LOUISVILLE METRO HOUSING AUTHORITYNon-Profit

Finding 2025-001 Program Name: Moving to Work (ALN #14.881) Federal Awarding Agency: Department of Housing and Urban Development Compliance Requirement: Eligibility Type of Finding: Material Weakness; Material Noncompliance Qualification Criteria: HUD regulations require certifications to be completed and entered timely to ensure accurate calculation of Housing Assistance Payments (HAP), Total Tenant Payment (TTP), and utility reimbursements. Condition: Of the 60 Moving to Work files tested, the following items were noted: - 40 instances of certifications not completed timely - 6 instances where the file did not contain income support - 3 instances where housing quality standards inspections were not completed within the last 2 years - 1 instance in which a rent comparison was not completed for a new move in Cause: The housing authority does not have sufficient controls or monitoring procedures to ensure certifications are processed before their effective date. Effect: The Authority was not in compliance with the eligibility compliance requirements for the year ended June 30, 2025. Failure to perform income recertifications and errors in calculating deductions and allowances could result in improper housing assistance payments. Auditor Recommendation: Implement a process to track upcoming certifications and assign responsibility to specific staff for monitoring deadlines. Additionally, perform periodic reviews to confirm certifications are completed and entered prior to their effective date. Questioned Costs: Potential questioned costs exist; however, the amount was not determinable at the time of audit. Management’s Response: LMHA continues to work through issues around the proper and timely processing of program certifications to support accurate Housing Assistance Payments, Total Tenant Payments and utility reimbursements. Currently, recertifications are processed on a biennial basis schedule, through a three-tiered system outlined in our updated MTW plan. This will address timeliness of recertification while also ensuring compliance and review of supporting documentation. Please note the following rules tied to LMHA’s three-tiered recertification system: 1) When the family is zero income, they will go to an annual recertification. 2) When family is working, (enrolling in KTAP (Kentucky Transitional Assistance Program), receiving Child Support, and other similar sources of income) they will go to a biennial recertification. 3) When a family has fixed income, (receiving Social Security, Supplemental Security Income, and/or Pension payments), they will go to a triennial recertification. The HCV Team is also working with Yardi (ERP system) to maximize the reporting and monitoring of the recertification schedule. The manager initiates the tracking for needed processing and possible termination of participants. With the three-tiered system, staff will be able to review all tenant information closely during recertifications to ensure proper housing assistance payments. Additionally, to improve sufficient controls and internal monitoring, the HCV Team is partnering with the Compliance Team to review tenant files for errors and improper supporting documentation.

Finding 2025-002 Program Name: Housing Choice Voucher (HCV) Cluster (ALN #14.871) Federal Awarding Agency: Department of Housing and Urban Development Compliance Requirement: Eligibility Type of Finding: Material Weakness; Material Noncompliance Qualification Criteria: HUD regulations require certifications to be completed and entered timely to ensure accurate calculation of Housing Assistance Payments (HAP), Total Tenant Payment (TTP), and utility reimbursements. Condition: Of the 40 Housing Choice Voucher tenant files tested, the following items were noted: - 32 instances of certifications not completed timely - 3 instances where the file did not contain income support or the support in the file did not agree to the amount used on the certification (the file was later updated with the correct income for one of these tenants) - 7 instances where housing quality standards inspections were not completed within the last 2 years - 1 instances where a rent comparison was completed, the rent requested by the landlord was determined to not be reasonable, but the rent was still used in the payment calculation Cause: The housing authority does not have sufficient controls or monitoring procedures to ensure certifications are processed before their effective date. Effect: The Authority was not in compliance with the eligibility compliance requirements for the year ended June 30, 2025. Failure to perform income recertifications and errors in calculating deductions and allowances could result in improper housing assistance payments. Auditor Recommendation: Implement a process to track upcoming certifications and assign responsibility to specific staff for monitoring deadlines. Additionally, perform periodic reviews to confirm certifications are completed and entered prior to their effective date. Questioned Costs: Potential questioned costs exist; however, the amount was not determinable at the time of audit. Management’s response: LMHA continues to work through issues around the proper and timely processing of program certifications to support accurate Housing Assistance Payments, Total Tenant Payments and utility reimbursements. Currently, recertifications are processed on a biennial basis schedule, through a three-tiered system outlined in our updated MTW plan. This will address timeliness of recertification while also ensuring compliance and review of supporting documentation. Please note the following rules tied to LMHA’s three-tiered recertification system: 1) When the family is zero income, they will go to an annual recertification. 2) When family is working, (enrolling in KTAP (Kentucky Transitional Assistance Program), receiving Child Support, and other similar sources of income) they will go to a biennial recertification. 3) When a family has fixed income, (receiving Social Security, Supplemental Security Income, and/or Pension payments), they will go to a triennial recertification. The HCV Team is also working with Yardi (ERP system) to maximize the reporting and monitoring of the recertification schedule. The manager initiates the tracking for needed processing and possible termination of participants. With the three-tiered system, staff will be able to review all tenant information closely during recertifications to ensure proper housing assistance payments. Additionally, to improve sufficient controls and internal monitoring, the HCV Team is partnering with the Compliance Team to review tenant files for errors and improper supporting documentation.

Finding: 2024-001 Program Name: Moving to Work (ALN #14.881) Federal Awarding Agency: Department of Housing and Urban Development Compliance Requirement: Eligibility Type of Finding: Material Weakness; Material Noncompliance Qualification Criteria: Per 24 CFR section 982.516, the Authority must reexamine family income and composition at least once every two years and adjust the tenant rent and housing assistance payment as necessary using the documentation from third party verification. Condition: Of the 52 Housing Choice Voucher tenant files tested, the following items were noted: • 48 instances of certifications not completed timely • 17 instances where the file did not contain income support or the support in the file did not agree to the amount used on the certification (the files were later updated with the correct income for 6 of these tenants) • 5 instances where an incorrect payment standard was used • 11 instances where the standard medical deduction did not match the deduction allowed per the Administrative Plan • 2 instances where inspections were not completed within the last 2 years • 7 instances where the incorrect utility allowance was used • 1 file was missing a citizenship declaration for a household member. Cause: During fiscal year 2024, the Authority had employee turnover resulting in a backlog of recertifications. Because payments to landlords on the annual HAP contracts were set to expire, the Authority rolled forward the tenant’s prior year form HUD-50058 Family Report without updating family income and composition. In addition, the shortage of staff resulted in errors noted above in calculations. Effect: The Authority was not in compliance with the eligibility compliance requirements for the year ended June 30, 2024. Failure to perform income recertifications and errors in calculating deductions and allowances could result in improper housing assistance payments. Auditor Recommendation: We recommend the Authority perform a review of all tenant files to ensure income has been appropriately recertified and housing assistance payments are accurate. Questioned Costs: Undeterminable. Management’s Response: LMHA implemented in March of 2024, a comprehensive plan to resolve the backlog of recertifications that necessitated the roll forward of tenant’s prior year form HUD-50058 family report without updating family income and composition. First and foremost, representing the rolling forward of the tenant’s HUD-50058 as a biennial recertification has been discontinued. Housing Choice Voucher Department staff has implemented training of Housing Specialists and other staff to ensure biennial recertification and use of HUD-50058 Type 2 (“Annual Recertification”) will now be compliant. LMHA continues its contractual relationship with Nan McKay & Associates to assist with the recertification process and resolve the backlog of 50058 recertifications. LMHA has restructured workflows to provide efficiencies and accountability that will promote compliance. LMHA continues to work with various HUD departments and personnel to assess noncompliance and how to move forward. LMHA engaged its Financial Auditor, Cherry Bekaert, to review the Housing Choice Voucher Program for process, compliance, and internal control. From that collaborative process, in July 2024, LMHA was provided a comprehensive report including recommendations to improve the HCV program processes in all phases which LMHA is actively incorporating into everyday procedures.

Finding: 2023-001 Program Name: Moving to Work (ALN #14.881) Federal Awarding Agency: Department of Housing and Urban Development Compliance Requirement: Eligibility Type of Finding: Material Weakness; Material Noncompliance Qualification Criteria: Per 24 CFR section 982.516, the Authority must reexamine family income and composition at least once every two years and adjust the tenant rent and housing assistance payment as necessary using the documentation from third party verification. Condition: Of the 25 Housing Choice Voucher tenant files tested, the annual recertification was not completed for five tenant files and the information from the prior year 50058 was rolled forward without verification of current income. For two additional tenant files, the 50058 was rolled forward without updating as required; however, the income was later recertified. Cause: During fiscal year 2023, the Authority had employee turnover resulting in a backlog of recertifications. Because payments to landlords on the annual HAP contracts were set to expire, the Authority rolled forward the tenant’s prior year form HUD-50058 Family Report without updating family income and composition. Effect: The Authority was not in compliance with the eligibility compliance requirements for the year ended June 30, 2023. Failure to perform income recertifications could result in improper housing assistance payments. Auditor Recommendation: We recommend the Authority perform a review of all tenant files to ensure income has been appropriately recertified and housing assistance payments are accurate. Questioned Costs: Undeterminable. Management’s Response: LMHA has implemented a comprehensive plan to resolve the backlog of recertifications that necessitated the roll forward of tenant’s prior year form HUD-50058 family report without updating family income and composition. First and foremost, representing the rolling forward of the tenant’s HUD-50058 as a biennial recertification has been discontinued. Compliance staff has implemented training of Housing Specialists and other staff to assure biennial recertification and use of HUD-50058 Type 2 (“Annual Recertification”) will now be compliant. LMHA has contracted with a vendor to assist with the recertification process. LMHA has also restructured workflows to provide efficiencies and accountability that will promote compliance. LMHA is also working with various HUD departments and personnel to assess noncompliance and how to move forward. In addition to resolving these issues with HUD, LMHA has engaged its Financial Auditor, Cherry Bekaert, to review the Housing Choice Voucher Program for process, compliance, and internal control.

Finding: 2023-002 Program Name: Moving to Work (ALN #14.881) Federal Awarding Agency: Department of Housing and Urban Development Compliance Requirement: Special Tests and Provisions Type of Finding: Material Weakness; Material Noncompliance Qualification Criteria: Per 24 CFR section 990.280(d), the Authority may only charge centralized maintenance services to Public Housing projects on a fee-for-service approach. Each project must be charged for the actual services received and only to the extent that such amounts are reasonable. Condition: During our testing of the reasonableness of centralized maintenance costs charged by the COCC, we noted work orders in which excessive hours were charged to public housing including multiple instances of more than 15 hours per day per employee charged as maintenance time. Cause: Work orders prepared by maintenance staff were not reviewed for reasonableness. Effect: The Authority was not in compliance with the special tests regarding fees charged for centralized services for the year ended June 30, 2023. After management’s review of all instances of excessive maintenance hours, management reduced fees charged by the COCC to the public housing program by $1.2 million. Auditor Recommendation: We recommend supervisors review all time charged by maintenance staff on a routine basis. We would also recommend an additional review by the finance department to ensure hours are reasonable prior to posting charges to the Public Housing projects. Questioned Costs: All costs were corrected and fees were reversed. Management’s Response: To verify that the hours charged by maintenance staff are reasonable, Central Maintenance supervisors/coordinators will verify the accuracy of the hours recorded to work orders completed. Questionable hours will be reviewed and corrected when appropriate. The report will then be submitted to Financeto be charged to Public Housing development. The Finance Department will perform an additional review for reasonableness prior to posting.

Finding: 2023-003 Program Name: Moving to Work (ALN #14.881) Federal Awarding Agency: Department of Housing and Urban Development Compliance Requirement: Special Tests and Provisions Type of Finding: Material Weakness; Material Noncompliance Qualification Criteria: The Authority is required to aggregate cost and consumption data from utility invoices for each Operating Fund project. This aggregated data is transferred to form HUD-52722 Calculation of Utilities Expense Level and used to determine the utility portion of the Operating Fund subsidy. Condition: We selected three projects to test the accuracy of Form HUD-52722 and verify utility invoices supporting utility costs and consumption. The Authority was unable to provide invoices supporting utility consumption and cost for two projects. In addition, water costs were overstated for one project resulting in overstatement of the UEL by $34,200. Cause: The Authority does not have controls in place to ensure supporting documents are maintained to support all HUD-52722 forms. Effect: The amounts reported on Form 52722 could not be verified resulting in a potential error in the operating subsidy. Auditor Recommendation: The Authority should maintain files with all supporting documentation for each HUD-52722. Questioned Costs: Undeterminable. Management’s Response: To ensure supporting documents are maintained to support all HUD-52722 forms, all privately managed Mixed-Finance developments will submit utility cost and consumption data to include copies of invoices to LMHA monthly. Utility cost and consumption data to include copies of invoices are already collected by LMHA managed sites.

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