MUNICIPALITY OF SALINASLocal Government

During my reporting test, we noted that the Program did not maintain adequate and complete accounting records and did not summarize the information of all the financial transactions related to assets, liabilities, revenues, and expenditures of the Program in formal accounting records.

During my reporting test, we noted that the Program did not maintain adequate and complete accounting records and did not summarize the information of all the financial transactions related to assets, liabilities, revenues, and expenditures of the Program in formal accounting records.

EFFECT The Program’s accounting records did not provide updated and complete financial information related to the financial position and the result of operations

FINDING NUMBER 2022-005 FEDERAL PROGRAM SECTION 8 HOUSING CHOICE VOUCHERS (CFDA 14.871) U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT REQUIREMENT COMPLIANCE AND INTERNAL CONTROL NONCOMPLIANCE REPORTING CONDITION During my reporting test, We noted that the Program did not maintain adequate and complete accounting records and did not summarize the information of all the financial transactions related to assets, liabilities, revenues, and expenditures of the Program in formal accounting records. CRITERIA Code of Federal Regulations 24, Section 982.158 (a) states that the PHA must maintain complete and accurate accounts and other records for the program in accordance with HUD requirements, in a manner that permits a speedy and effective audit. The records must be in the form required by HUD, including requirements governing computerized or electronic forms of record-keeping. Also, 2 CFR Section 200.302 (a) of the Uniform Guidance, states that the non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. CAUSE The Program failed to establish adequate internal controls to ensure that adequate and complete set of accounting records are maintain. EFFECT The Program?s accounting records did not provide updated and complete financial information related to the financial position and the result of operations.

FINDING NUMBER 2021-005FEDERAL PROGRAM SECTION 8 HOUSING CHOICE VOUCHERS (CFDA 14.871) U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENTREQUIREMENT COMPLIANCE AND INTERNAL CONTROLNONCOMPLIANCE REPORTINGCONDITION During my reporting test, I noted that the Program did not maintain adequate and complete accounting records and did not summarize the information of all the financial transactions related to assets, liabilities, revenues, and expenditures of the Program in formal accounting records.CRITERIA Code of Federal Regulations 24, Section 982.158 (a) states that the PHA must maintain complete and accurate accounts and other records for the program in accordance with HUD requirements, in a manner that permits a speedy and effective audit. The records must be in the form required by HUD, including requirements governing computerized or electronic forms of record-keeping.Also, 2 CFR Section 200.302 (a) of the Uniform Guidance, states that the non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.CAUSE The Program failed to establish adequate internal controls to ensure that adequate and complete set of accounting records are maintain.EFFECT The Program?s accounting records did not provide updated and complete financial information related to the financial position and the result of operations.RECOMMENDATION Technical training must be provided to the accounting staff to improve the recordkeeping of the financial transactions of the Program in order to maintain complete and accurate accounting records.PRIOR YEAR FINDING Not applicable.QUESTIONED COSTS NoneVIEWS OF RESPONSIBLEOFFICIALS AND PLANNEDCORRECTIVE ACTION The Municipality will proceed to train the Section 8 program personnel so that they can record all the transactions through the system in order to maintain complete and accurate accounting record.

FINDING NUMBER 2021-006FEDERAL PROGRAM SECTION 8 HOUSING CHOICE VOUCHERS (CFDA 14.871) U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENTREQUIREMENT COMPLIANCE AND INTERNAL CONTROLNONCOMPLIANCE SPECIAL TEST- ROLLING FORWARD EQUITY BALANCESCONDITION As part of my rolling forward equities test, we recomputed the Administrative Fee and HAP equities to validate the amounts reported in the Voucher Management System (VMS) during the fiscal year 2020-2021 and found the following situations:? The Program did not report in the VMS any amount of Administrative Fee Equity during the fiscal year 2020-2021.? The Program did not maintain adequate records and accounting to support a proper roll-forward of the Administrative Fee Equity.CRITERIA Code of Federal Regulations, 24 CFR, Section 982.158 (a) (b) states that the PHA must maintain complete and accurate accounts and other records for the program in accordance with HUD requirements, in a manner that permits a speedy and effective audit. The records must be in the form required by HUD, including requirements governing computerized or electronic forms of record-keeping. The PHA must comply with the financial reporting requirements in 24 CFR part 5, subpart H. Also, the PHA must furnish to HUD accounts and other records, reports, documents, and information, as required by HUD.CAUSE The Program has not established adequate accounting procedures to ensure that the administrative fee equity account is properly calculated and supported.EFFECT The program is not reporting the correct balances of the administrative fee equity to HUD.RECOMMENDATION I recommended management to prepare an analysis of the accounting of the administrative fee equity account and adjust or correct any errors that affects this equity balance in order to report the correct balance to HUD.QUESTIONED COSTS NonePRIOR YEAR FINDING Not applicable.VIEWS OF RESPONSIBLEOFFICIALS AND PLANNEDCORRECTIVE ACTION We will prepare an analysis of the administrative fee equity account to adjust and correct any error that can affect the equity balance.

SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ________________________________________________________________________________________________________________________________ FINDING NUMBER 2020-005 FEDERAL PROGRAM SECTION 8 HOUSING CHOICE VOUCHERS (CFDA 14.871) U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT REQUIREMENT COMPLIANCE AND INTERNAL CONTROL NONCOMPLIANCE ELIGIBILITY CONDITION In order to test the eligibility process, I selected a sample of ten (10) participants? files and noted the following conditions: a. During the Covid-19 pandemic, I noted that the Program revised the income of the participants. In two (2) participant?s files evaluated, I found that during an interim reexam, the Program eliminated the income in the form 50058 without documenting in the files the reasons for such determination. b. In three (3) participant?s files, I found that one (1) employment certification and two (2) child support certifications used for the verification of the annual income during the annual reexam were not updated. c. The Program did not used consistently the payment standard schedule. In addition, the Program has not established policies for the use of the annual payment standard. CRITERIA Code of Federal Regulation 24, Subpart K, Section 982.516 (a) (1) states that the PHA must conduct a reexamination of family income and composition at least annually; (2) the PHA must obtain and document in the tenant file third party verification of the following factors or must document in the file why third party verification was not available: (A) reported family annual income; (B) the value of assets; (C) expenses related to deductions from annual income; and (D) other factors that affects the determination of adjusted income. Also, 24 CFR Section 982.503 (a) states that (1) HUD publishes the fair market rents for each market area in the United States. The PHA must adopt a payment standard schedule that establishes voucher payment standard amounts for each FMR area in the PHA jurisdiction. For each FMR area, the PHA must establish payment standard amounts for each ?unit size.? Unit size is measured by number of bedrooms (zero-bedroom, one-bedroom, and so on). (2) The payment standard amounts on the PHA schedule are used to calculate the monthly housing assistance payment for a family (?982.505). CAUSE The Program?s internal controls and procedures failed to assure that the HAP determination process was performed according to program requirements and guidelines. EFFECT The lack of monitoring and adequate supporting documentation during the eligibility and HAP calculation processes could lead to the approval and disbursement of improper amounts. RECOMMENDATION I recommend management to continue strengthening its internal control procedures to ensure that the HAP determination process is performed according to program requirements and guidelines. QUESTIONED COSTS None PRIOR YEAR FINDING Not applicable. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION We have instructed the Section 8 Program Staff to ensure that the HAP determination process is performed in accordance with program requirements.

SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ________________________________________________________________________________________________________________________________ FINDING NUMBER 2020-006 FEDERAL PROGRAM SECTION 8 HOUSING CHOICE VOUCHERS (CFDA 14.871) U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT REQUIREMENT COMPLIANCE AND INTERNAL CONTROL NONCOMPLIANCE REPORTING CONDITION During my reporting test, I noted that the Program did not maintain adequate and complete accounting records and did not summarize the information of all the financial transactions related to assets, liabilities, revenues, and expenditures of the Program in formal accounting records. CRITERIA Code of Federal Regulations 24, Section 982.158 (a) states that the PHA must maintain complete and accurate accounts and other records for the program in accordance with HUD requirements, in a manner that permits a speedy and effective audit. The records must be in the form required by HUD, including requirements governing computerized or electronic forms of record-keeping. Also, 2 CFR Section 200.302 (a) of the Uniform Guidance, states that the non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. CAUSE The Program failed to establish adequate internal controls to ensure that adequate and complete set of accounting records are maintain. EFFECT The Program?s accounting records did not provide updated and complete financial information related to the financial position and the result of operations. RECOMMENDATION Technical training must be provided to the accounting staff to improve the recordkeeping of the financial transactions of the Program in order to maintain complete and accurate accounting records. PRIOR YEAR FINDING Not applicable. QUESTIONED COSTS None VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION The Municipality will proceed to train the Section 8 program personnel so that they can record all the transactions through the system in order to maintain complete and accurate accounting record.

SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ________________________________________________________________________________________________________________________________ FINDING NUMBER 2020-007 FEDERAL PROGRAM SECTION 8 HOUSING CHOICE VOUCHERS (CFDA 14.871) U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT REQUIREMENT COMPLIANCE AND INTERNAL CONTROL NONCOMPLIANCE SPECIAL TEST- UTILITY ALLOWANCE SCHEDULE CONDITION The Program did not maintain an updated utility allowance schedule. During my utility allowance schedule test, I noted that the Program did not review the utility rates data within the last twelve (12) months to ascertain if there has been a change of ten percent or more in utility rates. CRITERIA Code of Federal Regulations, 24 CFR, Section 982.517 (c) (1) states that the PHA must review its schedule of utility allowance each year and must revise its allowance for a utility category if there has been a change of 10 percent (10%) or more in the utility rate since the last time the utility allowance schedule was revised. The PHA must maintain information supporting its annual review of utility allowance and any revisions made in its utility allowance schedule. CAUSE The Program has not established the procedures to revise the utility rates, at least annually, to determine if it is necessary to update the utility allowance schedule. EFFECT The absence of an updated utility allowance schedule could affect the amounts determine in the HAP calculations. RECOMMENDATION I recommended management to revise and update annually, if necessary, its utility allowance schedule as required by this compliance requirement. QUESTIONED COSTS None PRIOR YEAR FINDING Not applicable. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION We will resume the contract in order to carry out the study of the Utility Allowance as required.

SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS ________________________________________________________________________________________________________________________________ FINDING NUMBER 2020-008 FEDERAL PROGRAM SECTION 8 HOUSING CHOICE VOUCHERS (CFDA 14.871) U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT REQUIREMENT COMPLIANCE AND INTERNAL CONTROL NONCOMPLIANCE SPECIAL TEST- ROLLING FORWARD EQUITY BALANCES CONDITION As part of my rolling forward equities test, I recomputed the Administrative Fee and HAP equities to validate the amounts reported in the Voucher Management System (VMS) during the fiscal year 2019-2020 and found the following situations: ? The Program did not report in the VMS any amount of Administrative Fee Equity during the fiscal year 2019-2020. ? The Program did not maintain adequate records and accounting to support a proper roll-forward of the Administrative Fee Equity. CRITERIA Code of Federal Regulations, 24 CFR, Section 982.158 (a) (b) states that the PHA must maintain complete and accurate accounts and other records for the program in accordance with HUD requirements, in a manner that permits a speedy and effective audit. The records must be in the form required by HUD, including requirements governing computerized or electronic forms of record-keeping. The PHA must comply with the financial reporting requirements in 24 CFR part 5, subpart H. Also, the PHA must furnish to HUD accounts and other records, reports, documents, and information, as required by HUD. CAUSE The Program has not established adequate accounting procedures to ensure that the administrative fee equity account is properly calculated and supported. EFFECT The program is not reporting the correct balances of the administrative fee equity to HUD. RECOMMENDATION I recommended management to prepare an analysis of the accounting of the administrative fee equity account and adjust or correct any errors that affects this equity balance in order to report the correct balance to HUD. QUESTIONED COSTS None PRIOR YEAR FINDING Not applicable. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION We will prepare an analysis of the administrative fee equity account to adjust and correct any error that can affect the equity balance.