HOUSING AUTHORITY OF THE CITY OF DOTHANLocal Government

2024-002 – ALN 14.881 – Moving to Work Demonstration Program – Activities Allowed Condition and Criteria: The Authority operates several distinct programs. Allocated expenses are paid from the Moving to Work Demonstration (MTW) Program funds, which include public housing operating funds, capital funds and housing choice voucher funds, and reimbursed using inter-program accounts. Reimbursement between programs was not made timely and has caused an increase in interprogram receivables and payables over time between the MTW Program and the Central Office Cost Center (COCC) program. Cash management is the process of managing the Housing Authority to optimize its use of funds. This process involves the timing of receipts and disbursements to assure the availability of funds to meet expenditures and to maximize the yield from the investment of temporary surplus funds. The Authority incurred unallowable activities relating to the handling of interprogram balances between the MTW program and COCC program due to poor cash management controls. Context: During our audit, we noted that as of December 31, 2024, the Authority’s COCC program, which is composed on nonfederal funds, had an outstanding balance of $1,419,415 that was owed to the MTW program, which houses federal funds. The commingling of program funds noted during testing were found to have been used for activities outside of the federal funds authorized purpose. The commingling of these funds created a risk that federal resources were not used in accordance with program objectives and applicable laws and regulations. Questioned Costs $1,419,415. Cause: The Authority’s management failed to ensure inter-program advances were reimbursed properly and timely between its federally funded MTW program and non-federally funded COCC program. Effect: The Authority has a lack of internal controls over cash management and has not been regularly monitoring and reconciling inter-program activities between the COCC program and MTW program. The COCC program does not have sufficient unrestricted cash to satisfy the interprogram balances. The lack of cash to cover inter-program imbalances can limit the liquidity and operational flexibility of the program. There is an increased risk of non-compliance with federal guidelines. Auditor’s Recommendation: We recommend the Authority settle interfund balances on a monthly basis and implement a process to review net cash balances during its budgetary procedures to reduce the risk of further noncompliance. Further, the Authority needs to implement stricter processes around interprogram balances to ensure the Authority can properly assess cash balances at a program level. Grantee Response: The Chief Executive Officer acknowledges the finding and is following the auditor’s recommendation.

2023-001 – ALN 14.881 – Moving to Work Demonstration Program - Eligibility Condition and Criteria: In accordance with HUD eligibility compliance requirement, Uniform Guidance Single Audit compliance requires that for tenant eligibility, tenant files include certain information and documentation that is both accurate and complete such as to obtain and document third-party verification of annual income and other factors that affect the determination of adjusted income or income-based rent, and then properly calculate the rent payment using this documentation. Per 24 CFR sections 5.230, 5.609, & 982.516, tenants are required to provide necessary information, documentation, and releases for the Authority to verify income eligibility. Per 24 CFR 982 Subpart K, the Authority should maintain a utility allowance schedule, determine if rent to owner is reasonable, and adopt a payment standard schedule that establishes voucher payment standard amounts for each FMR area in the PHA jurisdiction. During our audit, it was determined that internal control deficiencies over compliance existed over the Authority’s Moving to Work Demonstration Program eligibility determination process. The Authority's staff had inadequate internal controls over the Authority’s Moving to Work tenant eligibility process which has led to incomplete and inaccurate eligibility documentation. Out of twenty-five tenant files tested for eligibility compliance, 36% of these files had exceptions where there were improperly filled out HUD required forms. Context: H&P noted that 36% of the files tested had issues relating to improperly filled out HUD required forms. There were four instances noted where utility allowances were incorrectly calculated. There were three instances noted where required documentation lacked elements such as dates corresponding to signatures on signed documents and/or citizenship verification forms lacking the names of household members also entering the program. Two instances in which the utility allowance amount or annual income reported on HUD 50058 form were incorrect. We determined that these internal control deficiencies and resulting noncompliance appeared to be consistent and prevalent among the Authority's tenant files. Questioned Costs: None. Cause: The Authority’s staff's internal controls over the Moving to Work Demonstration Program eligibility determination process that were in place lacked the necessary controls over information and communication of HUD regulatory requirements to properly follow HUD’s eligibility requirements as determined by 24 CFR. There appears to be a lack of quality control procedures in place regarding the monitoring of tenant files in order to catch inaccurate and/or incomplete required tenant eligibility documentation and rent calculations. Effect: The absence of complete and accurate documentation compromises the accuracy of tenant eligibility determinations. Incorrectly stating annual income or utility allowances can affect eligibility status of current or future tenants and potentially places undue financial burdens on the tenants who apply. Some of the Authority’s tenants were potentially not receiving the correct amount of Housing Assistance Payments, which in turn, can cause the tenants' portion of rent payments owed to the landlords to be incorrect. Some of these tenants may still be receiving an erroneous Housing Assistance Payment and could be paying the wrong amount to the landlords until the staff and management can perform interim reexaminations or annual reexaminations. Auditor’s Recommendation: We recommend the Authority's Executive Director and Moving to Work staff review the internal controls over Moving to Work Demonstration Program eligibility to improve the detection and correction of misstatements. The Authority's staff should be attentive when calculating the annualized income for tenants and ensure that all third-party verification of income and deductions is being obtained. The Authority should utilize effective monitoring controls to check the accuracy of tenant rent and utility allowance calculations and payment standards for each initial lease-up and reexamination and, if any errors have been made, the Authority can identify these quickly and take the necessary corrective action. Additionally, the Authority should continue performing internal quality control re-inspections (not to be performed by the same employee who performed the original lease-up or reexamination but by someone with adequate knowledge of the tenant eligibility process) of a sample of applicant and tenant files to ensure that all eligibility and reexamination steps are being performed properly and in line with Federal regulations and the Authority's Moving to Work Administrative Plan policies and procedures. Grantee Response: The Executive Director acknowledges the finding and is following the auditor’s recommendation.