AIKEN HOUSING AUTHORITYLocal Government

2024-001 ALN 14.850 – Public Housing Operating Fund – Activities Allowed, Unallowed Condition and Criteria: 24 CFR 990.280(b) permits the use of Public Housing Operating Fund (PHOF) for specific project related operating expenses. It does not permit such amounts to be loaned to related parties. In prior years, the Authority had loaned PHOF monies to related parties. As of September 30, 2024, $98,663 of PHOF loans remain outstanding to discretely presented component units of the Authority. $126,892 remains outstanding to other programs of the Authority, $100,642 of which was loaned to the Business Activities program which houses the Authority's non-federal funds. Amount of Questioned Costs: $199,305 Context: The Authority’s Public Housing Operating Fund has miscellaneous receivables from Edgefield Senior Housing, LLC, Valley Homes, LLC, and other related parties in the amounts of $9,152, $22,459, and $67,052, respectively. The Public Housing Program is also due $100,642 from the Business Activities program. Cause: Management of the Authority in prior years (who were different individuals than the current management of the Authority) either did not understand or did not follow federal guidelines. Effect: Public Housing monies were used for unallowed purposes. Auditor’s Recommendation: The management of the Authority should continue to pursue collection of these amounts. Grantee Response: The Authority has developed procedures to ensure that restricted funds are repaid to the Low Rent Program and to ensure that further restricted funds are not advanced. Upon notification from the Department of Housing and Urban Development to cease and desist of the Authority’s cost sharing agreement, the Authority immediately discontinued the advancement of funds to other programs operated by the Authority. Current management is actively pursuing collection efforts and understands these federal guidelines.

2024-002 ALN 14.872 – Public Housing Capital Fund Program – Cash Management Condition and Criteria: In accordance with Chapter 7 of the CFP Guidebook, a Public Housing Agency (PHA) is to first disburse CFP funds from LOCCS to the PHA’s bank account and then pay the applicable bill(s) within 3 business days after the deposit of the funds into the PHA’s bank account. The Authority has internal control deficiencies over CFP cash management as they were drawing down CFP grant money well after the Authority had incurred and paid for the corresponding expenses. Amount of Questioned Costs: N/A Context: The Authority incurred CFP expenses during the year under audit of $32,177 that have been recorded as Accounts Receivable- Due From HUD as none of these funds have been drawn down from LOCCS. Additionally, the Authority accumulated a significant amount of expenses over the course of several weeks and months, ultimately submitting large lump-sum drawdowns to reimburse the total amount incurred. Cause: The Authority did not properly design internal controls over the CFP grant disbursement and expenditures process in order to ensure that CFP drawdowns were being requested prior to the costs incurred being paid. Effect: The Authority was not abiding by the CFP Grant Agreement or the HUD CFP Guidebook by drawing down CFP grant funds well after the Authority had incurred and paid for the corresponding expenses. Auditor’s Recommendation: Internal control procedures should be updated and implemented to be in line with the Capital Fund Guidebook by changing the handling of CFP grant disbursements from being done on a reimbursement basis to being done in advance of making payments to vendors and contractors. Grantee Response: The Authority has developed and implemented the necessary standard operating procedures to ensure Capital Fund Program grant disbursements are being drawn down prior to the issuance of payments to vendors and/or contractors.

ALN 14.850 – Public and Indian Housing Program – Activities Allowed, Unallowed Condition and Criteria: 24 CFR 990.280(b) permits the use of Public and Indian Housing Program (PIH) for specific project related operating expenses. It does not permit such amounts to be loaned to related parties. In prior years, the Authority had loaned PIH monies to related parties. As of September 30, 2023, $98,663 of PIH loans remain outstanding to discretely presented component units of the Authority. $126,892 remains outstanding to other programs of the Authority, $100,642 of which was loaned to the Business Activities program which houses the Authority's non-federal funds. Amount of Questioned Costs: $199,305 Context: The Authority’s Public Housing Program has miscellaneous receivables from Edgefield Senior Housing, LLC, Valley Homes, LLC, and other related parties in the amounts of $9,152, $22,459, and $67,052, respectively. The Public Housing Program is also due $100,642 from the Business Activities program. Cause: Management of the Authority in prior years (who were different individuals than the current management of the Authority) either did not understand or did not follow federal guidelines. Effect: Public Housing monies were used for unallowed purposes. Auditor’s Recommendation: The management of the Authority should continue to pursue collection of these amounts. Grantee Response: Management acknowledges the finding and will follow the auditor’s recommendation. The current management of the Authority understands these federal guidelines, has stopped any further loans of Public Housing monies to related parties or other programs and is actively pursuing collection efforts.

2022-001 - Inadequate Controls Over Financial Reporting Material Weakness in Internal Control Repeat of 9/30/21 Finding 2021-001 (originally reported at 9/30/19 as Finding 2019-004) Criteria: Management is responsible for designing and following internal controls that provide reasonable assurance regarding the reliability of financial reporting. The Authority should have adequate internal controls in place to allow for timely and accurate financial reporting within a short time frame following the Authority?s year end and without auditor adjustment. Condition: Our audit identified deficiencies in the design and/or operation of internal controls that adversely affected the Authority?s ability to produce reliable financial statements. As a result, more than fifty audit adjustments and reclassifications were proposed that resulted in material changes to financial statement amounts as follows: ? Total assets increased by $358,336 ? Total liabilities increased by $227,891 ? Total equity decreased by $257,671 ? Total revenue increased by $81,191 ? Total expenses decreased by $306,925 Cause: Accounting personnel, being relatively new to the Authority, did not have adequate training or experience to prepare accurate financial reporting information in a timely manner Effect: Accurate and timely financials are not provided to those charged with governance and material audit adjustments were required to correct the financial statements. Questioned Costs: None. Recommendation: We recommend the Authority adopt policies and procedures that require timely financial reporting at the end of each month and fiscal year end. The procedures should include a full review of the balances as of the close of the year with reconciliations and workpapers prepared and agreed to supporting information. In order to accomplish this, the Authority should provide additional training to its accounting personnel. During the fiscal year, the Authority was assisted by an independent outside fee accountant with the monthly accounting and the closing of its year-end accounting for the federal programs, but was not involved with the other programs of the Authority. We recommend that the Authority also engage the fee accountant with the other programs of the Authority. Views of Responsible Officials of the Auditee: The Authority acknowledges this finding and will establish more review, oversight and training for the staff responsible for these procedures and will engage the outside fee accountant to assist with all programs.

2022-002 ? Activities Allowed or Unallowed: Loans to Related Parties Public and Indian Housing Program ? CFDA Number 14.850 Material Weakness in Internal Control, Material Noncompliance Repeat of 9/30/21 Finding 2021-002 (Originally reported as finding 2019-005 and 2019-010 at 09/30/19) Criteria: 24 CFR 990.280(b) permits the use of Public and Indian Housing Program (PIH) for specific project related operating expenses. It does not permit such amounts to be loaned to related parties. Condition: In prior years, the Authority had loaned PIH monies to related parties. As of September 30, 2022, approximately $209,000 of PIH loans remain outstanding to related parties and approximately $127,000 to other programs of the Authority. Cause: Management of the Authority in prior years (who were different individuals than the current management of the Authority) either did not understand or did not follow federal guidelines. Effect: PIH monies were used for unallowed purposes. Questioned Costs: None. Recommendation: Management of the Authority should continue to pursue collections of these amounts. Views of Responsible Officials of the Auditee: Current management of the Authority understands these federal guidelines, has stopped any further loans of PIH monies to related parties or other programs and is actively pursuing collection efforts.

2022-003 - Eligibility ? Tenant Files Section 8 Housing Choice Vouchers ? CFDA Number 14.871 Material Weakness in Internal Control, Material Noncompliance Repeat of 9/30/21 Finding 2021-005 (Originally reported as finding 2020-005 at 09/30/20) Criteria: As a condition of assisted tenancy, the landlord and tenant must execute the lease agreement and tenancy addendum prior to the initial term of the lease, and the public housing authority must execute the HAP contract within 60 days from the beginning of the lease term (24 CFR 982.305). In addition, the tenant must submit to the public housing authority a request for approval of tenancy and a copy of the lease during the term of the voucher (24 CFR 982.302). Condition: Out of a total tenant population of approximately 884 leased vouchers, 25 files were selected for testing in a statistically valid sample. Exceptions were noted as follows: ? 1 error where the lease agreement was not signed by the owner ? 1 error where the file did not contain a signed lease agreement ? 1 error where the file did not contain a signed HAP contract. Also, during our New Admissions testing (11 tested out of 108 new admissions) we noted the following: ? 1 error where the HAP contract was signed but not dated by the Authority. ? 1 error where the lease agreement was not signed by the owner. ? 4 errors where the RFTA was signed but not dated by the landlord and/or by the tenant. Cause: Compliance with all of the HUD requirements was not being carefully followed and the Authority lacked procedures for proper oversight and review of employees performing these compliance procedures. Effect: The Authority is not in compliance with the assisted tenancy requirements. The HAP contract is void if the Authority is unable to obtain an executed lease agreement and tenancy addendum prior to the initial term of the lease. Also, the HAP contract is void if an executed HAP contract is not obtained within 60 days from the beginning of the lease term. In addition, the HAP contract is void if the request for approval of tenancy and copy of the lease is submitted after the lease term (including extensions). As such, the tenant would not meet the eligibility requirements to be housed. Questioned Costs: None. Recommendation: The Authority should correct the deficiencies noted in the tested files and utilize an ongoing quality control review process on the entire tenant population to ensure proper compliance with the requirements related to tenant eligibility. Ongoing staff training and timely management reviews should be utilized to ensure staff is aware of acceptable procedures. In addition, the Authority should review staffing levels, skill sets and case load. Views of Responsible Officials of the Auditee: The Authority acknowledges this finding and will establish more review, oversight and training for the staff responsible for these procedures.

2022-004 - Eligibility ? Tenant Files Public and Indian Housing Program ? CFDA Number 14.850 Significant Deficiency in Internal Control, Other Matters Required to be Reported Repeat of 9/30/21 Finding 2021-003 (originally reported at 9/30/19 as Finding 2019-009) Criteria: As a condition of admission or continued occupancy, the tenant and other family members are required to provide necessary information, documentation, and releases for the Authority to verify income eligibility (24 CFR sections 5.230, 5.609, and 960.259). For both initial income examinations and reexaminations, the Authority must obtain and document in the family file third-party verification of (1) reported family annual income, (2) the value of assets, (3) expenses related to deductions from annual income, and (4) other factors that affect the determination of adjusted income or income-based rent (24 CFR section 960.259). Condition: Out of a total tenant population of approximately 141 tenants, 15 files were selected for testing in a statistically valid sample. Exceptions were noted as follows: ? 1 tenant file where the tenant?s flat rent was overstated by $4 due to a miscalculation. ? 1 tenant file where the tenant?s flat rent was overstated by $2 due to a miscalculation. ? 1 tenant file where the tenant?s income was miscalculated. Correcting this error caused the tenant?s rent to increase by $6. ? 1 tenant file where the tenant?s income was miscalculated. Correcting this error caused the tenant?s rent to decrease by $63 ? 1 tenant file where the tenant?s General Assistance was coded as wages on the 50058 form. Cause: Compliance with all of the HUD requirements was not being carefully followed and the Authority lacked procedures for proper oversight and review of employees performing these compliance procedures. Effect: The Authority is not in compliance with all of the HUD requirements regarding eligibility and tenant recertifications, which could result in incorrect total tenant payments for rent. Questioned Costs: None. Recommendation: The Authority should correct the deficiencies noted in the tested files and utilize an ongoing quality control review process on the entire tenant population to ensure proper compliance with the requirements related to tenant eligibility. Ongoing staff training and timely management reviews should be utilized to ensure staff is aware of acceptable procedures. In addition, the Authority should review staffing levels, skill sets and case load. Views of Responsible Officials of the Auditee: The Authority acknowledges this finding and will establish more review, oversight and training for the staff responsible for these procedures.

2021-001 - Inadequate Controls Over Financial Reporting Material Weakness in Internal Control Repeat of 9/30/20 Finding 2020-001 (originally reported at 9/30/19 as Finding 2019-004) Criteria: Management is responsible for designing and following internal controls that provide reasonable assurance regarding the reliability of financial reporting. The Authority should have adequate internal controls in place to allow for timely and accurate financial reporting within a short time frame following the Authority?s year end and without auditor adjustment. Condition: Our audit identified deficiencies in the design and/or operation of internal controls that adversely affected the Authority?s ability to produce reliable financial statements. As a result, more than forty audit adjustments and reclassifications were proposed that resulted in material changes to financial statement amounts as follows: ? Total assets decreased by $452,464 ? Total liabilities decreased by $1,964,325 ? Total equity increased by $664,307 ? Total revenue increased by $710,974 ? Total expenses decreased by $136,580 Cause: Accounting personnel, being relatively new to the Authority, did not have adequate training or experience to prepare accurate financial reporting information in a timely manner. The timing of completion of the prior year audit and the ongoing Covid issues also contributed to inaccurate financial information. Effect: Accurate and timely financials are not provided to those charged with governance and material audit adjustments were required to correct the financial statements. Questioned Costs: None. Recommendation: We recommend the Authority adopt policies and procedures that require timely financial reporting at the end of each month and fiscal year end. The procedures should include a full review of the balances as of the close of the year with reconciliations and workpapers prepared and agreed to supporting information. In order to accomplish this, the Authority should provide additional training to its accounting personnel. The Authority should also give consideration to hiring an independent outside fee accountant to assist with the monthly accounting and the closing of its year-end accounting. Views of Responsible Officials of the Auditee: The Authority concurs with this finding and will establish more review, oversight and training for the staff responsible for these procedures and subsequent to 9/30/21 has already hired a fee accountant to assist with the monthly accounting and year-end closing procedures. 2021-001 - Inadequate Controls Over Financial Reporting Public and Indian Housing Program ? CFDA 14.850 Section 8 Housing Choice Vouchers ? CFDA Number 14.871 Material Weakness in Internal Control, Material Noncompliance Same as Financial Statement Audit Finding 2021-001 above as it relates to the FDS reporting for both programs: Reporting

2021-002 ? Activities Allowed or Unallowed: Loans to Related Parties Public and Indian Housing Program ? CFDA Number 14.850 Material Weakness in Internal Control, Material Noncompliance Repeat of 9/30/20 Finding 2020-002 (Originally reported as finding 2019-005 and 2019-010 at 09/30/19) Criteria: 24 CFR 990.280(b) permits the use of Public and Indian Housing Program (PIH) for specific project related operating expenses. It does not permit such amounts to be loaned to related parties. Condition: In prior years, the Authority had loaned PIH monies to related parties. As of September 30, 2021, approximately $240,000 of PIH loans remain outstanding to related parties and approximately $127,000 to other programs of the Authority. Cause: Management of the Authority in prior years (who were different individuals than the current management of the Authority) either did not understand or did not follow federal guidelines. Effect: PIH monies were used for unallowed purposes. Questioned Costs: None. Recommendation: Management of the Authority should continue to pursue collections of these amounts. Views of Responsible Officials of the Auditee: Current management of the Authority understands these federal guidelines, has stopped any further loans of PIH monies to related parties or other programs and is actively pursuing collection efforts.

2021-003 - Eligibility ? Tenant Files Public and Indian Housing Program ? CFDA Number 14.850 Material Weakness in Internal Control, Material Noncompliance Repeat of 9/30/20 Finding 2020-003 (originally reported at 9/30/19 as Finding 2019-009) Criteria: As a condition of admission or continued occupancy, the tenant and other family members are required to provide necessary information, documentation, and releases for the Authority to verify income eligibility (24 CFR sections 5.230, 5.609, and 960.259). For both initial income examinations and reexaminations, the Authority must obtain and document in the family file third-party verification of (1) reported family annual income, (2) the value of assets, (3) expenses related to deductions from annual income, and (4) other factors that affect the determination of adjusted income or income-based rent (24 CFR section 960.259). Condition: Out of a total tenant population of approximately 155 tenants, 16 files were selected for testing in a statistically valid sample. Exceptions were noted as follows: ? 1 error where the 214 affidavit forms are missing for 3 tenants of the household. Each member of the household is a U.S. citizen based on their birth certificates. ? 1 error where the tenant?s wage income was miscalculated. This error would decrease the tenant?s rent by $38. ? 1 error where the head of household was not awarded the $400 disability allowance. This error would decrease the tenant?s rent by $10. ? 1 error where the tenant?s flat rent was reported $96 higher than the actual flat rent amount reported on the 50058 form. ? 1 error where the tenant?s social security income was coded as wages on the 50058 form. ? 1 error where the tenant did not sign the lease agreement. ? 2 errors where the management agent did not sign the lease agreement. ? 1 error where the tenant?s lease agreement reported the security deposit to be $0 when it should have been reported for $50. ? 1 error where the EIV form is missing for the tenant?s annual recertification. ? 8 errors where the tenant?s utility allowance was rolled forward from the prior year. Using the correct utility allowance for the 2021 fiscal year would decrease the tenants? rent between $1 and $2. Cause: Compliance with all of the HUD requirements was not being carefully followed and the Authority lacked procedures for proper oversight and review of employees performing these compliance procedures. Effect: The Authority is not in compliance with all of the HUD requirements regarding eligibility and tenant recertifications, which could result in incorrect total tenant payments for rent. Questioned Costs: None. Recommendation: The Authority should correct the deficiencies noted in the tested files and utilize an ongoing quality control review process on the entire tenant population to ensure proper compliance with the requirements related to tenant eligibility. Ongoing staff training and timely management reviews should be utilized to ensure staff is aware of acceptable procedures. In addition, the Authority should review staffing levels, skill sets and case load. Views of Responsible Officials of the Auditee: The Authority concurs with this finding and will establish more review, oversight and training for the staff responsible for these procedures.

2021-004 ? Special Tests and Provisions ? Waiting List and New Admissions Public and Indian Housing Program ? CFDA Number 14.850 Material Weakness in Internal Control, Material Noncompliance Repeat of 9/30/20 Finding 2020-004 Criteria: The Authority must establish and adopt written policies for admission of tenants. The Authority tenant selection policies must include requirements for applications and waiting lists, description of the policies for selection of applicants from the waiting lists, and policies for verification and documentation of information relevant to acceptance or rejection of an applicant (24 CFR sections 960.202 through 960.206). Condition: Waiting List Testing: In a statistically valid sample, we tested 25 applicants out of a population of 1,072 applicants appearing on the Authority?s waiting list. Exceptions were noted as follows: ? 4 errors where the applicants were not awarded the disabled preference point. Fixing this error would cause the applicants to move up by more than 79 positions on the waiting list. ? 1 error where the applicant was not awarded the working preference point. Fixing this error would cause the applicant to move up 86 positions on the waiting list. ? 1 error where the applicant was awarded the working/disabled/elderly preference point when they should have not been awarded the preference point. Correcting this error would cause the applicant to move down 102 positions. ? 3 errors where the applicant?s application is missing. ? 5 errors where the time stamp was missing on the applicants? application. The missing time stamp would have no impact on the applicants? ranking on the waiting list. ? 4 errors where the time stamp on the applicants? application did not agree to the time on the waiting list. This had no impact on the applicants? ranking on the waiting list. ? 1 error where the time stamp was missing on the applicant?s application. The missing time stamp could impact the ranking of the applicants on the waiting list. ? 1 error where the date and time stamp were missing on the applicant?s application. The missing stamp could impact the applicants ranking on the waiting list. ? 1 error where the time stamp on the applicant?s application did not agree to the time on the waiting list. Fixing this error caused the applicant to move up five positions on the waiting list. New Admissions Testing: In a statistically valid sample of 4 new admissions out of a population of 9 new admissions for the year, we noted the following exceptions: ? 2 errors where the tenants? pre-application had no date and time stamp of when the applicants applied to the program. As such, we were unable to determine whether the tenants were selected properly upon admission. ? 2 errors where the tenant should have been housed sooner than later based on their selected preference points on their pre-application for which they qualified at the time of their admission. ? 1 error where the tenant should have been either housed later or placed on the current waiting list due to receiving preference points for which they did not qualify at the time of their admission. ? 1 error where the criminal background check on the tenant was either not performed or is missing. Cause: Compliance with all of the HUD requirements was not being carefully followed and the Authority lacked procedures for proper oversight and review of employees performing these compliance procedures. Effect: The Authority is not in compliance with all of the HUD requirements regarding maintenance of its waiting list and verification and documentation of information relevant to new admissions. Questioned Costs: None. Recommendation: The Authority should correct the deficiencies noted in the tested files and review all of the relevant supporting information on its current waiting list to determine the accuracy of such information. The Authority should also establish an ongoing quality control review process of its maintenance of the waiting list and the selection of new tenants for admission. Views of Responsible Officials of the Auditee: The Authority concurs with this finding and will establish more review, oversight and training for the staff responsible for these procedures.

2021-005 - Eligibility ? Tenant Files Section 8 Housing Choice Vouchers ? CFDA Number 14.871 Material Weakness in Internal Control, Material Noncompliance Repeat of 9/30/20 Finding 2020-005 Criteria: As a condition of admission or continued occupancy, the tenant and other family members are required to provide necessary information, documentation, and releases for the Authority to verify income eligibility (24 CFR sections 5.230, 5.609, and 982.516). For both initial examinations and annual reexaminations, the Authority must obtain and document in the family file third-party verification of (1) reported family annual income; (2) the value of assets; (3) expenses related to deductions from annual income; and (4) other factors that affect the determination of adjusted income or income-based rent (24 CFR section 982.516). Condition: Out of a total tenant population of approximately 885 leased vouchers, 25 files were selected for testing in a statistically valid sample. Exceptions were noted as follows: ? 1 error where there was no lead-based paint addendum with the lease agreement. ? 1 error where the tenant?s unemployment income was incorrectly calculated as $109 per week when support from the state showed the benefit was actually $131 per week. This would have changed the tenant's income from $5,668 to $6,812, and cause the HAP rent to decrease by $28. ? 5 errors where there was no proof of an inspection done (missing tenant self-certification documentation). ? 1 error where the tenant?s child support was calculated at $2,000 when support in the file indicated the tenant received $2,400 annually, which would have increased the tenant's income by $400 and decrease the HAP rent $10. ? 1 error where $5,200 in annual unreimbursed child care costs were reported with no support in the file, which would have increased the tenant's income by $5,200. This had no change on the HAP rent. ? 1 error where the Authority reported $400 of student wage income on the 50058 when $480 should have been reported. Fixing this error would cause the HAP rent to decrease by $2. Cause: Compliance with all of the HUD requirements was not being carefully followed and the Authority lacked procedures for proper oversight and review of employees performing these compliance procedures. Effect: The Authority is not in compliance with all of the HUD requirements regarding eligibility and tenant recertifications, which could result in incorrect HAP payments. Questioned Costs: None. Recommendation: The Authority should correct the deficiencies noted in the tested files and utilize an ongoing quality control review process on the entire tenant population to ensure proper compliance with the requirements related to tenant eligibility. Ongoing staff training and timely management reviews should be utilized to ensure staff is aware of acceptable procedures. In addition, the Authority should review staffing levels, skill sets and case load. Views of Responsible Officials of the Auditee: The Authority concurs with this finding and will establish more review, oversight and training for the staff responsible for these procedures.

2021-006 ? Special Tests and Provisions: Housing Quality Standards Section 8 Housing Choice Vouchers ? CFDA Number 14.871 Significant Deficiency in Internal Control, Other Matters Required to be Reported Repeat of 9/30/20 Finding 2020-006 Criteria: The Authority must inspect the unit leased to a family at least annually to determine if the unit meets Housing Quality Standards (HQS) and the Authority must conduct quality control re-inspections. The PHA must prepare a unit inspection report (24 CFR sections 982.158(d) and 982.405(b)). Condition: Out of a total population of 66 failed inspections, 7 failed inspections were selected for testing in a statistically valid sample. Exceptions were noted as follows: ? 1 error where there is no owner certification letter stating that the unit deficiencies indicated by the tenant had been corrected, and the HAP rent was never abated. ? 1 error where the unit deficiencies were not repaired until 7 months after the extension deadline, and the HAP rent was never abated. Cause: Compliance with all of the HUD requirements was not being carefully followed and the Authority lacked procedures for proper oversight and review of employees performing these compliance procedures. Effect: The Authority is not in compliance with all of the HUD requirements regarding Housing Quality Standards, which could result in tenants living in unsafe conditions. Questioned Costs: None. Recommendation: The Authority should more closely monitor failed inspections to make sure that all needed repairs are made by the landlords in a timely fashion and maintain written documentation of any extensions granted to landlords. Ongoing staff training and timely management reviews should be utilized to ensure staff is aware of acceptable procedures. In addition, the Authority should review staffing levels, skill sets and case load. Views of Responsible Officials of the Auditee: The Authority concurs with this finding and will establish more review, oversight and training for the staff responsible for these procedures.

2020-002 ? Activities Allowed or Unallowed: Loans to Related Parties Public and Indian Housing Program ? CFDA Number 14.850 Material Weakness in Internal Control Repeat finding from September 30, 2019 (Finding 2019-005 and 2019-010) Criteria: 24 CFR 990.280(b) permits the use of Public and Indian Housing Program (PIH) for specific project related operating expenses. It does not permit such amounts to be loaned to related parties. Condition: In prior years, the Authority had loaned PIH monies to related parties. As of September 30, 2020, approximately $925,000 of PIH loans remain outstanding to CDIC, approximately $240,000 to other related parties and approximately $129,000 to other programs of the Authority. Subsequent to September 30, 2020 (through July 31, 2021), CDIC has repaid to the Authority approximately $$487,000 of the $925,000 owed. Cause: Management of the Authority in prior years (who were different individuals than the current management of the Authority) either did not understand or did not follow federal guidelines. Effect: PIH monies were used for unallowed purposes. Questioned Costs: None. Recommendation: Management of the Authority should continue to pursue collections of these amounts and should also continue to work with HUD on obtaining a HUD-approved repayment agreement. Views of Responsible Officials of the Auditee: Current management of the Authority understands and adheres to the federal guidelines to ensure that restricted funds are not advanced to other related parties or programs. In addition, management is actively pursuing collection efforts and plans to execute a HUD-approved repayment agreement.

2020-003 - Eligibility ? Tenant Files Public and Indian Housing Program ? CFDA Number 14.850 Material Weakness in Internal Control Repeat finding from September 30, 2019 (Finding 2019-009) Criteria: As a condition of admission or continued occupancy, the tenant and other family members are required to provide necessary information, documentation, and releases for the Authority to verify income eligibility (24 CFR sections 5.230, 5.609, and 960.259). For both initial income examinations and reexaminations, the Authority must obtain and document in the family file third-party verification of (1) reported family annual income, (2) the value of assets, (3) expenses related to deductions from annual income, and (4) other factors that affect the determination of adjusted income or income-based rent (24 CFR section 960.259). Condition: Out of a total tenant population of approximately 254 tenants, 25 files were selected for testing in a statistically valid sample. Exceptions were noted as follows: ? 4 files had income calculation errors (resulting in immaterial differences in monthly tenant rent). ? 1 file where a tenant receiving Social Security disability payments was not given the proper $400 allowance. ? 8 files where the required Section 214 Citizenship Affidavit form was either missing or not completed properly. ? 4 instances where the HUD 9886 form was not signed by the head of household. ? 2 files were missing a signed declaration from the head of household as to the accuracy of information provided. ? 1 file where a tenant chose to pay rent based on income, but the flat rent amount was used instead. ? 2 files where the required annual re-certification was not done timely and were not covered by a COVID waiver. ? 2 files were missing Form 50058: one for an initial move-in and one for a change of unit. ? 1 file was missing the tenant?s signature on the lease. ? 1 file where the lease agreement showed a security deposit of $0, but the Authority?s 9/30/20 security deposit report showed $40. ? 1 file where the EIV report was not run for the annual recertification. ? 3 files where the wrong utility allowance schedule was used (resulting in immaterial differences of $1 to $4 per month in tenant rent). Cause: Compliance with all of the HUD requirements was not being carefully followed and the Authority lacked procedures for proper oversight and review of employees performing these compliance procedures. Effect: The Authority is not in compliance with all of the HUD requirements regarding eligibility and tenant recertifications, which could result in incorrect total tenant payments for rent. Questioned Costs: None. Recommendation: The Authority should correct the deficiencies noted in the tested files and utilize an ongoing quality control review process on the entire tenant population to ensure proper compliance with the requirements related to tenant eligibility. Ongoing staff training and timely management reviews should be utilized to ensure staff is aware of acceptable procedures. In addition, the Authority should review staffing levels, skill sets and case load. Views of Responsible Officials of the Auditee: The Authority is correcting the noted deficiencies in the tested files. Management has revised its quality control review procedures to ensure tenant eligibility requirements are met. The Authority?s staff will continue to receive adequate training involving the compliance of all the Department of Housing Urban Development (HUD) requirements. In addition, staffing levels and skill sets were evaluated and adjustments were made accordingly.

2020-004 ? Special Tests and Provisions ? Waiting List and New Admissions Public and Indian Housing Program ? CFDA Number 14.850 Material Weakness in Internal Control Criteria: The Authority must establish and adopt written policies for admission of tenants. The Authority tenant selection policies must include requirements for applications and waiting lists, description of the policies for selection of applicants from the waiting lists, and policies for verification and documentation of information relevant to acceptance or rejection of an applicant (24 CFR sections 960.202 through 960.206). Condition: Waiting List Testing: In a statistically valid sample, we tested 25 applicants out of a population of 572 applicants appearing on the Authority?s waiting list. Exceptions were noted as follows: ? 3 errors where the original applications could not be found. ? 3 errors where the applicants were not given the proper preference points, which resulted in the applicants being 109 to 173 position points lower on the waiting list than what their proper positioning should have been. ? 22 errors where the date and/or time stamp on the application did not agree to the waiting list and where 10 of those errors would have moved the applicant 1-7 positions up/down on the waiting list. New Admissions Testing: In a statistically valid sample of 4 new admissions out of a population of 31 new admissions for the year, we noted the following exceptions: ? 4 errors where there was no documentation to show that the tenant was selected properly at the time of admission. ? 1 error where the required Section 214 Citizenship Affidavit form was not completed properly. ? 2 errors where there was no documentation of the preference points awarded to the tenant at the time of their admission. ? 2 errors where the original application could not be found. ? 1 error where the time on the application did not agree to the time on the waiting list. Cause: Compliance with all of the HUD requirements was not being carefully followed and the Authority lacked procedures for proper oversight and review of employees performing these compliance procedures. Effect: The Authority is not in compliance with all of the HUD requirements regarding maintenance of its waiting list and verification and documentation of information relevant to new admissions. Questioned Costs: None. Recommendation: The Authority should correct the deficiencies noted in the tested files and review all of the relevant supporting information on its current waiting list to determine the accuracy of such information. The Authority should also establish an ongoing quality control review process of its maintenance of the waiting list and the selection of new tenants for admission. Views of Responsible Officials of the Auditee: The Authority is correcting the noted deficiencies in the tested files and reviewing all of the relevant supporting information on its current waiting list to determine the accuracy of such information. Management has revised its quality control review procedures to ensure the maintenance of its waiting list and the selection of new tenants for admission is accurately being processed. The Authority?s staff will continue to receive adequate training involving the compliance of all the Department of Housing Urban Development (HUD) requirements.

2020-005 - Eligibility ? Tenant Files Section 8 Housing Choice Vouchers ? CFDA Number 14.871 Material Weakness in Internal Control Criteria: As a condition of admission or continued occupancy, the tenant and other family members are required to provide necessary information, documentation, and releases for the Authority to verify income eligibility (24 CFR sections 5.230, 5.609, and 982.516). For both initial examinations and annual reexaminations, the Authority must obtain and document in the family file third-party verification of (1) reported family annual income; (2) the value of assets; (3) expenses related to deductions from annual income; and (4) other factors that affect the determination of adjusted income or income-based rent (24 CFR section 982.516). Condition: Out of a total tenant population of approximately 891 leased vouchers, 25 files were selected for testing in a statistically valid sample. Testing was suspended after testing 20 files due to the exceptions noted as follows: ? 3 errors where there was not a signed 214 affidavit form, but 2 of those files had birth certificates indicating that they are a U.S. Citizen. ? 1 error where the tenant?s child support income of $2,232 was not verified for the tenant?s annual recertification. ? 1 error where the tenant?s income was miscalculated, but did not cause the HAP rent to change. ? 1 error where the tenant?s social security income of $10,164 was not verified for the tenant?s annual recertification. There was a 1.6% COLA increase for the 2020 calendar year and would have increased the tenant?s social security income and decrease the HAP rent by $4. ? 1 error where a deduction of $480 was given to a member of the household who is over 18, not disabled, nor a student. There was no change in the HAP rent. ? 1 error where a 3 bedroom payment standard was used when a 2 bedroom payment standard should have been used based on the family size for their annual recertification. This had no change on the HAP rent. ? 1 error where the rent increases were not reasonable when compared to the comparable units on the rent reasonableness form. ? 1 error where the rent reasonableness procedure was not performed for the tenant?s rent increase. ? 1 error where the utility allowance was miscalculated and caused the HAP rent to decrease by $51. ? 1 error where the utility allowance was miscalculated, but there was no change in the HAP rent. ? 1 error where the utility allowance was calculated correctly, but was reported incorrectly on the 50058 form. This did not cause the HAP rent to change. ? 1 error where the EIV report was not run for the tenant?s annual recertification. As part of our new admissions testing, we also noted the following: ? 1 error where there is no support of a signed HAP contract. ? 1 error where there was not a signed 214 affidavit form for 2 members of the household, but both of those files had birth certificates indicating that they are U.S. Citizens. Cause: Compliance with all of the HUD requirements was not being carefully followed and the Authority lacked procedures for proper oversight and review of employees performing these compliance procedures. Effect: The Authority is not in compliance with all of the HUD requirements regarding eligibility and tenant recertifications, which could result in incorrect HAP payments. Questioned Costs: None. Recommendation: The Authority should correct the deficiencies noted in the tested files and utilize an ongoing quality control review process on the entire tenant population to ensure proper compliance with the requirements related to tenant eligibility. Ongoing staff training and timely management reviews should be utilized to ensure staff is aware of acceptable procedures. In addition, the Authority should review staffing levels, skill sets and case load. Views of Responsible Officials of the Auditee: The Authority is correcting the noted deficiencies in the tested files. Management has revised its quality control review procedures to ensure tenant eligibility requirements are met. The Authority?s staff will continue to receive adequate training involving the compliance of all the Department of Housing Urban Development (HUD) requirements. In addition, staffing levels and skill sets were evaluated and adjustments were made accordingly.

2020-006 ? Special Tests and Provisions: Housing Quality Standards Section 8 Housing Choice Vouchers ? CFDA Number 14.871 Significant Deficiency in Internal Control Criteria: The Authority must inspect the unit leased to a family at least annually to determine if the unit meets Housing Quality Standards (HQS) and the Authority must conduct quality control re-inspections. The PHA must prepare a unit inspection report (24 CFR sections 982.158(d) and 982.405(b)). Condition: Out of a total population of 144 failed inspections, 15 failed inspections were selected for testing in a statistically valid sample. Exceptions were noted as follows: ? 1 error where the re-inspection was not done timely. The passed re-inspection was done 39 days after the original failed inspection. The Authority believes they gave an extension to the landlord but did not maintain any supporting documentation that an extension was granted. ? 1 error where the failed inspection documentation could not be located and there was no documentation of the unit later passing inspection. ? 1 error where the authority never followed up with the failed unit and did not pass inspection until 7 months later. Cause: Compliance with all of the HUD requirements was not being carefully followed. The last two errors above both occurred during the period when the Authority?s staff were all working from home due to COVID. COVID waivers permitted the Authority to postpone initial inspections, but not re-inspections of failed inspections. Effect: The Authority is not in compliance with all of the HUD requirements regarding Housing Quality Standards, which could result in tenants living in unsafe conditions. Questioned Costs: None. Recommendation: The Authority should more closely monitor failed inspections to make sure that all needed repairs are made by the landlords in a timely fashion and maintain written documentation of any extensions granted to landlords. Ongoing staff training and timely management reviews should be utilized to ensure staff is aware of acceptable procedures. In addition, the Authority should review staffing levels, skill sets and case load. Views of Responsible Officials of the Auditee: Management is closely monitoring failed HQS inspections to ensure repairs are completed in a timely manner and to ensure extensions issued to landlords are being maintained and properly documented. The Authority?s staff will continue to receive adequate training involving the compliance of all the Department of Housing Urban Development (HUD) requirements. In addition, staffing levels and skill sets were evaluated and adjustments were made accordingly.

Condition: As noted in the limited management review report dated December 12, 2017, the Authority?s balance sheet included a non-current related party receivable in the amount of approximately $600,000. Criteria: The Authority is required to comply with Capital Fund Program (CFP) statute (i.e., Section 9 of the United States Housing Act of 1937) and Capital Fund regulations in regard to loans that it extends. 24 CFR 905.106 states that PHAs or owner/management entity or their partners are required to comply with all applicable provisions of this part. Cause: The Authority has not pursued collection of this related party receivable. Effect: Collection of this receivable cannot be ensured. Recommendation: Management should ensure that the related party immediately reimburses the program with non-federal funds or execute a HUD-approved repayment agreement.

Condition: The Authority has encumbered Federal Assets. Funds totaling $401,957, held as certificates of deposit in the Public and Indian Housing fund have been utilized as collateral for two loans reflected in the Authority?s non-major funds. Criteria: In accordance with the Authority?s Annual Contribution Contract and in accordance with 24 CFR 905.700, the Authority may not pledge, mortgage, enter into a transaction that provides recourse to public housing assets, or otherwise grant a security interest in any public housing project, portion thereof, or other property of the Authority without obtaining the prior approval of HUD. In addition, Section 9 of the Annual Contributions Contract limits the use of the Annual Contribution Contract funding to the development and operation of public housing projects. Cause: The Authority does not have sufficient internal controls in place to prevent or detect the encumbrance of federal funds. Effect: Funds are not available to be utilized for their intended purpose in the Public and Indian Housing program. Recommendation: We recommend that management collateralize the Corporation?s debt using non-federal funds.

Condition: Two expenditures, one in the Low Rent program and one in the Capital Fund program, were incurred in the prior fiscal period. Criteria: Allowable costs submitted to HUD for reimbursement should relate to the current year. Cause: Procedures were in place to pay invoices in a timely fashion. These invoices were lost and paid several months later. Effect: Certain expenditures reported on the schedule of expenditures of federal awards were incurred in the prior year. Recommendation: The Authority should verify that expenditures are reported in the period incurred.

Condition: Two expenditures, one in the Low Rent program and one in the Capital Fund program, were incurred in the prior fiscal period. Criteria: Allowable costs submitted to HUD for reimbursement should relate to the current year. Cause: Procedures were in place to pay invoices in a timely fashion. These invoices were lost and paid several months later. Effect: Certain expenditures reported on the schedule of expenditures of federal awards were incurred in the prior year. Recommendation: The Authority should verify that expenditures are reported in the period incurred.

Condition: Documentation of tenant rent in one tenant file did not match what was submitted on HUD form 50058. Criteria: Eligibility for the program requires a reexamination of family income and composition at least once every 12 months and adjust the tenant rent and housing assistance payment as necessary using the documentation and for accurate date to be submitted to HUD based on the reexamination data. Cause: The Authority does not have the appropriate policies and procedures in place to ensure appropriate rental rates are submitted to HUD. Effect: Participants could pay incorrect rental rates and/or inaccurate rental rates are reported to HUD. Recommendation: The Authority should develop and enforce the appropriate standard operating procedures necessary to ensure participants pay appropriate rental rates and rates are submitted correctly to HUD.

Condition: Operating and program receipts received by the Low Rent Public Housing program were advanced to other programs operated by the Authority. Criteria: Terms of the Annual Contributions Contract provided by HUD-53012 require the operating and program receipts generated by or in connection with the ownership or operation of public housing, including grant funds received pursuant to HUD Requirements shall be utilized only by the Low Rent Public Housing program. Cause: Procedures are not in place to prevent utilizing funds restricted by HUD in other programs operated by the Authority. Effect: Funds totaling $125,611 have been advanced to other programs operated by the Authority. Recommendation: The Authority should develop procedures to ensure that restricted funds are repaid to the Low Rent Program and to ensure that further restricted funds are not advanced.

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