Housing Authority of the City of Marshall

2020-003. Accounts Payable ? Port-In Criteria: All account balances reported in the financial statements must be supported by adequate documentation. Condition: Accounts payable ? PHA projects under HCV program in the amount of $11,933 did not reconciled to the sub-ledger. Although, the PHA maintained detailed activities of the portable participants, I was unable to trace such payable to accounting records (invoice or supporting documentation from the third party) that agreed to the G/L. Questioned Costs: None noted. Effect: The aforementioned account may not be an accurate representation of the account category. Cause: It appears that PHA personnel does not possess the necessary skills to ensure all accounts are properly recorded on the G/L. Recommendation: I recommend that the PHA provide necessary training to its personnel, so all accounts are adequately recorded in the financial statements and liability, if any are paid in a timely manner. Management?s Response: During the administrative staff changeovers occurring in 2019 during the former administration, the Public Housing Program manager was made the Section 8 HCV program manager and now continues in that position. There was neither sufficient notice nor time for the newly appointed HCV staff to assimilate fully what was required because of these circumstances of this change. As the 2020 year progressed, the new HCV manager learned the basics of portability but agrees that she will be willing to do follow-up training concerning portability accounting. The same will go for the Deputy Director/Office Manager. But will also bring this notice to the attention of our fee accountant to insure that as the entries are made into the General Ledger by their office, the Housing Authority should immediately get notice of the financials not balancing. Had that been done we would not have this problem. We could not find specific training under the HUD Exchange programs that would cover the item of general ledger balances under variable portability errors are available at this time. In the interim, Section 8 staff have each been provided an up-to-date Housing Choice Voucher Program guidebook that somewhat covers the Portability Financial Management issues and staff are instructed to read it thoroughly. We are following up with PHA Web for possible staff training on same.

2019-006. Board Meetings Criteria: It is the responsibility of the Board of Commissioners to oversee the operation of the PHA. The responsibilities include taking steps to ensure PHA operates in a financially responsible manner and meets all statutory and regulatory requirements. In order to meet these responsibilities, the Board must be provided with accurate, timely and complete information regarding PHA activities so that the Board may make informed decisions. Condition: Based on my review of the Board minutes, it appears that the Board of Commissioners were not adequately involved with the PHA?s activities and/or the PHA?s financial condition during FY 2019. PHA?s policy is to meet quarterly at a minimum, however, no Board meetings took place from January 2019 till August 2019. Questioned Costs: None noted. Effect: The Board was not able to make informed decisions regarding PHA operating and financial activities, and in some cases, it may not have participated in the decision-making process. Cause: The administration does not appear to be knowledgeable regarding the PHA?s operating and financial activities and did not provide the Board with accurate, timely and complete information during part of FY 2019. Recommendation: I recommend that the Board be provided with accurate, timely and complete information regarding PHA activities so it may make informed decisions. Management?s Response: The Board agrees with the Auditor's finding. Necessary steps have been taken to ensure the Board's routine involvement with the agency's decision making process by: 1. Beginning February 18, replacing the former Executive Director with Mr. Tom McClurg, a former Housing Authority of the City of Marshall Executive Director from 2014 ? 2016 and now the Interim Director for the duration of settling the Agency?s internal affairs resulting from HUD inquiries and the 2019 audit period. 2. Holding Monthly Board of Commissioners meetings who are provided with: a. Monthly Financial Reports b. Executive Director Reports on Agency Activities c. Board Committee Reports on Finance, Personnel, Planning, and Tenant Hearings. d. All agency checks are to be countersigned by either the Chairperson or Vice-Chairperson along with the Executive Director or Deputy Director?s signatures. e. Limit use to Only Board Approved electronic signatures and signature stamps. f. Approve the use of a singular Agency Credit Card checked out by appropriate staff to use with Executive Director or Deputy Director?s approval of intended purchase with card and returned to office with invoices/receipts attached. 3. Require Board to Attend Board of Commissioners video training program under the HUD Exchange training programs.

2019-007. Account Analysis Criteria: All account balances reported in the financial statements must be supported by adequate documentation and recorded in compliance with PHA?s personnel policy. Condition: I noted the following accounts were either not supported with proper documentation or not in compliance with PHA policy: ? Accounts receivable ? PHA projects under HCV program in the amount of $2,228 did not reconciled to the sub-ledger. Although, the PHA maintained detailed activities of the portable participants, I was unable to trace such receivable to subsequent receipts or trace receivable to PHA records that agreed to the G/L. ? Accrued compensated liability recorded on the G/L was not in compliance with PHA?s personnel policy. ? A repayment agreement requested during audit was not available for examination. ? Two years of PILOT liability has not been paid by PHA as of current. Questioned Costs: None noted. Effect: The aforementioned accounts may not be an accurate representation of the account category. Cause: It appears that PHA personnel does not possess the necessary skills to ensure all accounts are properly recorded on the G/L. Recommendation: I recommend that the PHA provide necessary training to its personnel, so all accounts are adequately recorded in the financial statements and liability, if any are paid in a timely manner. Management?s Response: The occurrence of inter-fund transfers has now been limited to extreme emergencies only and only when reserve funds are available to make a transfer for an emergency need and only when there is a reasonable expectation that those funds can be assured to re-fund to the lending account within a specified time. In general, each program manager knows that funds are to be used for that program?s operations only. When there is a misapplication of funds, it should be immediately reported by either the bookkeeper/Administrative Assistant or the Fee Accountant to the Executive Director or to the Board Chairman. Once reported the Board or Executive Director will take appropriate measures to correct the misapplied funds and personnel action when required according to the Agency?s Personnel Policies. Financial recordkeeping has improved significantly in 2020. We have established an effective communications program between the program management staff, Fee Accountant, Executive Director, and Board Chairman. The Agency?s Executive Administrative Assistant is serving as the Bookkeeping Officer and communicates directly with the Fee Accountant and reports to the Executive Director. Invoices and reporting documents are filed and tracked directly to related expense checks. Executive Director reviews all requests for payment invoices; checks are then processed and sent to Board Chairman/Vice-Chairman for review and signature before released. Checks are processed at least once weekly. Copies of all invoices and payments are forwarded to the Fee Accountant for recording monthly. Running records of program budget line items and line item expenses are now maintained at all times. Additional training in financial responsibilities has been scheduled for the Administrative Assistant and Deputy Director in 2020. Both are currently enrolled in on-line HUD-sponsored webinars and will continue to follow those course trends as a routine part of their on-the-job training. Other than the above, the question of a financial liability amounting to $28,934 (See Financial Statements, Note 3E, Accounts Payable ? PILOT) The Housing Authority of the City of Marshall objects to the allocation of funds under HUD Notice PIH 2016-10, Rev-1, Section 6, Paragraph D. Payment in Lieu of Taxes (PILOT) as follows: This current Administrator, having assumed office February 18, 2020, had been unaware of the implementation of the PILOT program in 2016 and cannot explain why the Housing Authority had taken no action in this matter except having affirmation from the former accountants and auditors that they had no knowledge of this requirement. There is no related statement known whereas the former Executive Director had so informed or not informed either the Board or accountants of this regulation. The Interim Director brought this issue to the attention of the Board of Commissioners upon receipt of the draft audit for program year 2019 during their September 14, 2020 Board of Commissioners meeting. With that understanding on the cause of this liability, and that this omission could have been rectified upon implementation by HUD with the Housing Authority making certain entries in a Excel-formatted documents to reflect a different amount other than what HUD had established and entered on behalf of the Housing Authority of the City of Marshall. The dollar amount that should have been stated in HUD?s PILOT calculation should have been Zero. There is no amount to be reimbursed to the City because there was (1) no cooperative agreement known to exist between the Housing Authority and the City, and (2) there was no billing or other statement ever made informing the Housing Authority of such a bill due and no payments ever paid. Also, since there was no specific budget allocation that the Housing Authority made to set aside such funds towards a PILOT, there was no move to hold the PILOT allocation in reserve to alleviate the potential liability. 24 CFR 990.190(c) provides that ?each PHA will receive an amount for PILOT in accordance with section 6(d) of the 1937 Act, based on its cooperation agreement or its latest actual PILOT payment.? Section 6(d) of the 1937 Act specifies that PILOT shall be equal to ?10 per centum of the sum of the shelter rents charged in such project, or such lesser amount as is (i) prescribed by State law, or (ii) is agreed to by the local governing body in its agreement for local cooperation with the public housing agency required under section 5(e)(2) of this Act, or (iii) is due to failure of a local public body or bodies other than the public housing agency to perform any obligation under such agreement.? ?. ?If one of the lesser amounts identified in (i), (ii), or (iii) above apply, the PHA must overwrite the pre-populated amount with the lesser amount.? The Housing Authority of the City of Marshall has submitted a written request on September 24, 2020 to the City of Marshall, via the Mayor and the City Manager, requesting that the charges relating to the PILOT allocations be waived. If the City grants the waiver, their response will be forwarded directly to HUD for consideration. The Board also wishes to express their concern and activity relating to the Capital Fund Program inactivity during 2017, 2018, and 2019. The Housing Authority is making rapid progress by drawing down fund balances for Program Years 2017, 2018, and 2019 for Capital Improvements under the Public Housing Program. To date, 100% has been spent of the $73,468 budget for 2017. $73,219 has been spent of the $114,076 budgeted for 2018. $50,785 has been spent of the $118,441 budgeted for 2019. 100% of the balances remaining will be expended by December 31, 2020. The Housing Authority is very much aware of the dependency upon HUD for the funding of operations. It is taking action to (1) complete a repositioning process to one of the HUD Section 8 program platforms; and (2) Seeking a more involved relationship between the City of Marshall?s Community Development Block Grant programs with new construction Section 8 and Section 8 Homeownership, which would also include other state and federal housing initiatives. A planning study is underway to determine which of the program platforms best suit Marshall?s needs. We are anticipating a final decision on which Section 8-based program will be chosen by the end of November 2020. The Board and Executive Director will begin discussions with the City of Marshall also in November 2020. There is a proposed involvement for affordable housing initiatives in cooperation with East Texas Housing Finance Corporation, USDA, Habitat for Humanity, and local realtors and banks. The Housing Authority would play a major role in administering the program activities in Harrison County, thus providing additional administration funds to support the needs of the Housing Authority.

2019-008. Activities Allowed or Unallowed Criteria: The Authority is required to follow OMB Circular A-87 which sets forth criteria and requirements that costs incurred must meet to be allowable or charged to a federal program. Condition: I noted several instances during FY 2019 where PHA incurred expenses which appeared to be unallowable costs as follows: ? Interfunds receivable / payable between Public Housing and HCV program. The Public Housing owes HCV program $74,945 at year-end. ? Excessive bank charges. ? Bonuses paid to employees via Emergency Food & Shelter National Board Program grant in the amount of $1,750. In addition, house rent of ex-Executive Director was paid in the amount of $1,850. ? Form 1099 was issued in the amount of $24,375 for 2019 to a contractor which appeared to be a relative of ex-Executive Director per PHA. Questioned Costs: Unable to determine. Effect: PHA is not in compliance with costs allowed per OMB Circular A-87 as noted above. Cause: It appears that PHA personnel were not aware of the regulations prohibiting unallowed costs. Recommendation: I recommend that the PHA reviews the types of transactions that are considered allowed and unallowed by OMB Circular A-87 and that management attends training to further their knowledge on the allowable costs. In addition, the PHA should review this finding with HUD. Management?s Response: In regards to the Inter-funds transfers amounting to $74,945, those funds are being repaid to the HCV program during 2020. This will probably not recur in the future if the policy of inter-fund transfers as stated in the previous management response above is followed accordingly. The excessive bank charges have been resolved with a change in banking institutions started in 2020. MHA will assess its bank charges annually with each audit period. If excessive (above recommended/standard) costs, then the Board will accept offers for other banking institutions and make a decision to change or not to change according to submitted cost estimates. In regards to "Bonuses" paid to staff from Emergency Food and Shelter Program (EFSP) funds, those payments were made in accordance with EFSP eligibility rules for rent, mortgage, or a utility bill, and also included an EFSP allowable 2% administrative cost from the EFSP grant, which was divided among the staff who handled the client applications for the program. The house rent of the then-Executive Director appears to have been a case of poor judgment in regards to that person's eligibility for the program at that time. Neither the Board nor the current Executive Director has any knowledge of that activity and is awaiting a finding from the EFSP National Office in that matter. We would certainly not entertain any future activity of that sort under new EFSP funding. The Board will require the senior staff to follow up on available HUD-provided financial training that includes OMB Circular A-87 allowed costs.

2019-009 Housing Assistance Payments (HAP) Criteria: The ending HAP equity must equal monies set aside for HAP funds. Condition: I noted that the HAP funds set aside at year-end ($91,115) did not equal the ending HAP equity ($115,316) at year-end. Questioned Costs: Unknown. Effect: The Authority?s HAP equity is under-funded. Cause: It appears that the Authority used HAP funding for purposes other than HAP needs. Recommendation: I recommend that the Authority ensure all HAP funds received are used for HAP purposes only. Management?s Response: The Board of Commissioners and senior staff realize the purposes of each funding source and require that each program?s expenses be paid from within that program?s account. The monthly financial report General Ledger and Journal clearly show expenses and payment detail by account for ease in tracking expenses by program. The senior staff is currently enrolled in basic accounting practices IAW HUD program regulations.

2019-010 Section Eight Management Assessment Program (SEMAP) Submission Criteria: The Section Eight Management Assessment Program (SEMAP) measures the performance of the public housing agencies (PHAs) that administer the Housing Choice Voucher program in 14 key areas. SEMAP helps HUD target monitoring and assistance to PHA programs that need the most improvement. PHA is required to submit this form on an annual or biennial basis. Condition: PHA was unaware of any submission made for FY 2019 and could not locate the submission form per audit request. Questioned Costs: None noted. Effect: The PHA did not submit SEMAP submission for FY 2019. Cause: Unknown. Recommendation: I recommend that the Authority ensure SEMAP form is submitted to HUD in a timely manner and available for audit examination. Management?s Response: The Board recognizes the requirements for SEMAP submission and will ensure that annual SEMAP forms be remitted to HUD in a timely manner.

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