60 days of fiscal year end (and the audited FDS within 9 months), supported by an accelerated year-end close process. Reply and Corrective Action Plan: The Authority concurs with the finding regarding late submission of the unaudited FDS. Establish a regulatory reporting calendar; assign responsibilities and supervisory review; and accelerate year-end closing procedures to support timely FDS submissions.

ompliance Deficiencies Identified in HUD Monitoring Review (ALN 14.881) Condition: The compliance deficiencies identified in the U.S. Department of Housing and Urban Development (HUD) Compliance Monitoring Review conducted June 24–28, 2024 (formalized in HUD’s letter dated March 24, 2025) remained unresolved as of September 30, 2025. The open items span multiple program areas, including governance and internal controls, Housing Choice Voucher (HCV) program compliance, Project-Based Voucher (PBV) documentation, Public Housing operations, ROSS grant administration, Violence Against Women Act (VAWA) policy, and Section 3 compliance. This condition is a repeat of prior year finding 2024-006. Criteria: The HUD findings cite noncompliance with various federal regulations, including 2 CFR Part 200 and 24 CFR Parts 5, 35, 75, 960, 982, and 983, as well as HUD Notices PIH 2016-22, 2017-13, 2022-10, and 2023-03. Under 2 CFR §200.303 and §200.521, the Authority is responsible for taking timely and appropriate corrective action on identified deficiencies. Cause: The Authority had not fully implemented or updated the policies, procedures, and documentation necessary to resolve the open HUD monitoring findings and align with current HUD requirements. Effect: Failure to resolve these deficiencies on a timely basis results in continued noncompliance with federal program requirements, may lead to disallowed costs or HUD sanctions, and increases the risk of recurring audit findings in future periods. Questioned Costs: None. Recommendation: The Authority should prioritize timely resolution of all open HUD monitoring findings; implement the corrective actions outlined in HUD’s letter (policy updates, staff training, file reviews, and required certifications); assign responsibility and target completion dates for each open item; and maintain ongoing communication with HUD to confirm closure. Reply and Corrective Action Plan: The Authority concurs with the finding and acknowledges it is a repeat of finding 2024-006. Maintain a remediation tracker; implement corrective actions identified by HUD; conduct training and file reviews; submit required certifications; and provide progress updates until all items are closed.

Unsupported and Improper Timing of MTW Capital Fund Program (CFP) Drawdowns (ALN 14.881) Condition: During testing of the Moving to Work Demonstration Program - Capital Fund Program, we selected a sample of eight eLOCCS drawdown vouchers for review. Of these, the Authority was unable to provide sufficient supporting documentation to substantiate the eligibility, timing, or purpose of the drawdowns for four vouchers. For another voucher, the Authority could only partially support the amount drawn. These issues reflect a lack of adequate documentation necessary to substantiate the allowability and propriety of the expenditures charged to the CFP grants. Criteria: Under 2 CFR §200.302(b)(3) and §200.305(b), non-Federal entities must maintain adequate documentation to support all federal fund drawdowns and ensure that funds are drawn only when needed for immediate disbursement. Additionally, under the Moving to Work Demonstration Program (ALN 14.881), participating agencies must adhere to the terms of their HUD-approved MTW Agreement, which incorporates applicable requirements of the Uniform Guidance, including principles of financial management and internal control. MTW agencies must ensure that drawdowns are supported by actual, timely obligations and expenditures, and must maintain records sufficient to permit the tracing of funds to a level that ensures proper use in accordance with MTW statutory purposes and HUD requirements. Cause: The Authority lacked sufficient internal controls to ensure that drawdowns were properly documented at the time of request and reimbursement requests aligned with immediate, allowable expenditures. Effect: The lack of supporting documentation for certain voucher draws impairs the audit team's ability to verify the allowability and propriety of the expenditures. This may result in questioned costs, findings of noncompliance with federal requirements, and potential recovery actions by HUD Questioned Costs: $332,356 Recommendation: The Authority should enhance its internal controls to ensure all voucher draws are fully supported by appropriate documentation, reconciled to actual expenditures, retained in compliance with federal recordkeeping requirements, and that unsupported draws are reviewed for potential corrective actions, including reimbursement to HUD if warranted. Reply and Corrective Action Plan: The Authority will implement a process requiring that all MTW Capital Fund drawdown requests be accompanied by complete supporting documentation. Each request will be reviewed for eligibility and compliance with “just-in-time” funding requirements prior to approval by the Executive Director.

Missing Required Moving to Work (MTW) Demonstration Program Documentation (ALN 14.881) Condition: During our review of the Authority's administration of the MTW Program, the Authority was unable to provide a copy of its Annual Contributions Contract (ACC), which serves as the foundational agreement between the Authority and HUD for the receipt and use of federal funds. Criteria: Under 2 CFR §200.302 and §200.334, non-Federal entities must maintain effective control over and access to records that support compliance with federal program requirements. The MTW Operations Notice (85 FR 10232) and the Authority's MTW ACC Amendment require that the PHA maintain and certify compliance with its MTW Plan and statutory objectives. The ACC establishes the legal basis for receiving and administering MTW-related federal funds. Cause: The Authority did not have adequate internal procedures to ensure that foundational program documents were retained, tracked, and made available for audit and oversight purposes. Effect: The absence of the Annual Contributions Contract (ACC) impairs verification of the Authority's legal authority to receive and administer HUD funds under the MTW program and may result in HUD compliance findings, delayed approvals, or other administrative sanctions. Questioned Costs: None Recommendation: The Authority should obtain and retain a copy of its executed ACC for audit and HUD monitoring purposes and establish or strengthen internal controls to track and retain all required MTW program records and certifications in accordance with HUD guidance and federal record retention requirements. Reply and Corrective Action Plan: To address missing foundational documentation, the Authority will locate and archive its Annual Contributions Contract (ACC), the required supplement to the annual MTW Plan, the HUD-issued approval letter for the supplement, and complete the MTW Certification of Compliance for the most recent fiscal year.

Incomplete Tenant File Documentation and Inconsistencies in MTW Housing Assistance and Public Housing Records (ALN 14.881) Condition: During tenant file testing for both the Housing Choice Voucher (HCV) and Public Housing (PH), components of the Moving to Work (MTW) Demonstration Program, we identified multiple deficiencies in the Authority’s documentation and reporting practices:1. For six out of sixteen HCV tenants, the Authority was unable to provide the tenant file for review. 2. Among the files that were available, several lacked required documentation for the required period to support continued occupancy, rent adjustments, reexaminations, income verification, and inspections. 3. Additionally, variances were noted between the amounts reported on HUD Form 50058 and the actual HAP/UAP disbursements made.Criteria: Under the MTW Operations Notice (85 FR 10232), 2 CFR §200.302, and HUD regulations at 24 CFR §982, public housing authorities must maintain complete and accurate tenant files and ensure that all disbursements are supported by appropriate documentation. HUD Form 50058 must accurately reflect the tenant’s eligibility and payment information, and all payments must be consistent with the amounts authorized and documented in the tenant file. Cause: The Authority lacked effective internal controls and monitoring procedures over tenant file documentation, rent calculation, inspection recordkeeping, and HUD form completion and retention. Effect: Incomplete tenant files and discrepancies between reported and actual disbursements impair the Authority’s ability to demonstrate compliance with HUD requirements. These issues increase the risk of improper payments, audit findings, and potential administrative sanctions. Questioned Costs: $462,754 Recommendation: The Authority should strengthen its internal controls over tenant file maintenance and disbursement reconciliation. All tenant files should be reviewed for completeness, and missing documentation should be obtained. Disbursements should be reconciled to HUD Form 50058 and verified against supporting documentation. Staff should receive training on documentation and compliance requirements under the MTW HAP program, and periodic quality control reviews should be implemented to ensure ongoing compliance. Reply and Corrective Action Plan: The Authority will implement a process to improve tenant file management, ensure complete documentation for occupancy and eligibility, and reconcile disbursement variances with HUD Form 50058 to strengthen compliance with MTW Housing Assistance Payment requirements.

Missing Receipt Support for MTW Public Housing Tenant Transactions (ALN 14.881) Condition: A review of tenant files under the Moving to Work (MTW) Public Housing program found that while the tenant files themselves were complete, the Authority did not provide supporting documentation for certain rent receipts. In several instances, the rent amounts recorded in the receipt or rent register did not agree with the amounts reported on HUD Form 50058, and no receipt documentation was available to reconcile the difference. Criteria: Under the MTW Operations Notice (85 FR 10232), 2 CFR §200.302, and HUD regulations at 24 CFR §960, public housing authorities must maintain complete and accurate records that support rent calculations, payments, and tenant eligibility. HUD Form 50058 must accurately reflect tenant rent obligations, and all payments must be properly documented and reconciled. Cause: The Authority did not maintain adequate documentation to support rent receipts and reconcile them with HUD Form 50058 data. Effect: The absence of receipt documentation impairs the Authority’s ability to demonstrate compliance with HUD requirements and increases the risk of rent misstatements, audit findings, and potential administrative sanctions. Questioned Costs: $125,170 Recommendation: The Authority should implement procedures to ensure all rent receipts are supported by appropriate documentation and reconciled to HUD Form 50058, provide staff training on documentation and recordkeeping requirements, and conduct periodic internal reviews of tenant files to verify that all payment records are complete and accurate. Reply and Corrective Action Plan: To address missing rent receipt documentation and inconsistencies with HUD Form 50058, the Authority will implement procedures to improve tenant file management, ensure all receipts are properly documented, and reconcile rent records to support accurate reporting and compliance.

Criteria: Emergency Safety and Security grants should be managed in the same manner as grants provided by the Department for unforeseeable or unpreventable emergenciesunder 24 C.F.R § 905.204. Therefore, PHAs have 1 year to obligate and 2 years to expend Emergency Safety and Security grant funds. Additional guidance from PIH notice 2023-10 Condition: The Housing Authority obligated the funds within time frame above however only spent approximately 50% of the obligated funds with the 24 months. Context: The 2021 Emergancy CFP grant of approximately $2.8 million was obligated within 12 months however only approximately $1.4 million was expended withing the 24 month period resulting in$1.4 million being returned to HUD. Cause: Due to changes in staff, disagreements with contractors the obligated funds were not spent in time to meet the HUD compliance requirements. Effect: The Housing Authority was required to return the unspent funds after 24 months . Recommendations: Furture contracts should be monitored closely to ensure compliance with HUD guidelines to avoid returning significant portion of grants to HUD.