Anthony Housing AuthorityLocal Government

Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850, Capital Fund Program-CDFA#14.872 The Executive Director for the audit year was terminated October 31, 2024. The current Executive Director was hired December 4, 2024. 2024-001-Inadequate Accounting and Documentation-Allowable Costs/Principles and Reporting Criteria and Specific Requirement Internal controls should exist that allow the production and retention of accounting information that is properly recorded in accordance with generally accepted accounting practices. Disbursements should be properly authorized. Supporting data for each disbursement should be sufficient and available for third party review. (a)-Federal regulations require that certain financial data required by REAC be supported and documented (b)-Various CFPs, CARES Act, and other grants should be properly classified and accounted for (c)-Sufficient information should be submitted to the outside employed fee accountant to allow the latter to complete a year-end documentary checklist that all points considered by the fee accountant have been adequately addressed Condition Found The outside fee accountant delivered a letter dated November 30, 2024 that outlined the significant issues that management needed to address before the fee accountant could sign off on their year- end checklist regarding the unaudited financial statements. The fee accountant never received the information that would allow them to sign this checklist. With the accompanying daily operational issues the new Executive Director encountered, he was unable to give sufficient attention to the issues noted by the fee accountant, as outlined in their November letter. The financial statements were misstated, including the following: (a)-The Housing Check Voucher operating bank statement reflects an overdraft of $195,295, which includes approximately $252,818 of outstanding checks. These checks were dated from February 1, 2022 through September 1, 2024. Only $45,768 of these checks were dated from July 20, 2024 forward. (b)-The accounting records reflect an account payable of $255,086 for the General Fund- Low Rent program, owed to the HCV Program. $ 88,324 of this amount consists of Ross Grant funds received by the Low Rent program that should have been utilized by the Housing Choice Voucher (HCV) Program. The accounting records reflect that the remaining balance is owed to the HCV Program for various expenses, principally $76,700 for payroll and $39,500 for software. This $255,086 is incorrectly reflected as accounts payable, instead of interfund due to the HCV Program. The HCV program incorrectly shows an accounts receivable of $42,859, which is coded as only part of the $88,324 (see above), owed to HCV by the Low Rent Program. Instead of payables and receivables, these amounts due to HCV Program by the Low Rent program should be reflected as interfund receivables and payables, and the amount should equal. (c)-At September 30, 2024, the Authority had fully expended recent Ross Grants of $39,045 and $57,394. On September 23, 2024 the bank statement reflected a deposit of $41,144 labeled “HUD ROSS.” Management has been unable to give us a copy of the original grant agreement or other details of this grant. (d)-The HCV Program paid $3,131,825 in electronic payments. The Low Rent Program, via the General Fund, paid $15,009 in electronic payments. It appears the type of written second approval that we have recommended for multiple years was not used. Only the Executive Director appears to have initiated and completed these purchases. We were unable to review the supporting detail such as invoices or statements, except for 9 of 296 transactions in the HCV Program that totaled $1,721 and 16 of 78 in the Low Rent program that totaled $5,310. We note that almost all Authority expenses were paid in this manner. This includes payroll, HAP payments, and utilities. We noted payments coded mainly to Contract Materials that were paid to Walmart, Amazon, Sam’s Club, and Pilot. Travel expenses appear to be unusually high for a small, financially trouble Authority. (e)-Government Accounting Standards Bulletin (GASB) 96, a relatively new pronouncement, addresses subscription-based technology arrangements. The Authority utilizes a subscription software that performs various functions related to tenant files, waiting lists, and various reports to HUD. Since the Authority’s current agreement is for multiple years, a significant accounting adjustment should have been recorded on the general ledger, but was not. (f)-As detailed in Note 11 of the financial statements, the Authority participates in a Simplified Pension Plan (SEP). We have requested in prior years from management a copy of the board resolution, or some other documentation, that details the percentage to be contributed. We have still not received that documentation. Prior management claimed this percentage to be 8%. (g)-The fee accountant in their November 2024 letter requested clarification of $126,982 of deferred CARES Act funds. We believe this deferred amount is in error on the financial statements. In our opinion, $60,964 should have been reported as Admin and Tenant Services salaries for the audit year September 30, 2020. The remaining CARES Act funding of $66,018 should been reported as Tenant Services salaries for the years ended September 30, 2020 and 2021. Cause The lack of due diligence by prior management appears to be the principal reason. Effect Various accounts are misstated. Recommendation In our opinion, all of the following should be done before the unaudited financial statements are submitted to REAC for the year ended September 30, 2025. Our recommendations to the various subparts are as follows: (a)-Using the most recent bank reconciliation, all of the outstanding checks dated before audit year end, September 30, 2024, should be voided. In addition, management should consider voiding any checks older than six months, again using the most recent bank reconciliation. If from a scan, management believes some of the old outstanding checks are valid, the vendors should be promptly contacted. If management subsequently is contacted by a vendor for which an old outstanding check was voided, if the paperwork shows the vendor is properly owed its claim, a new check should be promptly issued. We recommend that the fee accountant consider a prior period adjustment for any checks written off dated on or before September 30, 2024. For charges in the current year, for voided checks, the charges should be reversed. (b)-The unaudited accounting information showed only an aggregate figure that approximated the ending payable of $255,096 owed by the Low Rent Program, but without any detail. We were able to detail this amount ourselves to a $924 unreconciled balance. Management should review this detail again. The amount should be reclassified to interfund due HCV. If the amount is still deemed materially correct, the fee accountant should consider adjusting the reclassifying the $42,859 accounts receivable to interfund, and adjusting the interfund balance to the same amount reflected by Low Rent. In our opinion, a prior period adjustment should be considered. Cash should be transferred if possible between the programs, and the interfund should be reduced as much as possible. (c)-Management should contact HUD if necessary to obtain the grant information for the $41,144 Ross grant deposit. (d)-If the authority chooses to continue electronic payments, an approval form should be co-signed by a second party, as we have recommended in prior years. A copy of the invoice must be retained, available for not only the co-approval person, but also for third parties. All HCV Programs have a similar process for determining each month’s HAP checks. This involves, starting with the prior month list, then adding and deleting, including possible abatements. A second person should document their review of the HAP list before it is finalized. (e)-Management should contract with the fee accountant to make the necessary adjusting journal entries, to reflect proper compliance with GASB 96. (f)-If the terms of contribution to the SEP are not found in writing my management (or even if they are), management should note by board resolution what the percentage of contribution of the Authority will be in the future. (g)-It appears that no future action is needed. View of Responsible Official I am Louis Alfaro, Executive Director and Designated Person to answer these findings. We will comply with the auditor’s recommendation. As noted above, I did not become Executive Director until after this audit period.

Section 8 Housing Choice Voucher Program-CDFA #14.871, Low Rent Program-CDFA#14.850 2024-002-Administration of the Homeownership Program and FSS Programs Need Improvement-Special Tests Criteria and Specific Requirement The Low Rent Program and the Housing Choice Voucher Program both participate in the FSS programs. Federal regulations dictate how the FSS program should work. Enrollees have a choice of goals to accomplish and thus graduate with FSS funds. The Authority should keep documentation that the FSS program was offered to all new participants. In addition, the Homeownership program was established years ago from excess Admin fees of the HCV program, when this was still permitted from pre-2004 Admin fees. An escrow “major repair or replacement” account was maintained for each participant, with the authority calculating monthly additions based on formula. If participants presented documentation of major expenditures or additions, they could be reimbursed from the established escrow accounts. An audit finding has existed for years that neither the FSS or Homeownership programs were being properly administered. Condition Found FSS A recently hired case worker is adequately tracking three participants in the program. However, two participants have graduated. They should be notified that they are due funds if they elect to draw them now. The liability to the two tenants at September 30, 2024 is a total of $3,976. In addition, there is no documentation in the files that recent new people to the program were made aware that if they chose to, they could participate in the program Homeownership For the last several years, the various E.D.s have asserted that they were behind in updating the status of Homeownership participants. They provided no lists of enrollees. However, in the current audit period, a case worker has found a list dated September 30, 2015 of 13 participants. A review has found an additional enrollee. The review has determined that of the 14 total, 6 are no longer on the program. The status of the other eight is presently not known. Cause All of the reasons, perhaps even the principal reason, are not known for the inadequate administration. However, case worker turnover and lack of training is partly responsible. In addition, management has not been diligent in overseeing these programs. Effect Two of the effects are that federal regulations for FSS and the Authority -established Homeownership policy have not been complied with. Recommendation FSS It appears that the current case workers overseeing the FSS programs are adequately tracking the enrollees. However, documentation in writing should be obtained that the two tenants eligible for funds should be notified. In addition, for all future move-ins, and at least at time of annual renewal, documentation should be obtained that all participants are informed that they are eligible for the FSS program. Finally, a quality control check by someone other than the two caseworkers needs to be documented. Or, each case worker can check the other and document this check. Homeownership (a)-The board’s adopted, original policy is no longer available. In addition, due to the comingling of funds, inadequate accounting and perhaps other reasons, the original amount of money contributed to the program, and any remaining funds is not known. Due to these factors, the Authority should consider the program to have been suspended and/or terminated as of September 2015. This is the date of the last participant update recently found by the case worker, as noted in Condition Found, noted above. (b)-Of the 8 participant files that are open, as noted in Condition Found, a review for participant contracts should be made. Since 7 of the files have been ported out to the El Paso Housing Authority, likely arrangements will need to be made for an Anthony case worker to review the files in El Paso. (c)-If any contracts are found, they should be carefully reviewed by the case worker and also management, and furnished to the auditor of the applicable audit year. (d)-For any of the 8 participants with properly executed contracts, the Authority should consider adding interest to the September 30, 2015 escrow balance of 3% per annum from October 1, 2015 through the most recent date. (e)- The participant with contracts should be notified in writing of their escrow balance. Since the EPHA now handles these tenants, communications will need to worked out. The participants should be informed that for major expenditures or additions (or other expenses, as determined by the board, as long as they are consistently applied) they can be reimbursed Our recommendation could vary from the above, depending on what the terms of the original participant agreement says, if such an agreement is found. Also, HUD or legal counsel, if sought, may have other recommendations. View of Responsible Officials We will review all of the above at our next board meeting. But initially, I agree with the above recommendations.

Section 8 Housing Choice Voucher Program-CDFA #14.871 2024-003-Lack of quality control and SEMAP-Eligibility and Special Tests Criteria and Specific Requirement The waiting list, tenant file functions, and quality control should be documented. Condition Found The tenant files and waiting list were much improved over the prior year, for which numerous exceptions were noted. However, we did note the following: (a)-SEMAP was apparently not prepared by prior management. SEMAP is required by HUD regulations. This is a documentation that quality control was performed, broken down into subsets. Even if SEMAP was not required by HUD, at least similar documented quality control should be done and available for third party review. Statement of Auditing Standard #115, which auditors must follow, states “absent or inadequate segregation of duties within a significant account or process” is defined by the Standard as at least a significant deficiency or material weakness. Either require an audit finding. (b)-It appears that quality control inspections were not done. (c)-It appears that the last utility allowance review was done in August 2023. Federal regulations require that utility allowances be done annually. At least when any one category changes more than 10% since the last review, the allowances must be revised. Cause Apparent oversight. Effect Federal regulations were not complied with. Recommendation We have discussed the particulars with management. We have also furnished them with blank forms to complete the filing. View of responsible official We will comply with the auditor’s recommendation.

Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.872 and Capital Fund Program-CDFA#14.872 2024-005-Reporting Deadline Not Met-Reporting Criteria and Specific Requirement Federal regulations should be filed no later than nine months after the end of the fiscal year, or June 30, 2025. Condition Found The audit report is being filed beyond the due date. Cause The new Executive Director had difficulty in securing an auditor. The audit contract was not executed until May 16, 2025. Accounting records were not received by the auditor until a few weeks later. Effect Federal regulations were not complied with. Recommendation The audit report should be timely filed. View of Responsible Official We will comply with the auditor’s recommendation.

Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850 2023-001-Inadequate Accounting and Documentation-Allowable Costs/Principles Criteria and Specific Requirement (a)-Travel expenses should be correctly classified. (b)-Direct payments (ACH- no check) should be properly authorized and supported. (c)-Credits on the Low Rent rental register should be adequately documented. In addition, the rental registers should be reviewed each month before closeout. (d)-Federal regulations require that certain financial data required by REAC be supported and documented (e)-Various CFPs and other grants should be properly classified and accounted for (f)-Sufficient information should be submitted to the outside employed fee accountant to allow the latter to complete a year-end documentary checklist that all points considered by the fee accountant have been adequately addressed Condition Found (a)-We noted $4,334 of travel costs that were improperly classified in either Maintenance Expense-Materials or Other Administrative Expenses-Other. The above amounts were reclassified by audit adjustment to travel costs. (b)-The adopted policy is for direct payments (ACH- without check) to be accompanied by an authorized check request. As a result of early exceptions we noted, we reviewed approximately 100% of the noted direct payments. Only a minority of the direct payments that we reviewed were accompanied by such an authorized written request. In addition, we do not know the documentation or explanation that was viewed by the authorized person, when the requests that we were able to review was signed. Approximately $55,051 of total payments were made by direct payments. $34,334 and $20,717 were charged to the HCV Fund and the General (Low Rent) Funds, respectively. $49,974 of the total was not supported by adequate documentation. This was $31,586 and $18,388 charged to the HCV and General (Low Rent) Funds, respectively. Much of the unsupported direct payments were travel costs. The total travel costs after reclassifications noted above were $21,336. Of the total travel costs, only $2,723 was paid by check. All tested check amounts contained adequate support. $18,613 of travel costs were paid by direct payments. (c)-We selected three credits at random on the Low Rent rental register that totaled $4,361 that was spread over three months. We requested documented explanations from management for these credits. However, we did not receive any. In addition, we noted in our review of month- to- month Low Rent rental revenue charged, that there was a large variance that may have not been initially detected by management. The average dwelling rent charged for 10 months was $5,800. However, the rent charged for January and February 2023 were $10,855 and $1,570, respectively. We received the accounting information without adjustment or comment on this. Management states that they subsequently found the errors. However, the January variance should have been noted by management before the February rent register was run. (d)-The unaudited financial statements were conditionally approved by REAC. One of the conditions was that PORTs reported on the VMS was $6,009. However, the amount reported on Financial Data Scheule (FDS) Line 97350 is zero. While this difference is immaterial to the financial statements, REAC expects these numbers to agree. To date, management has been unable to reconcile these numbers. (e)-In the current year, Accounting coded a $38,573 advance to a ROSS grant. However, the detailed ELOCCS indicates this is instead was an advance on the CFP 2020 program. In addition, a $46,710 advance was incorrectly classified to the 2021 CFP. Instead, it should have been credited to the 2019 CFP program. (f)-The fee accountant only partially completed their year- end unaudited checklist, that is prepared by a supervising accountant that reviews the year-end unaudited statements prepared by other members of the fee accounting firm. The fee accountant requested but did not receive the necessary information from management. Cause Unknown. Effect Federal regulations were not complied with. In addition, the accounting information is not as accurate as it should be. Recommendation to prevent future occurrences Management should ensure that the above inadequacies are corrected. Internal controls over all of these areas should be improved. View of Responsible Official We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.

Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850 2023-002-Inadequate Administration of Facets of Programs-Allowable Costs/Principles Criteria and specific requirement (a)-Both the Low Rent and Housing Choice Voucher Plans participate in the Family Self-Sufficiency (FSS) programs. Various tenants participate in the program. Various HUD-approved goals for personal improvement are established. Authority personnel help the participants set the objectives and time frames for accomplishing the goals. Authority personnel counsel the participants and track their progress. If the goals are timely met, the escrowed funds are disbursed to the participant. If the goals are not timely met, the escrowed amount is forfeited by the authority. (b)-Funds are earned by participants who meet goals established similarly to the FSS program noted above in the Family Self Sufficiency Program. This program was established years ago from excess Admin fees of the HCV program, at a time when this was still permitted. The funds are referred to as Homeownership Set Aside funds. (c)-As noted in Note 11, Retirement System, the authority participates in a Simplified Pension Plan (SEP). $17,722 was contributed to the Plan during the audit year. We requested a copy of the Master Plan, but we have not received it. Also, we requested a breakdown of how the $17,722 was calculated, and to which participant(s) this money had been credited to. We have not received that. Condition Found (a) and (b)-It appears the enrollment, progress of participants to meet the established goals, and potential earning and disbursement of FSS and Set Aside funds have been inadequately monitored for at least the last two years.(c)-Without both of these requested items noted above, we are unable to determine if the SEP contribution terms were adequately complied with. Cause It appears that the authority has not retained adequate personnel to oversee the FSS and Set Aside tracking. We do not know why we have not received the SEP information. Effect The federal regulations for FSS and Set Aside tracking has not been complied with. In addition, it is possible the terms of ERISA (Employers Retirement Income Security Act) may have not been complied with, in some respects. Recommendation to prevent future occurrences Personnel should be trained in the FSS and Homeownership programs. They should adequately track and administer the program. The SEP provisions should be complied with in all material respects. View of Responsible Officials We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.

Section 8 Housing Choice Voucher Program-CDFA #14.871, Low Rent Program CDFA#14.850 2023-003-Tenant file deficiencies and SEMAP errors noted-Eligibility and Special Tests Criteria and Specific Requirement (a)-SEMAP should be timely filed and properly documented (b)-Tenants who moved in during the audit year should be found on the waiting list. In addition, the waiting lists should contain explanations of why the applicants listed before (above) the admitted tested tenant was not admitted instead of the applicant who was. (c)-HAP payments should be the same amount of expenditure as listed on the last 50058 before the HAP payment is disbursed (d)-Reasonable rent comparisons should be made for all Move Ins(e)-Income Enterprise Verifications (EIV) should be documented for all tenants when their annual re-examination is done (f)-All 1099’s issued to landlords should be available for third party review. Condition Found (a)-SEMAP was not filed before the regulatory deadline. Since the deadline was missed, the SEMAP could not be submitted. We requested the worksheets used to document SEMAP. management brought in the files that they claim were used to review for SEMAP. the other thing available were twenty inspection forms that management claims were HQ’s. We were unable to determine whether the HQ’s covered both failed and passed initial inspections. Again, no worksheets were available to document the results of the tests. in the last two audit periods, we gave examples and explanations to management of an adequate way to document SEMAP. We recommended a couple of webcasts to attend on SEMAP. Management claims they viewed the webcasts. (b)-We reviewed twenty-five HCV files. Nine were current year move ins. sixteen were annual re-exams. Of the nine move ins tested, we could not locate three on the waiting lists (we asked management three weeks before we reviewed the files to tab the waiting list for the tested move ins). In addition, of one of the six that we did locate on the waiting list, we could not find an explanation of why the applicants listed before (above) were not admitted. We reviewed two move-ins for low rent, a non-major program. We located the applicants on the waiting list. however, there was no explanation why the applicants listed before (above) were not admitted. (c)-Of the twenty -five HCV files tested, the September 2023 HAP payment did not agree to the last available 50058 filed before September for two tenants. We asked if there were possibly interim 50058s that did not make it to the file, but we did not receive any. two were immaterial differences-one being $9 per month, the other $3 per month. (d)-Of the nine move-ins tested, we could not locate a reasonable rent survey for two. (e)-Of the sixteen re-exams we reviewed, we could not find an EIV for the re-exam of one tenant.(f)-We were unable to agree the names of several landlords to 1099’s issued in their name or to a DBA (doing business as). Cause Unknown Effect Controls over the admittance process, calculation of HAP payments, and other facets of eligibility and occupancy are not as strong as they should be. Recommendation to prevent future occurrences The above inadequacies should be corrected. Suggested improved procedures and internal controls have been discussed with management in prior audits. View of responsible official We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.

Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850 2023-004-Significantly large interfund account needs to be reduced-Allowable Costs/Principles Criteria and specific requirement In small and medium-sized PHAs, there is a required allocation of expenses between programs. It is often not practical to maintain separate bank accounts and pay each program’s expenses out of its individual bank account. As a result, usually there are interfund payables and receivables between the accounts/programs. Ideally, the interfund amounts should be kept to a minimal amount, if not paid in full at the start of every month. The danger is that the larger the interfund amount is and/or grows, the more difficult it may be to pay off the interfund payable amount. The practical effect is if this happens, one fund is paying the expenses of another fund on a permanent basis. This results in a “transfer” between the Housing Choice Voucher and Low Rent programs, which federal regulations do not allow.Condition Found At September 30, 2023, the Low Rent Program owes the Housing Choice Voucher Program $71,428. Context The significant interfund balance has existed for several years. We note that it was substantially reduced in the audit year, from $165,833 to $71,428. Cause Apparent oversight. Effect The possibility exists that the fund that owes the funds might be unable to repay the balance. Recommendation to prevent future occurrences The interfund balance should be paid off as soon as possible. View or Responsible Official We will comply with the auditor’s recommendation. I do note that we were short of personnel for the entire audit period. I believe that I have staff presently that can do most of the assigned duties. I admit that not all of the deficiencies noted were due to being understaffed, but lack of training (being new to HUD) and understanding. But we will also correct those errors to the best of our ability.

The former Executive Director was terminated effective January 9, 2022. The current Executive Director was named to this position effective November 2, 2021. Section 8 Housing Choice Voucher Program Program-CDFA#14.871, Low Rent Program-CDFA#14.850-Allowable Cost/Principles 2022-001-Significantly large interfund account needs to be reduced Criteria and specific requirement In small and medium-sized PHAs, there is a required allocation of expenses between programs. It is often not practical to maintain separate bank accounts and pay each program?s expenses out of its individual bank account. As a result, usually there are interfund payables and receivables between the accounts/programs. Ideally, the interfund amounts should be kept to a minimal amount, if not paid in full at the start of every month. The danger is that the larger the interfund amount is and/or grows, the more difficult it may be to pay off the interfund payable amount. The practical effect is if this happens, one fund is paying the expenses of another fund on a permanent basis. This results in a ?transfer? between the Housing Choice Voucher and Low Rent programs, which federal regulations do not allow. Condition Found At September 30, 2022, the Low Rent Program owes the Housing Choice Voucher Program $165,833. Context The significant interfund balance has existed for several years. Cause Apparent oversight. Effect The possibility exists that the fund that owes the funds might be unable to repay the balance. Recommendation to prevent future occurrences The interfund balance should be paid off as soon as possible. View or Responsible Official The entire balance was paid off subsequent to year-end. Section 8 Housing Choice Voucher Program-CDFA#14.871-Special Tests

2022-002-SEMAP and Quality Control Needs Better Documentation Criteria and Specific Requirement SEMAP is a required method of reporting on the Housing Choice Voucher Program that reports on various aspects of quality control checking. Even in the years that SEMAP is not required to be filed, the Authority should have documented internal control over compliance of the waiting list, tenant files, and inspection functions that is sufficient to detect errors and oversight. Statement on Auditing Standard (SAS) #115 dictates that ?inadequate design of controls over a significant account or process? is defined by the Standard as at least a significant deficiency, if not a material weakness. Condition Found (a)-for the move-ins tested, the move-ins were listed on the waiting list. However, none of the move-ins in our sample were on the top of the waiting list. Often, there were several applicants listed above the move-in participant., without an explanation. There should be notes for why the above applicants listed were not moved in before the one of our sample. Some of the typical reasons we often see is ?voucher expired?, ?no longer interested?, or ?unable to contact.? Most computerized waiting lists allow the Authority to list in ?notes? the reason why applicant was not moved in. Or, manual explanations can be added on the waiting list. The Admin Plan states there are no local preferences. So, giving points for preferences is not a reason that should be listed for early admittance. (b)-The waiting list was tested. However, per the federal regulations, half the sample should start with the waiting list and review the disposition. The other half should start with the current year admits and work back from the waiting list. It appears the sample was not pulled in the above manner. Regarding the definition of the total universe, this has never been exactly defined. If the Authority has received direction from HUD about the definition of the universe, the Authority should follow that direction. (c)-It appears the waiting list was not purged annually, in accordance with the Admin Plan. Cause Apparent oversight. Effect Quality control review over certain aspects of the Housing Choice Voucher Program may not have been adequate, which increases the possibility of error. Recommendation Management should carefully review the directions of preparing SEMAP per the Final Rule issued by HUD. In addition, we recommend that the Executive Director and at least the employee involved with preparation of the SEMAP and quality control review attend a webcast or seminar on preparing SEMAP. Origination Date and Prior Year Reference The finding originated in the prior year. View of Responsible Official We will comply with the auditor?s recommendation.

The former Executive Director, who held this position for the entire audit year, was terminated effective January 9, 2022. The current Executive Director was named to this position effective November 2, 2021. Section 8 Housing Choice Voucher Program- CDFA #14.871, Low Rent Program- CDFA #14.850, Capital Fund Program-CDFA #14.872-Allowable Costs/Principles 2021-001-Salaries Are Not Adequately Supported Criteria and specific requirement Both federal regulations and generally accepted accounting principles require that salaries be adequately supported. Daily attendance, time off due to illness, vacation, or other reasons needs to be documented as to specific days or parts of days. Accrued vacation and sick time should be adequately supported by proof of the aforementioned items. Condition found An apparently unauthorized bonus was paid to the former Executive Director on February 11, 2021. The gross amount was $59,737, of which $50,776 and $$8,961 were allocated to the Housing Choice Voucher Program and Low Rent programs, respectively. The amount paid to the former E.D., net of withholdings, was $34,609. There is some mention in the board minutes of proposed ?back pay? to the former E.D., but the minutes do not mention a specific amount, and more importantly, are inconsistent. See the next audit finding. A former employee had become a salaried Executive Director. In our opinion, back pay would not be justified. The gross salary paid to the former E.D. was $144,297. The net of the unauthorized bonus noted above of $59,737 is $84,560. This exceeds the budgeted amount listed in the Schedule of Positions and Salaries of $78,654. Context We reviewed the salaries for all programs of the Authority. Possible asserted effect Cause Unknown. Effect Unauthorized salaries were apparently paid to the former Executive Director. Recommendations to prevent future occurrences The board should review the latest available financial statements at every board meeting. Any variances in employee salaries should be reviewed. Origination date and prior year reference (if applicable) The finding originates in the current fiscal year. View of Responsible Official I am Mary Grace Saenz, the current Executive Director and Designated Person to answer these findings.

Section 8 Housing Choice Voucher Program-CDFA #14.871, Low Rent Program-CDFA#14.850, Capital Fund Program-CDFA #14.872-Special Tests and Provisions 2021-002-Board Minutes Need Improvement Criteria and specific requirement Board minutes should be documented in compliance with federal and state laws. Condition Found Some of the Minutes and Agendas appeared to be inconsistent, and possibly duplicated, modified, and/or edited. These specific issues were noted before the hiring of the current Executive Director. However, regarding all Minutes that we reviewed, Minutes and resolutions were not always signed by the board members. It is not evident that the board always met with a quorum. As noted in the first audit finding, there was a mention of ?back pay? for the former Executive Director noted in the November 18, 2020 Minutes. But the Minutes are not clear, and no specific amounts were noted in the Minutes. A former employee had become a salaried Executive Director. In our opinion, back pay would not be justified. Context We reviewed all of the available Minutes through the date of the audit report. Possible asserted effect Cause Unknown. Effect Important decisions that are in the arena for the Board were not adequately documented. Recommendations to prevent future occurrences The Minutes that create most of the concern occurred in the board Minutes available before the current Executive Director was hired. However, we still recommend that at least the Executive Director, and members of the Board, if possible, should attend training on the proper keeping of the board minutes. Proper minutes include but are not limited to the following: a) a proper posting of the agenda with due notice (the Authority did this during the audit period) b) a sign-in sheet for attending board members c) compliance with state law when it is appropriate for the board to go into executive, closed session d) a recording of the number of yes and no on votes. An individual board member?s vote being recorded is allowed but not required e) a reading of the board minutes at the next board meeting before official adoption f) a proper signing by the appropriate officials of the minutes g) a proper numbering of resolutions passed. An Index of Resolutions is also preferable, but to our knowledge, is not required. Origination date and prior year reference (if applicable) The finding originates in the current fiscal year. View of Responsible Official We will comply with the auditor?s recommendation.

Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-CDFA#14.850-Allowable Costs/Principles 2021-003-Significantly large interfund account needs to be reduced Criteria and specific requirement In small and medium-sized PHAs, there is a required allocation of expenses between programs. It is often not practical to maintain separate bank accounts and pay each program?s expenses out of its individual bank account. As a result, usually there are interfund payables and receivables between the accounts/programs. Ideally, the interfund amounts should be kept to a minimal amount, if not paid in full at the start of every month. The danger is that the larger the interfund amount is and/or grows, the more difficult it may be to pay off the interfund payable amount. The practical effect is if this happens, one fund is paying the expenses of another fund on a permanent basis. This results in a ?transfer? between the Housing Choice Voucher and Low Rent programs, which federal regulations do not allow. Condition found At September 30, 2021, the Low Rent Program owed the Housing Choice Voucher Program $161,192. This increased from the amount owed at September 30, 2020 of $97,925. We note that as of July 31, 2022, the interfund payable had been reduced to $146,022, which is an improvement. We also note that as of all three dates noted above, the current assets versus current liabilities, with the amount of CFP and Low Rent operating subsidy funds available to draw down, were positive (liquid) amounts. Context We reviewed the interfund amounts from the prior year ending date through July 31, 2022, which was the date of the latest available financial statements Possible asserted effect Cause Apparent oversight Effect As noted above, if the interfund payable continues to grow, the possibility exists of an unauthorized transfer between the funds. In addition, regardless of liquidity, an amount of cash equal to noncurrent liabilities should be restricted. As described in Note 2, the restricted amount was $70,119 less than required at September 30, 2022. Recommendations to prevent future occurrences We will continue to try to reduce the interfund payable over the next year. View of Responsible Official We will comply with the auditor?s recommendation.

Section 8 Housing Choice Voucher Program-CDFA#14.871, Low Rent Program-#CDFA#14.850-Reporting 2021-004-SEMAP and VMS Not Adequately Documented Criteria and specific requirement SEMAP is a required method of reporting on the Housing Choice Voucher System that reports on various aspects of quality control checking. Even in the years that SEMAP is not required to be filed, the Authority should have documented internal control over compliance of the waiting list, tenant files, and inspection functions that is sufficient to detect errors and oversight. Statement on Auditing Standard (SAS) #115 dictates that ?inadequate design of controls over a significant account or process? is defined by the Standard as at least a significant deficiency, if not a material weakness. The Voucher Management System (VMS) is required reporting of monthly vouchers leased to HUD-REAC. This reporting is used to determine the level of funding for the Housing Choice Voucher program. Condition found VMS reporting of monthly voucher leased information is sent to REAC. These amounts should reconcile to the monthly amounts of Housing Assistance Payments (HAPs) per the unaudited financial statements. In addition, the total annual number of vouchers leased is listed on the unaudited financial statements sent to REAC. The auditor is required to make sure that these amounts reported to VMS agree to the financial statements, to within an immaterial difference. The total amount reported to REAC on VMS reporting for HAPs-Ports was $1,227,915. However, the amount per the financial statements is $1,253,770, for a difference of $25,855. In addition, the amount paid for non-Port HAPS reported to REAC was $1,541,867. The amount per the financial statements was $1,574,732, a difference of $32,865. Regarding SEMAP, the following issues were noted: a) the sample was dated after year end. The sample should be done during the audit year, preferably spread over the entire year, either monthly or quarterly. b) the waiting list per indicator 1 appeared not be tested. Per the federal regulations, half the sample should start with the waiting list and review disposition. The other half should start with current year admits and work backward to the waiting list. c) reasonable rent per indicator 2 did not appear to be tested. Cause Apparent oversight. VMS per the reporting to REAC should be reconciled to the financial statements on a monthly basis. The unaudited financial statements should not be submitted to REAC before the annual amounts are reconciled to within an immaterial amount. Effect Quality control over certain aspects of the Housing Choice Voucher program may not have been adequate, which increases the possibility of error. Regarding the VMS, assurance is not obtained to the degree that REAC requires that the reporting of monthly vouchers leased was correct. However, we note we reviewed twenty-eight Section Eight files. No exceptions were noted. The files appeared to be in excellent order. Recommendation Management should carefully review the directions for preparing SEMAP per the Final Rule issued by HUD. In addition, we recommend that at the Executive Director and at least the employee involved with preparation of the SEMAP and quality control attend a webcast or seminar on preparing SEMAP. In addition, if necessary to understand VMS reporting, the Executive Director should attend a seminar regarding VMS. The important thing however is to gain an understanding some way of VMS reporting. This is a complicated area that many PHAs struggle with. Origination Date and Prior Year Reference The finding originates in the current year. View of Responsible Official We will comply with the auditor?s recommendation.

Housing Choice Voucher Program #14.871, Low Rent Program, #14.850, Capital Fund Program #14.872-Reporting 2021-005-Late Filing of Audit Report With HUD-REAC Criteria and Specific Requirement The federal audit report is required to be filed within nine months of the year end. Condition found This report was due to HUD-REAC no later than June 30, 2022. Cause Management cites due to being understaffed and staff out due to COVID, in addition to dealing with problems inherited from prior management created shortage of time required to gather the necessary information for the audit. The initial information received by us the auditors, was June 20, 2022. Effect The possible changes resulting from the above audit findings would have been made earlier if the audit had been performed earlier. Recommendation Information should be made available to the auditing firm to allow the audit to be completed and reported on in a timely basis. View of Responsible Official We will comply with the auditor?s recommendation.

Section 8 Housing Choice Voucher-CDFA # 14.871, Family Self Sufficiency-CDFA #14.896, Section 8 Moderate Rehabilitation (SRO) -CDFA #14.856, Low Rent Program-CDFA # 14.850, Capital Fund Program-CDFA # 14.872-Award Year 2018 and 2019 2019-001-General and Contract Administration-Allowable Costs Criteria or specific requirement The Authority does not have all the policies in place that address specific Authority issues or concerns. Also, the bylaws need updating. In addition, documentation is lacking on some decisions taken by Management. We note that the long-time Executive Director departed in May 2019. We may not have access to all of the existing documentation or explanations. Condition Found a) The Authority needs to adopt several policies, including Procurement, Disposition, Capitalization, Credit Card Policy and Accounting System Policy and Procedures (see Recommendation below). While the Authority had an Ethics Policy, Management should consider updating it. b) Three related roofing jobs were done but the procurement and monitoring documentation is not sufficient. c) The bylaws need to be updated (see Recommendation below where to access). d) The required annual agreement with the owner of the property that housed the SRO participants was not timely renewed. e) Management should have taken extra steps to determine the correctness of transactions in prior years for Anthony Homes. Or, if such extra steps were taken, the documentation is no longer available. Context (a) and (b)- Management has provided a list of quotes obtained for each of the three related roofing jobs, which appears to be the principal procurement issue for the audit year. It appears that six quotes were obtained for each job. However, there is no documentation of criteria, or why the contractor was selected. The same six companies bid on the same three jobs. The award for each was to the same contractor. The award price was neither the lowest or the highest. No before or after photos or monitoring notes are possessed by current Management. No checks of references, certificates of insurance, or punch lists are available to current Management. There is no documentation of an Independent cost estimate, which is required by federal regulations for expenditures of this amount. A Disposition Policy should be in place to govern disposition of equipment and furniture. In addition, whether the Disposition Policy calls for it or not, considering the small size of the Low Rent program, the serial numbers of scrapped equipment should be noted by board resolution. As noted in the Significant Accounting Policies of the audit report, the Authority has a de facto capitalization limit of $1,000, a reasonable amount, and has followed this practice for years. Any capital asset of $1,000 or more is added to the depreciation schedule and depreciated, instead of being a period cost. The capitalization limit is the heart of a Capitalization Policy, and as noted above, the Authority recognizes and follows one. Still, the policy should be formally adopted. c) The current bylaws need updating. The current bylaws state that regular meetings shall be held on the first Tuesday of each month. Most revised bylaws state the date of the regular meeting is at the choosing of the board. The current bylaws state that the annual meeting shall be on the first Tuesday in September. Most revised bylaws state that the annual meeting shall be as determined by the board. The current bylaws state that board members terms shall be staggered so that one vacancy occurs each year. Most revised bylaws give more latitude on the appointment and filling of vacancies (See recommendation below). d) For several years, the Authority operated a Section 8 Moderate Rehabilitation Single Room Occupancy (SRO) Program for Homeless Individuals. One of the HUD requirements was that the Authority secure an annual written agreement with the owner of the project. In addition, the owner was required to meet certain standards and perform certain functions, delineated by the Owner Responsibility clause in the HAP contract, which was jointly executed by the Authority and the Office of Community Planning and Development-HUD. In addition, in accordance with the United States Housing Act of 1937, the owner was required to give a one year minimum notice before the contract was terminated. It appears the long-time owner may have sold the property before the audit period began. If prior Management obtained such notice or obtained a contract with the new owner, neither documentation of due notice or a new owner contract was available to us. e) A local program, Anthony Homes, was primarily funded by transfer of Section Administration fees earned prior to 2004. Per HUD Notice 2010-7, as well as prior and subsequent notices, the Authority could and still can use Admin fees earned before 2004 ?for any purpose permitted by state and local laws?. In January 2012, the Low Rent hired a Maintenance employee. In February 2012, a house Anthony Homes had purchased in October 2011 was sold to this same employee. Anthony Homes financed the note, and presently still collects the note payments from the same individual, who is still a housing Authority employee. Although no appraisal is now available to us, the house was sold for $7,200 more than the purchase price (four months after Authority purchase) and thus the sales price appears reasonable. We have consulted HUD-Legal for clarification of the use of pre-2004 Admin fees in similar situations, and their opinion has been the examples we presented met the legitimate purposes test. It would have been at least judicious, for prior Management to consult HUD-Legal to ensure this transaction did not run afowl of the Homeownership rules, as noted at 24 CFR 982.625, 628, and 632. If prior Management did consult HUD-Legal, that documentation is not available to us. Possible asserted effect Cause Unknown Effect Federal regulations were not as fully complied with as they should have been. Questioned Costs None Recommendations to prevent future occurrences a) The Authority should adopt the above policies, and consider revising other policies, especially the Ethics Policy. A Technical Agreement was signed with a well-known consulting firm in May 2019. It appears copies of the above policies (except Ethics) were reviewed by the Authority but not adopted. These drafts should be carefully reviewed b Management and the Board, and then adopted. However, we strongly recommend the Authority consider utilizing the website of the Texas Housing Association. Most if not all of these policies have been vetted by HUD. To access them, google Texas Housing Association/resources/documents/policies. There you will find the above policies and examples of bylaws, including in some instances more than one prototype. These prototypes need to be carefully reviewed by Management and the board and tailored to meet the Authority?s situation. The critical aspects of the Procurement include thresholds for micro-purchases, small purchases and sealed bids. The Authority must adhere to the most strict of either state of federal law. This THA prototype uses the more strict threshold. The micro purchase threshold in the prototype is $10,000. However, considering the small size of the Low Rent program, the board should consider a micro purchase threshold of $3,000 or so. Even for micro purchases when no additional bids are required, the Authority must document that the price is reasonable and any other factors besides price that were considered. When several items are normally purchased throughout the year that individually are under the micro purchase threshold, but should collectively exceed the threshold, other bids should be obtained. Examples of this are individual purchases of ranges or refrigerators but whose annual total often exceeds the micro purchase amount. b) Bids should be obtained for construction work such as roofing, in accordance with federal regulations and a duly adopted Procurement Policy. Certificates of insurance should be required for all contractors, including for periodic maintenance - electrical, plumbing, and others. References should be checked. The documentation of why a contractor was chosen should be complete. For sealed bids, the Procurement Policy is specific about which steps should be followed. c) The bylaws should be revised. See the examples at the THA website. d) HUD?s Financial Management Center utilized program reserves to extend funding through July 2019. Tenant protection vouchers were issued to families, to be administered by another housing authority, beginning August 2019. e) Management should be diligent about the use of Anthony Homes? funds in the future for any new activities. Origination Date and prior year reference (if applicable) The finding originated fiscal year ended September 30, 2019. View of Responsible Official I am Julie Quinones, Acting Executive Director and Designated Person to answer these findings. I will take these matters up with the Board of Commissioners and we will do as the auditor suggests. We will try to make the above changes no later than 90 days from the date of this audit report. We note that we already require proof of insurance from all of our independent contractors.

Section 8 Housing Choice Voucher-CDFA # 14.871, Family Self Sufficiency-CDFA #14.896, Section 8 Moderate Rehabilitation (SRO) -CDFA #14.856, Low Rent Program-CDFA # 14.850, Capital Fund Program-CDFA # 14.872-Award Year 2018 and 2019 2019-002-Internal Controls Over Disbursements Need Improvement-Allowable Costs Criteria or specific requirement 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. Condition found The Authority does not have adequate policies and procedures in place related to disbursements. Context a) The Authority reimbursed the former Executive Director for Authority related charges incurred on the E.D.s card. The former Executive Director left in May 2019. If at all possible, charges should only be incurred on Authority charge cards, not personal credit cards. b) Charges were incurred on the Executive Director?s card of $1,031 for three airplane tickets for flights to a seminar. The Authority was reimbursed for charges incurred on this card for seminar fees, after PHA personnel decided to not attend the trip. The Authority has no documentation of whether the former Executive Director obtained a refund of this $1,031. However, the airlines was contacted. The airlines asserts they do not refund these types of flight purchases. The Authority should not purchase non-refundable tickets. c) It appears the husband of the former Executive Director used a free airplane ticket as a result of earning points on this card, as a result of the heavy use by the Authority of this card. In our opinion, the Authority was entitled to the benefit of these points, not the former Executive Director or designate. d) The Authority has an electronic check policy that enables the Acting Executive Director to use passwords and by electronic signature, add an authorized co-signer. The board reviews a listing of General (Low Rent) Fund disbursements at the next board meeting. However, the board should also review and document such review of the disbursements from the Section 8 Fund. The board should in particular inquire about whether 1099s have been obtained for new landlords, and verification of ownership for new properties on the program. e) In our tests of HAP disbursements, we did not find any exceptions. However, we note that one person is responsible for preparation of the monthly HAP register. This person?s duties include beginning with the prior month?s and then revising for adds, drops, abatement, and pro-rates. It appears that a second person does not carefully review this list, except for a review at the time of co-signature of the HAP check. Internal controls will be improved if a second person carefully reviews the monthly changes before the final stage of preparation of the HAP checks. f) The Authority does not have an adequate policy that addresses internal controls. Possible asserted effect Cause Unknown. Effect While the specific dollar exceptions noted in (b) and (c) above are not material to either the financial statements or even a specific program, in qualitative terms we consider this a material weakness, of what could possibly occur. Questioned Costs None. Recommendations to prevent future occurrences Use of a charge card should be limited, and only for Authority-issued cards. The control and charges of the cards should be reviewed and documented. Non-refundable purchase of airlines tickets should not be made. The board should review disbursements at board meetings as noted above. Management should review the Accounting System Policy and Procedures draft already received from the consulting company, as noted in finding 2019-001. Management and the board should consider adopting some version of this. The limited size of the Authority should be considered, and those sections of the prototype that do not apply or perhaps that should be streamlined should be revised. Origination date and prior year reference (if applicable) The finding originated fiscal year ended September 30, 2019. View of Responsible Official We will do as the auditor suggests. We have already instituted most of the above suggestions. We will review the Accounting System Policy and Procedures Policy, and adopt some variation no later than 90 days from the date of this audit report.

Section 8 Housing Choice Vouchers-CDFA # 14.871, Family Self Sufficiency-CDFA #14.896-Award Year 2018 and 2019 2019-003-Internal Controls for Housing Choice Voucher Program and FSS Need Improvements-Special Tests Criteria or specific requirement All important facets of the Housing Choice Voucher Program and the FSS programs require documented evidence of quality control checks done on a representative basis. Condition found SEMAP was not required to be filed for the Authority for the audit year, due to its troubled status. However, even when SEMAP is not required, the Authority is still required to perform quality control and document the checks. Statement on Auditing Standards (SAS) #115 requires that when there is lack of documented quality control checks, the lack thereof is at least deemed a significant deficiency, if not a material weakness, as defined by the Standard. In our tests, we did not find documented quality control checks for the waiting list, rent reasonableness, inspections, or FSS. In addition to there being no quality control physical inspections being performed, there was no tracking of failed and follow-up inspections, known as the Enforcement Indicator for SEMAP. It appears the correct utility allowances were used. However, the Authority?s consulting company completed a utility allowance review in June 2019 and submitted this to the Authority. There is no documentation that Management and the Board reviewed these rates and approved that the old rates continue to be used. It appears from our review of the June 2019 analysis, that a revision of the rates was not required. Context We reviewed twenty-five Housing Choice Voucher files. Possible asserted effect Cause The Authority has capable, experienced people performing the original functions for the Housing Choice Voucher Program and FSS. However, regardless of the capability of any personnel, documented quality control checks of important functions are always required, per SAS #115 and also SEMAP. We note that the Board reviewed and approved the SEMAP for the year ended September 30, 2018, in November 2018. The former Executive Director left the Authority in May 2019. Effect Of the twenty-five HCV files we reviewed, seventeen non-Homeownership (HO) files used an incorrect payment standard for either the move-in HUD 50058 or the annual recertification 50058 filed in the audit year. However, there were no incorrect HAPs or tenant rents calculated as a result of using the wrong payment standard, principally because the contract rent was much less than the payment standard. Our tests of twenty-five files also included five HO files. Of these five, three used an incorrect payment standard. All three resulted in an underpayment to the respective mortgage companies. As a result, we also reviewed the remaining three HO files. Of these three, one used the incorrect payment standard, resulting in a fourth underpayment. We calculated the entire underpayment for each file error, by tracing to the prior and next subsequent 50058, all of which used the correct payment standard. The underpayments were $284, $600, $588, and $355, for a total of $1,827. Management has reviewed these eight files and agrees with the above numbers. Our twenty-five files include twelve move-ins. We noted no evidence of quality control documentation over the waiting list or rent reasonableness. No quality control inspections were present. However, in our tests, we noted no errors in selection of the waiting list. All move-ins or requests for rent increases had rent reasonableness tests. Physical inspections were noted for all move-ins and re-exams. We noted no errors in our review of FSS. Questioned Costs None Recommendation to prevent future occurrences a) We realize that the Authority is issuing many less vouchers, with its jurisdiction now restricted. However, quality control standards still need to be followed. SAS #115 always applies and SEMAP will eventually need to be filed. We recommend that two persons enroll and take the Nelrod webcast that can be viewed in the office. This is a complicated area, and two people need to review the requirements, so that they can discuss and review with each other. In deciding which people should view the webcast, Management should consider which personnel will still be with the Authority six months to a year from now. b) In particular, the people responsible for SEMAP need to carefully follow the instructions about defining the universe (the total number from which the sample is selected) and sampling. With forty to fifty vouchers per year, twelve or so documented tests spread over a course of a year, either done monthly (1) or at least quarterly (3) is sufficient. When choosing the sample, the preferable method is to use random generator number tables. An acceptable method but not preferable, is to use a blind, stab start, and then select every nth number. I have discussed both methods with the Acting Executive Director, and two HCV personnel. The main concern is to be able to prove to a second party how the selector did not purposely skip over a known bad file. c) We recommend that the underpayments totaling $1,827 noted above be paid to the respective mortgage companies. Origination date and prior year reference (if applicable) The finding originated fiscal year ended September 30, 2019. View of Responsible Official We will have people view the Nelrod webcast concerning SEMAP and try to document quality control to the best of our ability. We will refund the $1,827 to the respective mortgage companies. We will attempt to do this within sixty days from the date of the is audit report.