Meridian Housing AuthorityLocal Government

Questioned Costs The monetary impact needs further investigation to determine the amount for the period of non-compliance. Criteria As a condition of admission or continued occupancy, require the tenant and other family members to provide necessary information, documentation, and releases for the Authority to verify income eligibility (24 CFR sections 5.230, 5.609, and 982.516) Condition During the audit, it was noted that in one (1) instances, a family was over the income limits set by HUD field office but the family was still allowed to enter the public housing program while exceeding the new move-in income limits. Context This finding represents a potentially systemic issue within the Public Housing Program, as it was identified in one (1) files tested out of a sample of fifteen (15) families which is excess of a 5% error rate. Cause A family member income was ommitted from the calculation resulting in the family appearing qualified for the program. Effect Ineligible individuals or families may be receiving rental assistance and /or tenant portion of rent paid is being incorrectly calculated based on incorrect family incomes. Recommendations Management should implement internal control procedures to ensure that all income from family members are obtained during admission and re-examination. Management Views Management agrees with the finding, see Corrective Action Plan.

Finding 2023-001 – Public Housing Tenant Account Receivables – Cash Management/Eligibility - Internal Control Over Tenant Terminations and Nonpayment of Rent – Low Income Public Housing Program ALN #14.850 – Noncompliance and Material Weakness Criteria: The Code of Federal Regulations, the Housing Authority’s Admissions and Continued Occupancy Policy, Housing Authority dwelling lease, and the Public Housing Occupancy Guidebook Condition & Cause: We noted a concerning year-over-year increase in Public Housing tenant account receivables (TARs). The balance of the account increased from $389,224 to $826,310. We elected to randomly sample eight (8) participants across the spread of AMPs with high receivable balances to test for proper compliance with the ACOP and dwelling lease pertaining to the nonpayment of rent. We noted that all participants were billed through at least June 2023. We found that all eight participants were significantly behind on their rent. Of the total possible ninety-six (96) FY 2023 payments of rent (8 participants * 12 months) we noted only four (4) payments collected. Five of the participants did not make a single payment during the fiscal year but their leases were not terminated. Further we noted that four of the participants had moved out either prior to their FY 2023 annual exam or early into the lease. Since the dwelling leases were not terminated and the billings continued through June 2023 this has the implication of meaning that the units are counting as occupied for this period when either the unit was not occupied or that the Housing Authority is not enforcing its dwelling lease. This brings into question the occupancy fees that the Housing Authority is receiving from public housing to the Central Office Cost Center, occupancy scores in MASS, and funding received under operating subsidy calculations. Four participants were still active at 3/31/2023. For all of FY 2023 there were only two (2) payments collected from these active participants which in all amounted to $715 total. These are units which could be assisting other eligible families that would contribute rent. We inquired of staff as to the collection policy of the Authority. It was stated to us that eviction proceedings would not occur for nonpayment of rent generally for at least 6-7 months of nonpayment. We note that this is not congruent with the signed leases which states that fourteen (14) days of nonpayment should trigger action. Since the Housing Authority waits so long to respond to these lease violations it risks unoccupied units to be reported as occupied as we noted above. We believe there are significant noncompliance issues with regards to the dwelling lease and admissions policy as they pertain to lease termination and rent collection. This is further evidenced by bad debt expense increasing from $248,945 to $513,248 despite the concerning increase in TARs. Recommendation: We recommend that the Housing Authority begin to enforce its dwelling lease and housing policies as they pertain to the timeliness of rent payments. Current units with aged receivables in excess of 90 days should be contacted to ensure that they are still being occupied. Questioned Costs: N/A Repeat Finding: No Was sampling statistically valid? Yes Views of responsible officials: The PHA agrees with the results of the audit and recommendations.

Finding 2023-002 –Low Income Public Housing Tenant Files – Eligibility – Internal Control over Tenant Files – Noncompliance and Material Weakness – Low Income Public Housing – Subsidy ALN #14.850 Condition & Cause: Our review of fifty-five (55) Low Income Public Housing tenant files revealed a total of sixteen (16) files in error, which equates to roughly twenty-nine percent. Of these, we noted twelve income verification errors, one failure to collect third-party full-time student status, one file in which the annual recertification was updated in PIC without tenant paperwork, and two instances in which the applicable action could not be located. The primary cause for the income verification errors was failure to gather third-party verification for self-certified income. We noted that tenants are signing affidavits stating where they receive assistance, and the Authority is taking this affidavit with no additional verification. We found that the Authority has had difficulty gathering documentation from its tenants during the post-COVID period. When the Authority was unable to gather documentation in a timely manner, they would process annual actions with prior year information and increase the tenants’ rent to the flat rent, which is not a procedure outlined in the Housing Authority’s ACOP. This led to the tenants’ inability to meet the rental burden placed on them. However, as described in Finding 2023-001, tenants were not being evicted on a timely basis, leading to tenants accumulating extremely high Tenant Accounts Receivable balances. Criteria: The Code of Federal Regulations, the Housing Authority’s Admissions and Continued Occupancy Policy, and specific HUD guidelines in documenting and maintaining the Low-Income Public Housing tenant files. Recommendation: We recommend that the Authority conduct a thorough internal audit of the Low-Income Public Housing tenant files to determine the number of tenants who are noncompliant with their dwelling lease and/or the Admissions and Continued Occupancy Policy. The Authority should move forward with eviction proceedings for tenants unwilling to become compliant and negotiate repayment agreements for tenants who are willing. 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.

Finding 2022-001 ? Internal Controls over the Capital Fund Program and Capital Assets ? Significant Deficiency ? CFDA #14.850 & #14.872 Criteria ? Uniform Administrative Guidance and Standards for Internal Control in the Federal Government requires adequate internal controls over financial reporting to ensure that transactions are properly recorded and accounted for to permit the preparation of reliable financial statements and demonstrate compliance with laws, regulations, and other compliance requirements. Condition ? We examined the capital fund and related capital additions as part of our audit of the financial statements. We noted that in the prior audit period an accrual of $100,694 in grant CFP501-19 was not accounted for in the current period which resulted in grant revenue being overstated. We also noted that the client was tracking CFP costs incorrectly in their general ledger. Grant CFP501-19 costs were in excess of the grant amount by $120,900. These costs should have been expensed to grant CFP501-20 which consequently was understated by $102,010. This error was likely caused by the Authority using an interfund system involving the COCC whereby it pays for CFP costs and is reimbursed once draws are collected. We note that this is not an allowable practice. We have prepared journal entries to correct this for the audited financial statements. Failure to adequately track grant accounting can lead to misstatements in the financials and noncompliance with grant requirements. In the prior audit we noted that the Agency had a large outstanding Work in Process balance and we recommended that it be analyzed and moved to depreciable accounts. We note that the Authority has listened to that recommendation and moved $2,716,922 of 2016 bond additions to depreciable accounts. We find, however, that there is still a large amount of Work in Process that should be depreciated. CFP grants 501-17 and 501-18, which are fully spent, carry a $1,411,584 Work in Process balance at year end. Failure to move depreciable assets to the depreciation schedule in a timely manner distorts the financial statements and can lead to difficulties when attempting to accurately classify the assets on the depreciation schedule. As a mitigating factor we note that the Authority has had turnover in the capital fund tracking department and do not believe this to be a systemic issue. Effect ? The failure to properly account for CFP activity can result in noncompliance with laws and regulations related to grant programs. Failure to depreciate work in process in a timely manner can distort the financial statements and lead to difficulty in tracking physical assets. Recommendation ? We recommend that the Authority cease use of the interfund between CFP and the COCC and to track capital fund expenses and draws on a more direct basis. We recommend that current work in process be analyzed and reclassified to depreciable accounts.

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