Bay City Housing AuthorityLocal Government

REFERENCE NUMBER: 2021-001 FEDERAL PROGRAM: Housing Choice Voucher Program-#14.871 NAME OF FEDERAL AGENCY: U.S. Department of Housing and Urban Development (HUD) COMPLIANCE REQUIREMENT: Eligibility Criteria According to the 2021Compliance Supplement for the Section 8 HCV Program, regarding the Eligibility Compliance requirement, the PHA must do the following: (1) As a condition of admission or continued occupancy, require the tenant and other family members or provide necessary information, documentation, and releases for the PHA to verify income eligibility (24 CFR sections 5.230, 5.609, and 982.516). (2) For both family income examinations and reexaminations, obtain and document in the family file third-party verification of (a) reported family annual income; (b) the value of assets; (c) expenses related to deductions from annual income; and (d) other factors that affect the determination of adjusted income or income based rent (24 CFR section 982.516). (3) Determine income eligibility and calculate the tenant?s rent payment using the documentation from third-party verification in accordance with 24 CFR part 5 subpart F (24 CFR section 5.601 et seq.) (24 CFR sections 982.201, 982.515, and 982.516) (4) Reexamine family income and composition at least once every 12 months and adjust the tenant rent and housing assistance payment as necessary using the documentation from third-party verification (24 CFR section 982.516) In addition, as per 24 CFR section 982.503, the PHA must adopt a payment standard schedule that establishes voucher payment standards amounts for each Fair Market Rents (FMR) area in the PHA jurisdiction. For each FMR area, the PHA must establish payment standard amounts for each ?unit size.? The payment standard amounts on the PHA schedule are used to calculate the monthly housing assistance payment for a family. Further, according to the Compliance Supplement, if the cost of utilities is not included in the rent to the owner, the PHA uses a schedule of utility allowances to determine the amount an assisted family needs to cover the cost of utilities. Condition 1. In 2 instances out of a sample of 20 tenant files tested, we noted the following regarding payment standards: ? The payment standard amount reported on the Form 50058 was for the number of bedrooms on voucher, which was a higher amount than the payment standard for the number of bedrooms in unit. Based on federal guidelines, the payment standard is the lower of the payment standard for the family unit size or the payment standard for the size of the dwelling unit rented by the family. Therefore it appears the lower amount should have been used on the Form HUD 50058. ? The payment standard amount reported on Form HUD 50058 was $1,539, however this is different from the $1,399 payment standard amount for the number of bedrooms for this unit. 2. For 2 instances out of a sample of 20 tenant files reviewed in which we compared the utility allowance amounts on the supporting schedules provided by the PHA to the approved annual utility allowance schedules, we noted that the total amounts did not agree. 3. Regarding Form HUD-9886, used as approval for authorization to release information and as privacy notice, we noted 1 instance in which the form was not signed by tenant and 1 instance in which the form provided for lease with effective date of 3/1/2021 was dated 2/11/2020, so it does not appear the form was provided at the time of recertification or it was dated incorrectly. 4. In 1 instance we noted that supporting documentation for family reported income was not available for our review Questioned Costs None Effect For a sample of tenant files reviewed, it appears supporting documentation for some of the information in tenant files used as part of the eligibility determination was not maintained or executed in accordance with Section 8 program federal guidelines. Recommendation We recommend that the PHA improve its procedures regarding processing Section 8 program eligibility determinations and related calculations so that supporting income documentation, required HUD Forms and payment standards and utility allowance used are carefully reviewed to ensure that information is properly executed and documented in the tenant file for the correct period and family unit. View of Responsible Official PHA is in agreement

REFERENCE NUMBER: 2021-002 FEDERAL PROGRAM: Housing Choice Voucher Program-#14.871 NAME OF FEDERAL AGENCY: U.S. Department of Housing and Urban Development (HUD) COMPLIANCE REQUIREMENT: Reporting Criteria HUD-50058, Family Report (OMB No. 2577-0083) ? The PHA is required to submit this form electronically to HUD each time the PHA completes an admission, annual reexamination, interim reexamination, portability move-in, or other change of unit for a family. The PHA must also submit the Family Report when a family ends participation in the program or moves out of the PHA?s jurisdiction under portability (24 CFR Part 908 and 24 CFR section 982.158). Condition For 2 instances out of a sample of 20 Form HUD-50058 submissions tested, we noted that despite attempts to complete the submissions on a timely basis for at least one of these instances, electronic submissions were submitted 5 months or more after the HUD 50058 effective date, as follows: HUD 50058 Effective Date Transmission Date 3/1/2021 9/7/2021 10/1/2020 9/7/2021 Questioned Costs None Effect For the 2 samples noted, the PHA does not appear to be completing HUD 50058 electronic submission on a timely basis in order to support compliance with federal reporting compliance requirements. Recommendations We recommend that the PHA enforce procedures to ensure HUD 50058 electronic submissions are completed timely in accordance with Section 8 program compliance requirements. View of Responsible Official PHA is in agreement.

REFERENCE NUMBER: 2021-003 FEDERAL PROGRAM: Housing Choice Voucher Program-#14.871 NAME OF FEDERAL AGENCY: U.S. Department of Housing and Urban Development (HUD) COMPLIANCE REQUIREMENT: Special Test and Provisions Criteria Reasonable Rent The PHA?s administrative plan must state the method used by the PHA to determine that the rent to owner is reasonable in comparison to rent for other comparable unassisted units. The PHA must determine that the rent to owner is reasonable at the time of initial leasing. Also, the PHA must determine reasonable rent during the term of the contract (a) before any increase in the rent to owner, and (b) at the HAP contract anniversary if there is a five percent decrease in the published Fair Market Rent in effect 60 days before the HAP contract anniversary. The PHA must maintain records to document the basis for the determination that rent to owner is a reasonable rent (initially and during the term of the HAP contract) (24 CFR sections 982.4, 982.54(d)(15), 982.158(f)(7), and 982.507). Housing Quality Standards Inspections The PHA must inspect the unit leased to a family at least annually to determine if the unit meets Housing Quality Standards (HQS). The PHA must prepare a unit inspection report (24 CFR sections 982.158(d) and 982.405(b)). Record Keeping The PHA?s policies for record keeping and record retention in the Section 8 Admin Plan refer to 24 CFR 982.158 which indicates that the PHA must keep the following records for at least three years: An application from each ineligible family and notice that applicant is not eligible, and also applications for assisted leases. Condition 1. Reasonable Rent ? In 3 instances out of a sample of 20, we noted that Rent Reasonableness form says ?rent is not reasonable? and the contract rent per HUD 50058 was higher than the suggested rent, however no records appeared to be available to document the basis for the determination that the rent to the owner was reasonable. Condition (continued) ? For 1 sample out of 20 tested, we noted that the rent reasonable determination appeared to have been made after the effective date of lease, instead of at the time of leasing. 2. HQS Inspections - We noted 3 instances for certifications effective during FY 2021, in which the PHA included a copy of the HQS waiver chart, however a certification that the owner ?has no reasonable basis to have knowledge that life threatening conditions exist in the unit? did not appear to be documented in the tenant file in accordance with guidelines for the COVID 19 waivers for HQS inspections. Such guidelines indicate that the PHA, at a minimum, must require this owner certification. 3. Recordkeeping ? ? We noted for 5 out of a sample of 16 waiting list samples that applications for families that were not admitted into the program were not available for our review. The applications were dated from April 15, 2019 to 2021, and based on the PHA?s policies, it appears these applications should be kept. ? For 2 out of a sample of 6 new participants that were admitted to the program, we noted the following: - In one instance, the related application did not contain a date so supporting records do not appear complete - In one instance, the original application date as per the waiting list was 4/29/2019, however, the application provided for our review was dated 2/25/2021 Questioned Costs None Effect For the samples noted, the PHA does not appear to be maintaining supporting documentation for rent reasonableness and HQS inspections to support compliance with Section 8 program Special Tests and Provisions and COVID 19 waivers for HQS inspections requirements. Also, applications for sample of new family admissions do not appear to be maintained in accordance with record keeping policies. Recommendations Reasonable Rent We recommend that the PHA continue to utilize its resources for ensuring that rent reasonableness determinations are properly made with the required, correct information HQS Inspections For all tenant files in which there was a waiver for Section 8 HQS, in accordance with HUD guidelines, the PHA must ensure that the certification made by the owner is in the tenant file for the correct period that indicates that the owner has no reasonable basis to have knowledge that life threatening conditions exist in the unit. Recordkeeping We recommend that the PHA improve its record keeping and record retention procedures by ensuring that applications for families are properly dated and maintained as required. View of Responsible Official PHA is in agreement

REFERENCE NUMBER: 2021-004 FEDERAL PROGRAM: Public and Indian Housing NAME OF FEDERAL AGENCY: U.S. Department of Housing and Urban Development (HUD) Government Audit Standards Finding ? Compliance with regulations Criteria Form HUD-50058 requirements - Based on the HUD Form 50058 instructions and HUD guidelines for computation of tenant rent, the utility allowance indicated on the Form HUD 50058 is the monthly allowance amount for tenant supplied utilities that apply to the unit. Additionally, tenant rent is the amount the family pays to the PHA after deducting the utility allowance from the applicable rent. Eligibility Requirements- Based on the Public Housing Compliance Supplement, the PHA must obtain and document in the family file third party verification of reported annual income. Condition Form HUD-50058 requirements Based on our review of a sample of tenant files under the Public Housing Low Rent program, we noted that for six of the files reviewed, the approved utility allowance amounts which are maintained by the PHA and appear to be correct in the PHA?s software, were not reflected in the HUD Form 50058s for the applicable bedroom size and unit. Eligibility Requirements Additionally, we noted the following, out of a sample of 7 Low Rent tenant files: ? 1 instance in which the total rent as per tenant file did not agree to the amount according to the rental register. ? 1instance in which the supporting documentation for other income was not available for our review. ? 1 instance in which supporting documentation for other income was not available for our review, and the income reported on HUD 50058 did not agree to PHA?s income calculation Cause ? It appears a computer error during the recertification process may have contributed to the cause for the differences in the utility allowance amounts between the approved rates and those used on the form HUD-50058. ? Supporting documentation for other income apparently was not included in the tenant files. Questioned Costs None Effect For the sample of tenant files reviewed, it appears supporting documentation for some of the information in tenant files used as part of the eligibility determination was not maintained or executed in accordance with Low Rent program federal guidelines. Recommendations We recommend that the PHA improve its procedures regarding processing Low Rent program eligibility determinations and related calculations so that supporting income documentation and utility allowances used are carefully reviewed to ensure that information is properly executed and documented in the tenant file. View of Responsible Official PHA is in agreement

Housing Choice Voucher Program-#14.871-Low Rent Program-CDFA # 14.850-Capital Fund Program-CDFA #14.872-Award Years 2018, 2019 and 2020 2020-001-Internal Controls Over Disbursements and Receipts Need Improvement-Allowable Costs Criteria or Specific Requirements All disbursements should be supported by documentation which indicates the disbursement was legitimate, necessary to support the mission of the Authority, and was properly classified by account number in the financial information. Policies regarding the receipt, recording, and timely payments of liabilities needs to not only be in place, but also followed. Condition found a) A substantial number of disbursements were miscoded and required correction. The person doing the original coding at the Authority office, while she appears to be conscientious, is not a trained accountant. Therefore, for an adequate internal control to be operating, the supporting detail must be presented to someone at the fee accounting office who is a trained accountant. The latter should review the support and coding on a heavy test basis, and documentation kept of the checks. In turn, at least on a quarterly but preferably more frequently, the in-line fee accountant should be checked by a supervisor, and the documentation of that check also kept. It appears that the supporting detail was often not sent to the fee accountant?s office, especially early in the audit year. We recognize that the fee accountant cannot timely do their job without the support available to check. b) Revenues regarding the CFP program were materially misstated. c) There were unsupported payments noted in our tests, which means these payments were also considered improper, d) A vacation and sick leave accrual was not always in accordance with board policy. We do note however, that it appears the board reviewed and approved this revenue before payment was made. e) Liabilities, especially payroll tax liabilities, were not timely paid. In addition, penalties and interest were incurred, which may or may not be waived by the Internal Revenue Service. f) Payments to the defined contribution plan were not timely paid and an underpayment exists at year end. This is a violation of both federal and state pension trusts law. Context a) and b) The General Fund is comprised of both the Low Rent and Capital Fund programs. Both total liabilities and total revenue were materially misstated before audit adjustment. In our opinion, this risk would have been minimized if the fee accountant had timely received the back-up detail for disbursements and receipts. c) The grand total of all Authority disbursements was approximately $2,071,204. Our initial sample of General Fund disbursements was 43 items that totaled $288,750. The six that lacked support totaled $8,149. In addition, we reviewed 100% of the charges of $21,750 incurred on the VISA credit card program. Approximately $5,528 lacked adequate support, which covered all three authority programs. The total of improper payments noted was $13,677. In addition, the Houston HUD Office, in a November 20, 2020 letter addressed to the Board Chair, noted an additional $7,537 of expenditures made before year end, for which HUD cites lack of proper support documentation. We reviewed 53 disbursements made from the Housing Choice Voucher Fund that totaled $310,704. All appeared to be properly supported, as processed and paid to the proper landlord. However, we noted errors in calculation of the Housing Assistance Payment (HAP), as noted in Audit Finding 2020-002. After these initial tests, we examined the supporting detail in various substantive tests. All that we reviewed in these tests appeared to be properly supported. d) The revised sick and vacation policy adopted October 15, 2019 was not followed in one instance. An employee accrued 40 hours of vacation by July 31, 2019. The revised policy states that unused vacation and sick time may not be carried over. However, in December 2019, the employee was paid for this 40 hours, which was not in accordance with the revised policy. However, we note that the board of commissioners approved the payment for these 40 hours in December 2019. e) Procedures were not in place to timely review this payment and file for timely payment all invoices and statements for liabilities. Payroll taxes not only include obligations of the Authority but also remission of withholdings from employee checks. f) Obligations to the defined contribution plan should be made monthly and remitted monthly. Possible asserted effect-(cause effect) Cause a, b, and c) The reason that the disbursements and receipts detail was not timely sent to the fee accountant and properly classified after the fee accountant?s review is unknown. d) It appears that changes to the adopted policy regarding vacation and sick time made during the fiscal year may have added to the confusion. e and f) Procedures in place during the fiscal year were not adequate to timely process and pay the liabilities. Effect a-f) Financial information was not as reliable as it should be. Penalties and interest were incurred with the Internal Revenue Service. A contract person retained by the Authority is communicating with the IRS, in an attempt to get the penalties and interest waived. At audit year-end, an estimated $5,081 underpayment to the retirement, defined contribution plan was owed. This was comprised of $2,772 of employer contributions and $2,309 of employee contributions. Questioned costs None. However as noted above, we noted improper payments of $13,677. Also as noted above, HUD noted an additional $7,537. Recommendations to prevent future occurrences a. The person doing the original coding at the Authority should seek feed- back from the fee accountant?s office, as to whether the fee accountant is revising the coding. Since the person at the Authority, while conscientious, is not a trained accountant, the fee accounting individual should review the coding on all disbursements. The fee accountant should document this coding check by the use of checklists or other paper sources available to a third party. The Authority should attach documentation to all disbursements and receipts and make them timely available to the fee accountant. b. ELOCCS and other backup for all receipts, especially categorization for each CFP advance, should be timely sent to the fee accountant. We seldom work with Executive Directors who are trained accountants. But E.D.s must and usually do learn to review the highlights of the monthly financial statements, and in particular, to review the proper categorization of CFP advances by individual CFP program. c. The monthly work should be timely sent to the fee accountant. However, the E.D. should review the timely work to ensure that the person responsible at the Authority to attach the proper support has done so. d. Regarding payroll, the Executive Director should meet with all employees and get agreement on the accrued but unused vacation and sick time to date. In addition, the amounts accrued by employee should be reviewed with the Board of Commissioners. This board review does not have to be done indefinitely, but at least through meetings that would cover the audit year end March 31, 2021 accruals. e. and f. The Authority should consider continuing to use a local contract person to review and make sure that IRS and pension payments are timely made. For all the above, policies should be adopted and followed. Origination Date and prior year reference (if applicable) The finding originated fiscal year March 31, 2018. View of Responsible Official I am La Wanda Davis, Executive Director and Designated Person to answer these findings. We will do as the auditor suggests. Since year end, we have adopted the policies that cover the above and also that HUD recommended we adopt. However, I also note the following: Our authority was under manual review by HUD-Houston, from 2018 to the present. We had to submit all invoices and vouchers to HUD for their approval. All payouts of CFPs were approved by a HUD designated person. All invoices had a description of the requested amounts. HUD was informed of our concern of the lack of accountability HUD was taking on the issue. HUD is also suggesting that our authority owes $13,000 in late penalties to the IRS. The IRS has not made any determination on the late fees and penalties at this time. The authority awaits a decision on the waiver.

Housing Choice Voucher Program #14.871-Award Years 2018, 2019, and 2020 2020-002-Various Errors Noted in Program-Special Tests Criteria or Specific Requirement Housing Choice Voucher [Section Eight] payments, to be calculated correctly, should have rent reasonable tests done at move-in and for certain landlord payment increases (24 CFR 982.4), proper utility allowances used (24 CFR 982.517), and Housing Assistance Payments (HAPs) and tenant rents properly calculated. This includes the use of proper payment standards that fall within a range of Federal Market Rates (FMRs) for the Authority?s geographical area (CFR 982.503 and the Housing Choice Voucher Handbook). In addition, applicants should be properly selected from the waiting lists (24CFR 982.54). The Section 8 Management Assessment Certification (SEMAP), a reporting tool prepared by Management and submitted to HUD, should include proper calculations. Condition found We reviewed twenty-five tenant files. Twelve were for audit year move-ins, and thirteen were for annual recertifications done in the audit year. a. Of the twelve move-ins, three were not entered on the waiting lists. b. Of the twelve move-ins, four did not have the required rent reasonableness tests in the files. c. Of the twenty- five files reviewed, six used an incorrect utility allowance. d. In twenty-two of the reviewed files, an incorrect payment standard was used. If the gross rent is less than the payment standard, the HAP is not affected by the incorrect payment standard. However, in twenty-one of the files with the incorrect payment standard, the latter was less than the gross rent. This resulted in all of the twenty-one HAPs and corresponding tenant rent to owner being calculated incorrectly. e. On the SEMAP certification, Number 3, Determination of Adjusted Income, Management checked the box that obtained third party verification of income and correctly calculated adjusted gross income in ?at least 90% of files sampled.? Documentation was present that Management reviewed seventeen files in its quality control review, and noted 2 errors. This is a percentage of less than 90%-88% (15 divided by 17). Context a) Section Eight staff surmises that the required checks and paperwork on the three applicants had been completed. They surmise that the former employee responsible for these three simply forgot to click them onto the waiting list. b) Section Eight staff note that the four move-ins for which there was no rent reasonableness checks moved in before December 27, 2019. They claim that principally due to turnover, the employees were not admitted into the system until December 27, 2019. c) The incorrect six utility allowances used that we noted in our tests did not affect the HAPs paid or the tenant rent. This is because even using the correct utility allowance, the payment standard was still less than the recalculated gross rent. d) We could not find a written record of what the payment standards were at any specific time during the audit year. A July 16, 2019 board resolution noted that the payment standards were approved at 110%. However, it did not list the standards by bedroom size or the effective date of change. A September 17, 2019 board resolution notes that payment standards and FMRs were approved, but gives no specifics. The specific standards or the date of change, or even if this is different than the July 16th resolution, are not explained. We could not find the specific standards by bedroom size or the effective date of change from any other written record. For the audit, we used the payment standards and the effective dates of change that were given to us by staff and management. As noted above, using the standards provided by staff and Management, in twenty-two of the twenty-five files tested, the payment standard for the 50058 tested did not agree to the client-provided list of standards in effect at the time of move-in or annual recert. In the twenty-two files for which the payment standard was incorrect, the total payments per the tested 50058s were $11,588. The recalculated amounts, using the payment standards in effect per Management, was $10,211. When the three 50058s tested that displayed no exceptions is factored in, per the total test, the correct HAPs total was 90 % of the amount actually paid ($12,158 divided by $13,505). Per the financial statements, the total HAPs paid for the year was $1,183,628, excluding Ports. If the error rate per our tests applied the same to the total population, there was an overpayment of HAPs of approximately, $118,400 ($1,183, 628 times 10 %). For the twenty-two 50058s which appear to be in error, the total tenant rent to owner was $5,753. The total amount recalculated is $8,229. All 50058s were incorrect. When the HAP is mis-figured, the tenant rent to owner will also be misstated. e) The sample size for the SEMAP indicator for Adjusted Gross Income met the standards per the federal regulations. But the error rate was calculated in error. Cause It appears that the Authority hired persons to handle the Section Eight program who apparently had to learn on the job. The persons assigned to supervise them also had insufficient experience with the Section Eight program and SEMAP. Turnover of personnel has also contributed to the issues noted. Effect Various regulations for the Housing Choice Voucher Program were not complied with. It appears that HAPs may have been overpaid by a significant amount. Questioned Costs None. However, it appears the HAP payments were overpaid, as noted above. Recommendations to prevent future occurrences If the current personnel as it consists is expected to make minimal errors in the future, the Executive Director must gain a thorough understanding of the Housing Choice Voucher program and test check on a heavy test basis in all areas. Currently the staff person doing the primary Section Eight work appears to be conscientious and is learning quickly. For years, two experienced people instead of one handled the Section Eight program and the E.D. reviewed. This program does not have the total experienced man (woman) hours it previously had. Origination date and prior year reference The finding originated in the fiscal year ended March 31, 2018. View of Responsible Official We will do as the auditor suggests. We note that the utility allowances were timely reviewed during the year. The rent reasonableness survey is now current. Even with the COVID-19 issues, we have been able to re-exam our files on a timely basis.

Section Eight Housing Choice Voucher Program- CDFA #14.871, Low Rent Program-CDFA # 14.850 and Capital Funding Program # 14.872-Award Year 2018 and 2019 2019-002-Procurement and Monitoring of Rehabilitation and Capital Expenditures-Procurement Criteria and Condition Federal regulations and the procurement policy should be complied with regarding the proper purchasing of goods and services. In addition, monitoring of the progress and quality of rehabilitation and capital expenditures must be done and documented, according to federal regulations. Condition found a) The Authority expended a minimum of $167,975 during the audit year, spread to five contractors for which we could not find other bids, or documentation of efforts to obtain other bids. b) As noted in the above audit finding, the Authority incurred ineligible legal expenses totaling at least $44,250. Although the Authority should not have done this in any event, we also note that the Authority did not follow proper procurement procedures in the retention of the attorney. c) We were not able to review the Invitation to Bid or other efforts to secure the construction contractors. We do not know if the Authority checked the contractors? insurance bonds, checked for HUD debarment or denial, or referrals. We do not know if Authority representatives checked the quality of the work, its adherence to specs, or was done timely. We do not know if the contractors complied with the Davis-Bacon Act. Context a) There is no documentation that the Authority?s Procurement Policy was complied with. b) Professional services must also be secured in compliance with the Procurement Policy and federal regulations. c) Procurement and monitoring must not only be done but also documented in a sufficient manner that a third party can review what was done. Possible asserted effect (cause effect) Cause The cause is unknown. Effect There is no documentation that the most effective vendors were selected, using various criteria for selection as outlined in the Procurement Policy and federal regulations. Also, we were not able to review whether the proper specs, or quality of work was met, since no monitoring reports were available to us. Questioned Costs None Recommendations to prevent future occurrences Management personnel should attend seminars and learn what needs to be done. We understand this is already been done in some respects. We recommend that Management identify every service or product that the Authority has expended funds since April 1, 2019 for which procurement applies. We have consulted with Management on this and they should not hesitate to contact us with questions. Then, a folder or file should be established for every procurement item. In this file, there should be documentation on efforts to obtain other quotes, checking of insurance, etc. of contractors (if applicable), the criteria for selection and the reason or points for the awarded vendor, monitoring reports (if available), and documentation of Davis-Bacon compliance (if applicable). Origination Date and Prior Year Reference (if applicable) The finding originated current fiscal year ended March 31, 2019. Procurement was a management letter item in the prior year. In our opinion, in the prior year procurement issue was not significant enough to rise to an audit finding. View of Responsible Official We have attended seminars on Procurement and other issues. We will do as the auditor suggests.

Section Eight Housing Choice Voucher Program-CDFA #14.871-Award Year 2018 and 2019 2019-003-SEMAP Samples Not Supported, Lack of Documented Quality Control, Utility Allowances Not Timely Reviewed-Special Tests Criteria or Specific Requirement SEMAP was required to be reported to HUD for the year. This was done. Quality control samples for many of the financial indicators must be performed and documented. Payment standards should be annually reviewed. Utility allowances should be reviewed annually and adjusted, if necessary. The reasonable rent survey must be up to date and reasonable rent surveys done for move-ins and to support certain landlord rent increases. Condition Found Management answered ?yes? as to the results of the samples that were required to be performed by Authority personnel. However, it appears these samples were not actually done. Utility allowances were last reviewed before audit year-end in September 2016. The reasonable rent survey has not been recently updated. Context Even if SEMAP reporting did not exist, the Authority should perform and document the essentially same quality control samples. Statement on Auditing Standards (SAS) #115 states ?inadequate design of controls over a significant account or process? may be significant deficiency or a material weakness. Lack of documented quality control samples is either a significant deficiency or a material weakness, as defined by the Standard. Possible asserted effect (cause effect) Cause The cause is unknown. With only one exception, the personnel during the audit year was different than the current personnel. The current Executive Director did not assume this position until after year end. Effect Internal controls over the calculation of tenant rent, HAP payments, and various aspects of compliance were not as strong as they should have been. Utility allowances were not timely reviewed to see if they should be changed. The rent reasonableness tests on move-ins were not performed or documented. Either the waiting lists were not properly maintained, or there was a lack of proper transition to new personnel, since tested move-ins could not be located on the moving lists. Questioned Costs None Recommendations to prevent future occurrences Quality control checks should be done throughout the year, on a representative basis, which covers the entire population. The checks need to be properly documented in writing and be available for third party review. Payment standards need to timely reviewed. Utility allowances should be reviewed at least annually. The reasonable rent survey should be brought up to date and then performed for all move-ins and when the landlord requests at least a 10% rent increase. Normally at least three comparables should be listed. The Authority might consider contacting HUD to see if HUD will accept less than three. The move-ins should be listed on the waiting list. A paper trail needs to exist to prove the move-in tenant was offered in the proper order. Perhaps the best way to document this is to note in the software notes why the persons, if any, ahead of the move-in did not actually move-in-no longer interested, unable to contact, etc. Origination Date and Prior Year Reference (if applicable) The finding originated fiscal year ended March 31, 2018. View of Responsible Official We began performing documented quality control checks in October 2019. Utility allowances have been reviewed by a qualified third party since year end and no revision was deemed necessary. Payment standards were reviewed and revised after year end. We have contracted with a qualified third party to update our reasonable rent survey. We contacted them recently and they are almost finished. We are now making notes in our waiting list software as to the proper order of offers.

Section Eight Housing Choice Voucher Program-CDFA# 14.871-Award Year 2018 and 2019 2019-004-Tenant Files and Waiting List Deficiencies-Special Tests Criteria and specific requirement A third party should be able to review the move-ins for the year and review whether they were properly offered, according to the waiting lists. In addition, reasonable rent surveys should be present for move-ins. Condition found For the files we tested, we could not determine that the current year admits that we reviewed had arrived at the top of the list and were offered in the proper order. In addition, reasonable rent surveys were not present in any of the move-in tested files. Context We reviewed twenty-five files. Of these, ten were current year move-ins. Our sample was not a statistically valid sample. Possible asserted effect (cause effect) Cause The cause is unknown. As noted above, with the exception of one, all of the current personnel were not with the Authority in the audit year. Questioned Costs None Recommendation to prevent future occurrences Quality control checks should be done throughout the year, on a representative basis, which covers the entire population. The checks need to be properly documented and available for third party review. Origination Date and Prior Year Reference (if applicable) View of Responsible Official We have made the changes as noted above for Finding 2019-004 above.

Section Eight Housing Choice Voucher Program-CDFA #14.871, Low Rent Program-CDFA#14.850 and Capital Funding Program #14.872-Award Year 2018 and 2019 2019-005-Financial Reporting Not Timely Done-Reporting Criteria and specific requirement In accordance with 24 CFR Section 135.3, the Authority is required to submit the HUD 60002 information using the automated Section 3 Performance Evaluation and Registry System (SPEARS) regarding economic opportunities for low and very low-income families. Condition found The HUD 60002 report for the year ended March 31, 2019 has not been filed. Context The audit report and the HUD 60002 covers the financial and operational activities of the Authority. Possible asserted effect (cause effect) Cause The current Executive Director, who is ultimately responsible for this report, did not become the full-time E.D. until after year end. Effect Audited financial and other reporting data was not available to HUD on a timely basis. Questioned Costs None Recommendations to prevent future occurrences Management should make sure the report is properly prepared and timely filed. Origination date and prior year reference (if applicable) The finding originated fiscal year ended March 31, 2018. View of Responsible Official We will prepare and submit any past due 60002 reports within sixty days of the date of this audit report.

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