Housing Authority of the City of Waterbury

2025-001 – ACTIVITIES ALLOWED OR UNALLOWED Material Noncompliance / Material Weakness U.S. Department of Housing and Urban Development ALN #: 14.872 – Public Housing Capital Fund CRITERIA A PHA may use Capital Funds for operating costs only if it is included in the CFP 5-Year Action Plan that is approved by the PHA Board of Commissioners and HUD… A PHA with 250 or more units may use no more than 20 percent of its annual Capital Fund grant for activities that are eligible under the Operating Fund at 24 CFR part 990. (24 CFR 905.314 (I)) CONDITION Prior to year-end audit adjustments, the Authority recorded unearned revenue related to the 2023 and 2024 Capital Fund Formula Grants drawdowns for operations on the Central Office Cost Center. This amount should have been reflected as revenue on the public housing programs. CAUSE The Authority’s internal controls did not prevent the misunderstanding of the guidance contained in HUD’s Capital Fund Guidebook related to the use of Capital Funds for operations and the Authority incorrectly recorded the draw down for capital funds for operating costs. EFFECT As a result, prior to adjustments, the financial position of the public housing programs appeared to be worse off than it actually was which could lead management to make decisions that are not in the best interest of the Public Housing program. QUESTIONED COSTS None identified as the Public Housing Program was reimbursed. CONTEXT We selected a sample of 15 transactions charged to the Capital Fund Program from a population of approximately 150 transactions. This represented approximately 81% of Capital Fund Program Costs. This was not a statistically valid sample. REPEAT FINDING Not a repeat finding. RECOMMENDATION We recommend that the Authority enhance internal controls to ensure a review by those involved with the project the guidance contained in HUD’s Capital Fund Guidebook and the requirements of 24 CFR 905.202 related to eligible costs of the Capital Fund Program. AUDITEE’S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.

2024-001 - ELIGIBILITY Material Weakness/Material Noncompliance U.S. Department of Housing and Urban Development CFDA #: 14.850 – Public Housing Operating Fund CRITERIA PHAs shall establish allowances for PHA-furnished utilities for all check metered utilities and allowances for resident-purchased utilities for all utilities purchased directly by residents from the utilities suppliers. The PHA shall maintain a record that documents the basis on which allowances and scheduled surcharges, and revisions thereof, are established and revised. Such record shall be available for inspection by residents. (24 CFR 965.502) The PHA shall review at least annually the basis on which utility allowances have been established and, if reasonably required in order to continue adherence to the standards stated in § 965.505, shall establish revised allowances. The PHA may revise its allowances for resident-purchased utilities between annual reviews if there is a rate change (including fuel adjustments) and shall be required to do so if such change, by itself or together with prior rate changes not adjusted for, results in a change of 10 percent or more from the rates on which such allowances were based. An income-based rent is a tenant rent that is based on the family's income and the PHA's policies for determination of such rents. The income-based tenant rent must not exceed the total tenant payment (§ 5.628 of this title) for the family minus any applicable utility allowance for tenant-paid utilities. If the utility allowance exceeds the total tenant payment, the PHA shall pay such excess amount (the utility reimbursement) either to the family or directly to the utility supplier to pay the utility bill on behalf of the family. (24 CFR 960.253 c) CONDITION The Authority had not conducted an annual review of its utility allowances for the public housing program for 2023 to 2024. CAUSE The Authority did not follow its policy to annually review the utility allowances for the public housing program. EFFECT As a result of not reviewing and updating the utility allowances on a timely basis, residents overpaid their rent to the Authority. QUESTIONED COSTS Questioned Costs of $965,548 – Representing the aggregate amount of overpaid rent that was reimbursed to residents during fiscal year 2024. CONTEXT The Authority owns and operates 735 units of public housing. The Authority is required to review its utility allowance schedules at least annually. REPEAT FINDING Not a repeat finding. RECOMMENDATION We recommend that the implement policies and procedures to ensure that an annual review of its utility allowances is conducted and that the Authority should reimburse residents for any excess rental payments had the utility allowance schedules been update timely. AUDITEE’S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.

2023-002 – SPECIAL TESTS AND PROVISIONS – WAGE RATE REQUIREMENTS Other Matter/Significant Deficiency U.S. Department of Housing and Urban Development CFDA #: 14.850 – Public and Indian Housing Program CRITERIA The Davis-Bacon Act (DBA) applies to each federal government or District of Columbia contract in excess of $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or public works and requires that contractors and subcontractors pay their laborers and mechanics employed under such contracts no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area. The DBA’s prevailing wage provisions apply to “Related Acts,” under which federal agencies assist construction projects through grants, loans, loan guarantees, and insurance. The contractor shall submit weekly for each week in which any contract work is performed… The payrolls submitted shall set out accurately and completely all of the information required to be maintained under 29 CFR 5.5(a)(3)(i), (29 CFR 5.5 (a)(3)) CONDITION The Authority did not obtain copies of the certified payroll related to vacancy / apartment restoration services. CAUSE The Authority was unaware that the DBA applied to this vendor. EFFECT Failure to collect the weekly certified payroll may result in employee’s being paid less than the prevailing wage. QUESTIONED COSTS None CONTEXT Certified payrolls are required to be obtained for each week the contractor performs work. This vendor provided vacancy / apartment restoration services throughout the year. REPEAT FINDING Not a repeat finding. RECOMMENDATION We recommend that the Authority obtain copies of the weekly certified payrolls for each contract relating to construction, alteration or repair projects. AUDITEE’S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.

2023-003 – REPORTING – FINANCIAL REPORTS Significant Deficiency / Other Matter U.S. Department of Housing and Urban Development CFDA #: 14.871 / 14.879 – Housing Voucher Cluster CRITERIA Electronic submission of form HUD-52681-B data is a monthly requirement. The PHA submits this form monthly to HUD electronically via the VMS. Congress has instructed HUD to use VMS data to determine renewal funding levels. HUD also uses VMS data for other funding, monitoring, and SEMAP-related decisions. HUD relies on the audit of the key line items below to determine the reasonableness of the data submitted for the purposes of calculating funding under the program. CONDITION During the first half of fiscal year 2023, the Authority’s internal controls over the submission of VMS to HUD did not include a review or reconciliation of the information submitted to supporting documentation. In June 2023, the Authority implemented a review procedure in which at the end of each quarter a review of the preceding quarter is conducted. CAUSE The Authority had not established sufficient internal controls related to this submission requirement. EFFECT HUD uses the information submitted to determine renewal funding levels, and for other funding and monitoring decisions. Inaccurate information submitted could affect decisions made by HUD. QUESTIONED COSTS None Identified. CONTEXT Electronic submission of form HUD-52681-B data is a monthly requirement. REPEAT FINDING This is repeated from finding 2022-003. RECOMMENDATION The Authority should continue with their corrective action plan which began in April 2023. AUDITEE’S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.

2023-004 – SPECIAL TESTS AND PROVISIONS – CAPITAL FUNDS FOR OPERATING COSTS Significant Deficiency / Other Matter U.S. Department of Housing and Urban Development CFDA #: 14.872 – Public Housing Capital Fund CRITERIA A PHA may use Capital Funds for operating costs only if it is included in the CFP 5-Year Action Plan that is approved by the PHA Board of Commissioners and HUD, and limited as described in paragraphs (l)(1) and (2) of this section. Capital Funds identified in the CFP 5-Year Action Plan to be transferred to operations are obligated once the funds have been budgeted and drawn down by the PHA. Once such transfer of funds occurs, the PHA must follow the requirements of 24 CFR part 990 with respect to those funds. CONDITION The Authority had obligated capital funds related to operations (BLI 1406) prior to voucher request date for these draws. CAUSE Prior to March 2023, management was unaware of this requirement. EFFECT The Authority had obligated funds for operations prior to the voucher request date of these draws. QUESTIONED COSTS None Identified. CONTEXT The Authority had five open capital fund grants during fiscal year 2023 (Capital Fund formula grants 2020-2023 and an Emergency Capital grant). The Authority drew down funds for operating costs under capital fund year 2022. Total capital fund draws for operating costs under this grant during 2023 aggregated $592,497. REPEAT FINDING This finding is repeated from 2022-007. RECOMMENDATION The Authority should continue with their corrective action plan implemented in April 2023, in which funds are only obligated after which the Authority has a signed contract or agreement in place. AUDITEE’S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.

2022-002 ? ACTIVITIES ALLOWED / UN-ALLOWED Material Weakness/Material Noncompliance U.S. Department of Housing and Urban Development CFDA #: 14.871 / 14.879 ? Housing Voucher Cluster CRITERIA The HA must use program receipts to provide decent, sage, and sanitary housing for eligible families in compliance with U.S. Housing Act of 1937 and all HUD requirements. Program receipts may only be used to pay program expenditures. (Annual Contributions Contract) CONDITION As a result of our audit procedures, we identified the following expenses that were incorrectly charged to the Housing Choice Voucher Program: ? Dump truck repairs & plow kit(s) ? Payroll and benefit expenses for the Leasing Coordinator, whose job responsibilities were updated in 2018 to include working on other programs. However, the HCV program was charged 100% of the salary and benefit cost. ? Payroll processing fees, which prior to adjustments was allocated 64% of the cost despite having approximately 25% of the total employees. ? Professional organization fees that appear to be for executive management, which should have been charged to the Central Office Cost Center. CAUSE During the year ended June 30, 2022, the Authority did not have sufficient internal controls related to the allocation of expenses between programs. EFFECT The federal program was charged for expenditures relating to other programs. QUESTIONED COSTS None identified as the Authority refunded the HCV Program. CONTEXT Total non-Housing Assistance Payments expense for the HCV/ Mainstream Programs were $1,905,167. REPEAT FINDING Not a repeat finding. RECOMMENDATION On an annual basis, the Authority should review all indirect cost allocation to ensure that the allocations are reasonable and comply with HUD requirements. AUDITEE?S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.

2022-003 ? REPORTING ? FINANCIAL REPORTS Significant Deficiency / Other Matter U.S. Department of Housing and Urban Development CFDA #: 14.871 / 14.879 ? Housing Voucher Cluster CRITERIA Electronic submission of form HUD-52681-B data is a monthly requirement. The PHA submits this form monthly to HUD electronically via the VMS. Congress has instructed HUD to use VMS data to determine renewal funding levels. HUD also uses VMS data for other funding, monitoring, and SEMAP-related decisions. HUD relies on the audit of the key line items below to determine the reasonableness of the data submitted for the purposes of calculating funding under the program. CONDITION During the fiscal year ended June 30, 2022, the Authority?s internal controls over the submission of VMS to HUD did not include a review or reconciliation of the information submitted to supporting documentation. CAUSE The Authority had not established sufficient internal controls related to this submission requirement. EFFECT HUD uses the information submitted to determine renewal funding levels, and for other funding and monitoring decisions. Inaccurate information submitted could affect decisions made by HUD. QUESTIONED COSTS None Identified. CONTEXT Electronic submission of form HUD-52681-B data is a monthly requirement. REPEAT FINDING Not a repeat finding. RECOMMENDATION The Authority should implement a control of the information being entered into VMS is reconciled to supporting documentation. AUDITEE?S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.

2022-004 ? SPECIAL TESTS AND PROVISIONS ? CARES ACT FUNDING Material Weakness/Material Noncompliance U.S. Department of Housing and Urban Development CFDA #: 14.871 / 14.879 ? Housing Voucher Cluster CRITERIA ? The additional funds transferred to the COCC must be for immediate use and cannot be rolled into the PHA?s COCC reserves. This means, any additional fees above the safe harbor amounts transferred must be attached to a specific COCC expense and immediately used (i.e., used to pay the associated liability). ? The PHA is required to track and account for these additional COCC funds separately. This means that a PHA?s COCC records must show the amount, when these additional funds were transferred to the COCC, the actual expenses that the additional COCC funds were used to cover, and the date paid. ? Supplemental administrative fees used for capital activity will be reported as an equity transfer out of 14.HCC or 14.MSC to the respective HCV (CFDA #14.871) or Mainstream (CFDA #14.879) program. The HCV and Mainstream Voucher program will show the receipt of the capital assets as an equity transfer in (FDS line items 11040- 070 through 11040-110). Once the asset is placed into service, the PHA should transfer the asset to the program and report any associated depreciation expense in the program and not in 14.HCC and/or 14.MSC. (PIH Notice 2020-24) CONDITION The following conditions were found as part of the FY 2022 audit: ? The Authority?s system for tracking the expenditure of CARES Act related funds did not provide for sufficient detail in order to be able to clearly identify the program source of fund (PIH, HCV or Mainstream) and the use of funds. ? From the documentation reviewed, it is unclear what expenses the additional management fee of $296,949 was used for. In addition, $258,754 was reported as unearned revenue at June 30, 2021. ? Prior to audit adjustments, the Authority had incorrectly expensed $919,074 of CARES funding used for capital improvements. CAUSE The Authority did not establish adequate internal controls over compliance relating to CARES Act funding. EFFECT Funding provided through the CARES Act may have been used for ineligible expenditures. QUESTIONED COSTS None Identified. CONTEXT The Authority received $1,616,413 in CARES Act funding under the PIH, HCV, and Mainstream Programs. REPEAT FINDING Not a repeat finding. RECOMMENDATION We recommend that the Authority address this matter directly with HUD. AUDITEE?S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.

2022-005 ? SPECIAL TESTS AND PROVISIONS ? GENERAL DEPOSITORY AGREEMENTS Significant Deficiency / Other Matter U.S. Department of Housing and Urban Development CFDA #: 14.871 / 14.879 ? Housing Voucher Cluster CRITERIA The Annual Contributions Contract (ACC) requires the Authority to deposit and invest all program funds for projects under an ACC in accordance with the terms of a General Depository Agreement. The General Depository Agreement must be in a form approved by HUD and is executed between the Authority and the depository. The depository must be a financial institution whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Share Insurance Fund (NCUSIF). An original HUD-51999 should be maintained by the Authority and the financial institution. CONDITION During the fiscal year ended June 30, 2022 the Authority did not have an executed General Depository Agreement on file for all depositories of federal funds. CAUSE Management was unable to locate an executed General Depository Agreement. EFFECT The covenants set forth by the General Depository Agreement have not been conveyed to and agreed upon by the Authority and its financial institutions. QUESTIONED COSTS None Identified. CONTEXT The Authority maintains five separate bank accounts with various financial institutions, which had total deposits of $16.3 million at June 30, 2022. REPEAT FINDING Not a repeat finding. RECOMMENDATION We recommend that the Authority execute the General Depository form with their financial institution and retain of the executed document. AUDITEE?S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.

2022-006 ? SPECIAL TESTS AND PROVISIONS ? OPERATING TRANSFERS & ADMINISTRATIVE FEES Material Weakness/Material Noncompliance U.S. Department of Housing and Urban Development CFDA #: 14.871 / 14.879 ? Housing Voucher Cluster CRITERIA The ACC establishes the amounts HUD will provide a PHA for HAP and administrative fees. With the exception of Moving to Work Housing Authorities, HAP may not be used to cover administrative expenses nor may HAP (including RNP) be loaned, advanced, or transferred to other component units or other programs such as Public and Indian Housing (Assistance Listing 14.850) (24 CFR sections 982.151 and 982.152). CONDITION The Authority?s inter-program accounts did not properly net to zero and were out of balance by $5,105,852 with the corresponding variance classified as cash. CAUSE Due to a software issue, the Authority?s inter-program accounts were out of balance and not properly reconciled. EFFECT As a result of the missing control related to the timely reconciliation of inter-program accounts, HCV administrative fee funding could have been loaned, advanced, or transferred to other programs. QUESTIONED COSTS None Identified. CONTEXT The has two bank accounts for which regular payments are made from (one for landlord payments and the other for operating expenses). Expenses are allocated to the programs through the use of inter-program accounts. REPEAT FINDING Not a repeat finding. RECOMMENDATION The Authority should work with the software provider to correct this issue and verify that the federal programs funding was not used for other programs. AUDITEE?S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.

2022-007 ? SPECIAL TESTS AND PROVISIONS ? CAPITAL FUNDS FOR OPERATING COSTS Significant Deficiency / Other Matter U.S. Department of Housing and Urban Development CFDA #: 14.872 ? Public Housing Capital Fund CRITERIA A PHA may use Capital Funds for operating costs only if it is included in the CFP 5-Year Action Plan that is approved by the PHA Board of Commissioners and HUD, and limited as described in paragraphs (l)(1) and (2) of this section. Capital Funds identified in the CFP 5-Year Action Plan to be transferred to operations are obligated once the funds have been budgeted and drawn down by the PHA. Once such transfer of funds occurs, the PHA must follow the requirements of 24 CFR part 990 with respect to those funds. CONDITION The Authority had obligated capital funds related to operations (BLI 1406) prior to voucher request date for these draws. CAUSE Management was unaware of this requirement. EFFECT The Authority had obligated funds for operations prior to the voucher request date of these draws. QUESTIONED COSTS None Identified. CONTEXT The Authority had three open capital fund grants during fiscal year 2022 (Capital Fund years 2020-2022). The Authority drew down funds for operating costs under capital fund years 2020 and 2021. Total capital fund draws for operating costs under these two grants during 2022 aggregated $1,061,999. REPEAT FINDING Not a repeat finding. RECOMMENDATION The Authority should obligate the funds in LOCCS after the date of the voucher request. AUDITEE?S RESPONSE AND PLANNED CORRECTIVE ACTION See Corrective Action Plan.