Lexington-Fayette Urban County Housing Authority

Finding 2025-001 – Moving To Work Demonstration Tenant Files – Eligibility – Internal Control over Tenant Files – Noncompliance and Significant Deficiency Moving To Work Demonstration - subsidy ALN #14.881 Condition & Cause: Our review of one hundred seventy-one (171) Moving To Work tenant files found that twenty-three (23) files were noncompliant, representing 13.5% of our sample. Some files had multiple compliance issues. Specifically, we identified: • Eight (8) files with miscalculations of annual income • Two (2) files missing proper verification of income or deductions • Eleven (11) files missing the EIV report. • Four (4) files missing support for a unit inspection. • Three (3) files for which the annual reexamination was completed late. Using extrapolation, we concluded that the potential misstatement of subsidy from income miscalculations is $35,824, which is immaterial to the financial statements. The majority of the noncompliance occurred within the Low-Rent and Business Activities programs. Contributing factors included high staff turnover and inadequate oversight during the year. As a corrective measure, the Agency established new positions within the department during the fiscal year—including a director and an inspector—to strengthen oversight and improve compliance. Criteria: Compliance requirements are outlined in the Code of Federal Regulations, the Housing Authority’s Admissions and Continued Occupancy Policy (ACOP), Administrative Plan, Moving To Work (MTW) Plan, and specific HUD guidelines for documenting and maintaining Public Housing and Housing Choice Voucher tenant files. Effect: Failure to accurately calculate tenant income, obtain required verification, and conduct timely reexaminations may result in improper subsidy determinations, noncompliance with HUD regulations, and potential financial exposure. Additionally, missing EIV reports and inspection documentation reduce the Agency’s ability to ensure program integrity and housing quality standards. Ongoing noncompliance may also draw scrutiny from regulatory bodies. Recommendation: We recommend that the Agency enhance its internal controls over tenant files by strengthening standardized quality control procedures and support for supervisory oversight. Additionally, staff should receive regular training on HUD compliance requirements. Questioned Costs: $35,824 Repeat Finding: Yes Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.

Finding 2025-001 – Moving To Work Demonstration Tenant Files – Eligibility – Internal Control over Tenant Files – Noncompliance and Significant Deficiency Condition & Cause: The review of one hundred seventy-one (171) Moving To Work tenant files found that twenty-three (23) files were noncompliant, representing 13.5% of our sample. Some files had multiple compliance issues. Findings: Income Miscalculations (8)/Missing Income and Deduction Verifications (2)/Missing EIV Reports (11) Corrective Action Plan: The first step in our corrective action plan is to increase staff training. In the past year we have had significant staff turnover at the Management Specialist position. The position responsible for the annual recertification process and rent calculations. We will establish a training curriculum that will provide initial and ongoing training for this position. The goal being to develop and continue to build the knowledge base of the specialist. Ensuring they are able to perform the functions of their job in a manner that is compliant and consistent with HUD and LHA regulations and policies. The second step in our corrective action plan is to improve our compliance monitoring process. This process consists of layers of compliance monitoring that will provide a 100% audit of all files within the calendar year. The structure for compliance monitoring will be as follows: • Peer Review- Another specialist in the office must review and sign off on the completed certification before it is processed electronically. • Management review-The Housing Manager will audit ten files per week in the office including all new move-in files. • Compliance review-The Compliance Coordinator will audit 40 files per week (ten files from each team) and also review all new move-in files at the end of each month. The compliance monitoring will include a review sheet that lists any issues found in the file and a deadline for the team to make the necessary corrections and resubmit the file to compliance. These measures will ensure that all tenant files are reviewed multiple times on an annual basis for compliance, while providing staff training and awareness by identifying issues and correcting them. In addition to training, the Director of Housing Operations will also develop a checklist that will be included with every recertification to ensure that all forms and verifications including the EIV are in each file. Each specialist will sign the checklist certifying their work. Persons Responsible: Director of Housing Operations - Dana Mason; Compliance Coordinator - Dana Tincher; Housing Managers - Renee Christian, Cathy Hall & Sumaya Rayan; Management Specialists - Virginia Auxier, Marlene Stevenson, Brittany Williamson, Giana Hall, Jennfer Loudermilk, Linda Gates, Tiffany Clark & Sherily Blackburn Anticipated Completion Date: June 30, 2026 Finding: Late Annual Reexaminations (3) Corrective Action Plan: LHA staff have implemented several measures to correct this finding. We have hired additional staff and redistributed units to evenly spread the caseload. In addition to these measures, we also implemented reporting that is more accurate and consistent to ensure recertifications are completed timely. LHA’s Strategic Initiatives and Resident Programs (SIRP) Manager will provide monthly reports on recertification status for each team. This report will show upcoming recertifications due within 120 days and any that are past due for each team. Each manager will ensure that any past due recert is completed immediately. Person Responsible: Director of Housing Operations - Dana Mason; Strategic Initiatives and Resident Programs Manager - Samantha Passalacqua; Housing Managers - Renee Christian, Cathy Hall & Sumaya Rayan Anticipated Completion Date: June 30, 2026 Finding: Files Missing support for unit inspections (4) Corrective Action Plan: LHA created a new position earlier this year to address this audit finding. In May the new Public Housing Inspector was hired to conduct annual unit inspections for all LHA owned units. The inspector will complete an NSPIRE inspection in all units independent from the management office. This will ensure that all of the units have annual inspection going forward. The inspection will be maintained electronically for easy access and storage. Person Responsible: Director of Housing Operations - Dana Mason; Compliance Coordinator - Dana Tincher; Public Housing Inspector - Alan Pike Anticipated Completion Date: June 30, 2026

2024-001

Finding 2024-001 - Moving To Work Demonstration Tenant Files - Eligibility - Internal Control over Tenant Flies - Noncompliance and Significant Deficiency Moving To Work Demonstration - Subsidy ALN 14.881 Condition & Cause: Our review of two hundred (200) Moving To Work tenant files found that eighteen (18) files were noncompliant, representing 9% of our sample. Some files had multiple compliance issues. Specifically, we identified: • Thirteen (13] files where the annual reexamination was completed or made effective at least two months past the due date. • Four (4) files lacking proper verification of income or deductions. • Three (3) files with miscalculations of annual Income. • Four (4) files missing the EIV. • One (1) file processed for annual reexamination without tenant involvement. Using extrapolation, we concluded that the potential misstatement of subsidy from income miscalculations is immaterial to the financial statements. Criteria: Compliance requirements are outlined in the Code of Federal Regulations, the Housing Authority's Admissions and Continued Occupancy Policy (ACOP), Administrative Plan, Moving To Work (MTW) Plan, and specific HUD guidelines for documenting and maintaining Public Housing and Housing Choice Voucher tenant files. Effect: Deficiencies in tenant files can result in lost rental income due to late reexaminations, along with potential overpayments or underpayments by tenants stemming from inaccurate rent determinations. Ongoing noncompliance may also draw scrutiny from regulatory bodies, increasing the risk of financial penalties or loss of funding for the MTW program. Recommendation: We recommend that the Agency identify the annual recert1fications that are past or near due and complete these reexaminations. We also recommend that the Agency continue their monitoring and review of the Moving To Work files to determine whether occupancy specialists need additional training or procedures added to ensure compliance. Questioned Costs: None Repeat Finding: Yes Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.

2024-01 Audit Finding/Plan of Action As requested, the Lexington Housing Authority (LHA) proposes this corrective plan of action to address a finding and other deficiencies found during an audit conducted by Rector, Reeder & Lofton PC, onsite at LHA September 16-20, 2024. Specifically, those deficiencies include: • Thirteen (13) files where the annual reexamination was completed or made effective at least two months past the due date. • Four (4) files lacking proper verification of income or deductions. • Three (3) files with miscalculationsof annual income. • Four (4) files missing the EIV. • One (1) file processed for annual reexamination without tenant involvement. LHA proposes the following to address the finding and deficiencies. - LHA will require training for each Housing Management Specialist (HMS) to review rent calculation, income verification, deductions and EIV file documentation. - Like other employers nationally, LHA is challenged with staffing issues, with a turnover rate of 84% for new hire HMS. To address staffing LHA will: • Advertise open positions online, on social media and in the local newspaper. • Evaluate incentives that will allow LHA to retain staff. • Allow over-time on an as-needed basis to complete and process certifications. • Offer new HMS pay beyond the minimum position classification scale. Further, LHA housing management staff will adhere to the following procedures to facilitate timely completion of annual certifications. - HMS staff will continue utilize in-person interviews and mail (via USPS and email) to complete needed documentation for annual certifications. - HMS staff may utilize electronic signature to attain required signatures when necessary. - Periodically housing managers will run the certification audit report to be shared with the Chief Operating Officer to monitor the status of in-progress and upcoming certifications. - LHA's compliance coordinator will complete QC reviews of 50% or 457 public housing files during FY2025. The compliance coordinator has undergone several training workshops and staff-shadowing during 2024 and is adequately trained to complete this task. - LHA will evaluate the possibility of securing a third-party to assist in timely completion of annual recertifications. LHA staff will apply these procedures as outlined to mitigate this finding to ensure compliance and proper documentation of future certifications. Contact Person: Andrea Wilson, Chief Operating Officer Anticipated Completion Date: June 30, 2025

2023-001

Finding 2023-001 – Moving To Work Demonstration Tenant Files – Eligibility – Internal Control over Tenant Files – Noncompliance and Significant Deficiency Moving To Work Demonstration - subsidy ALN 14.881 Condition & Cause: Our review of two hundred (200) Moving To Work tenant files revealed that there were thirteen (13) annual recertifications completed late, one (1) annual recertification that was not completed, and one (1) miscalculation of annual income, which represents 7.5% of the total files examined. We noted that the Agency experienced difficulty in hiring and retaining staff and operated with several employee vacancies throughout the fiscal year. Based upon this control deficiency encountered with our sample, we believe the Housing Authority has a significant deficiency in this area of compliance. Criteria: The Code of Federal regulations, the Housing Authority’s ACOP, Admin Plan, MTW Plan, and specific HUD guidelines in documenting and maintaining the Public Housing and Housing Choice Voucher tenant files. Recommendation: We recommend that the Agency identify the annual recertifications that are past or near due and complete these reexaminations. We also recommend that the Agency increase their monitoring and review of the Moving To Work files to determine whether occupancy specialists need additional training or procedures added to ensure compliance. Questioned Costs: None Repeat Finding: No Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.

Re: 2023-01 Audit Finding/Plan of Action The Lexington Housing Authority (LHA) proposes this corrective plan of action to address the late recertifications (13) and annual recertification (1) from the audit conducted by Rector, Reeder & Lofton PC, onsite at LHA September 25-29, 2023. ADDRESSING STAFFING Securing qualified candidates to fill Housing Management Specialist (HMS) positions throughout 2020, 2021 and 2022 was challenging for LHA. In some instances, positions were vacant for up to 12 months before they were filled. LHA will do the following to address staffing: • Seek to fill HMS positions within forty-five (45) days of the position going vacant. • Advertise to hire two full-time HMS positions for the two management teams with the most units in their management portfolio. • Continue to advertise open positions online, on social media and in the local newspaper. • Offer incentive bonus up to $1,500 to newly hired HMS, paying $750 to new hires after six month of employment and an additional $750 after 12 months of employment. • Over-time will be allowed on an as-needed basis to complete and process certifications. CERTIFICATION PROCEDURES Further, LHA housing management staff will adhere to the following procedures to facilitate timely completion of annual certifications. - HMS staff will continue utilize in-person interviews and mail (via USPS and email) to complete needed documentation for annual certifications. - All housing management staff may utilize electronic signature to attain required signatures when necessary. - The first day of each month housing managers will run the certification audit report to be shared with the Chief Operating Officer to monitor the status of in-progress and upcoming certifications. - July 1, 2023, LHA implemented quality control (QC) of public housing files to be conducted by a newly created compliance position. LHA' s compliance coordinator will complete 229 (25%) QC reviews of public housing files during FY2024 (July 1, 2023 - June 30, 2024). - At least once monthly on a rotating basis housing management staff from all offices will convene at a selected housing management office to complete and process certifications. This schedule will continue until all offices are up to date on certifications. LHA staff will apply these procedures as outlined to mitigate this finding to ensure compliance and proper documentation of future certifications. Contact Person: Andrea Wilson, Chief Operating Officer Anticipated Completion Date: June 30, 2024