City of Winslow, Arizona

Finding Number: 2025‐001 Repeat Finding: Yes, 2024‐002, 2023‐101 Program Name/Assistance Listing Title: Housing Voucher Cluster Assistance Listing Number: 14.871 Federal Agency: Department of Housing and Urban Development Federal Award Number: N/A Pass‐Through Agency: N/A Questioned Costs: N/A Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Special Tests and Provisions Criteria Public Housing Authorities (PHAs) participating in the Housing Choice Vouchers program must have written policies in its HCVP administrative plan for selecting applicants from the waiting list and PHA documentation must show that the PHA follows these policies when selecting applicants for admission from the waiting list. (24 CFR §§982.204 and 982.205). Condition Internal controls were not functioning to maintain adequate documentation. Cause Internal controls and review procedures did not function as designed throughout the year for all required compliance requirements. Effect The PHA was not in compliance with special tests and provisions requirements. Context We noted the following items during our review of special tests and provisions requirements for the Housing Voucher Cluster:  For three of 21 waiting list applicants reviewed, the date applied did not agree with the application received date by one day. The applications positions on the waitlist were affected by two spots, were not affected, and by three spots, respectively.  Emergency Housing Voucher (EHV) program applicants were added to the regular Housing Choice Voucher (HCV) waiting list. However, those selected for EHV were not limited by those on the regular HCV waiting list. EHV vouchers were still distributed on a first come basis to those qualifying for the EHV program. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The PHA should ensure procedures over maintenance of the waiting list are operating appropriately. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2024‐001 Repeat Finding: No Program Names/Assistance Listing Titles: Assistance Listing Numbers: Federal Award Numbers: Questioned Costs: Housing Voucher Cluster 14.871 N/A N/A Coronavirus State and Local Fiscal Recovery Fund 21.207 N/A N/A Federal Agency(ies): Department of Housing and Urban Development, Department of Treasury Pass‐Through Agency(ies): Direct, Arizona Governor’s Office Type of Finding: Noncompliance, Material Weakness Compliance Requirements: Reporting Criteria Under 2 CFR §200.303, the City is required to establish and maintain effective internal controls over Federal awards that provide reasonable assurance that the City is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, PHAs submit HUD‐52681‐B monthly to HUD electronically via the VMS. Critical information from this report including unit months leased, HAP expenses, unrestricted net position (administrative fee reserves), restricted net position (HAP reserves), and cash in investments should be accurate and supported. In addition, recipients of Coronavirus Local Fiscal Recovery Fund monies are required to submit Project and Expenditure Reports either quarterly or annually in accordance with the SLFRF Compliance and Reporting Guidance issued by the Department of Treasury. In addition, in accordance with 2 CFR §200.512, the single audit must be completed, and the data collection form and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Condition The City did not have consistent processes and procedures to track federal grant information and expenditures. In addition, adequate supporting documentation for amounts reported was not maintained and the single audit was not submitted timely. Cause The City's internal controls were not adequately designed to track federal grant information needed for the Schedule of Expenditures of Federal Awards (SEFA). In addition, controls over document retention and report submission did not function as designed. Effect The City was not in compliance with federal regulations and guidelines for reporting. Context The following items were noted:  The City does not have a consistent process to track federal grant information and expenditures. As a result, $113,998 of Coronavirus Local Fiscal Recovery Fund expenditures were not reported on the fiscal year 2023 SEFA.  For all three Housing Voucher Cluster monthly financial reports reviewed, the City could not support how unrestricted net position and restricted net position agreed to the financial reporting software.  The annual Project and Expenditures Report for the Coronavirus State and Local Fiscal Recovery Funds program did not have accurately reported obligation or expenditures amounts.  The City's Single Audit Report was not completed and submitted within nine months of fiscal year‐end. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The City should standardize its process for tracking federal grant information, including the expenditure amount necessary for SEFA reporting. The City should design and implement effective internal controls over the review and retention of supporting documentation regarding the amounts reported. In addition, the City should implement better controls over financial reporting to ensure all documents are prepared and available for the timely completion of the financial and single audit reports. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2024‐002 Repeat Finding: Yes, 2023‐101 Program Name/Assistance Listing Title: Housing Voucher Cluster Assistance Listing Number: 14.871 Federal Agency: Department of Housing and Urban Development Federal Award Number: N/A Pass‐Through Agency: N/A Questioned Costs: N/A Type of Finding: Noncompliance, Material Weakness Compliance Requirement: Special Tests and Provisions Criteria Public Housing Authorities (PHAs) participating in the Housing Choice Vouchers program must do the following in relation to special tests and provisions:  PHAs are required to enter into general depository agreements (GDA) with their financial institutions in the form required by Housing and Urban Development (HUD). (24 CFR section 982.156)  PHAs are required to maintain complete and accurate accounts including the balances of HAP and administrative fee equity. (24 CFR section 982.158)  PHAs are required to inspect units leased to determine if they meet Housing Quality Standards (HQS). If a unit fails an inspection, it must be repaired within 30 days if not a life‐threatening condition. (24 CFR section 982.405) If the owner does not correct the cited HQS deficiencies within the specified correction period, the PHA must stop (abate) HAPs beginning no later than the first of the month following the specified correction period or must terminate the HAP contract (24 CFR section 982.404).  PHAs must have written policies in its HCVP administrative plan for selecting applicants from the waiting list and PHA documentation must show that the PHA follows these policies when selecting applicants for admission from the waiting list. (24 CFR sections 982.204 and 982.205). Condition Internal controls were not functioning to maintain adequate documentation. Cause Internal controls and review procedures did not function as designed throughout the year for all required compliance requirements. Effect The PHA was not in compliance with special tests and provisions requirements. Context We noted the following items during our review of special tests and provisions requirements for the Housing Voucher Cluster:  An executed copy of the depositor agreement as required by HUD was not maintained.  Prior year ending equity balances reported as part of the HUD REAC submission did not agree to beginning equity balances.  For one of 15 continuing tenants reviewed, the City did not maintain documentation following up on a failed HQS inspection.  For one of 20 waiting list applicants reviewed, the date applied did not agree with the application received date by one day. The applications position on the waitlist was affected by two spots.  Emergency Housing Voucher (EHV) program applicants were added to the regular Housing Choice Voucher (HCV) waiting list. However, those selected for EHV were not limited by those on the regular HCV waiting list. EHV vouchers were still distributed on a first come basis to those qualifying for the EHV program. However, the City should maintain a separate wait list for the EHV program. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The PHA should ensure it maintains documentation required by HUD. This includes an executed copy of the depositor agreement, information supporting changes in equity balances, and documentation supporting the follow up of failed HQS inspections. In addition, the PHA should ensure review procedures over the follow up of failed HQS inspections and maintenance of the waiting list are operating appropriately. Views of Responsible Officials See Corrective Action Plan.

Finding Number: 2024‐003 Repeat Finding: No Program Name/Assistance Listing Title: Coronavirus State and Local Fiscal Recovery Fund Assistance Listing Number: 21.207 Federal Agency: Department of Treasury Federal Award Number: N/A Pass‐Through Agency: Arizona Governor's Office Questioned Costs: N/A Type of Finding: Noncompliance, Significant Deficiency Compliance Requirement: Procurement Criteria Non‐federal entities are prohibited from contracting with or making sub awards under covered transactions to parties that are suspended or debarred. “Covered transactions” include those procurement contracts for goods and services awarded under a non‐procurement transaction that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR §180.220. Condition Verification of suspension and debarment was not performed for all vendors with whom the City spent at least $25,000 using federal grant monies. Cause The City does not have a process in place to verify vendors for suspension and debarment. Effect The City was not in compliance with federal regulations and guidelines related to suspension and debarment. Context For the two vendors that the City spent over $25,000 of federal monies with, suspension and debarment verification was not completed. However the vendors were not suspended or debarred. The sample was not intended to be, and was not, a statistically valid sample. Recommendation The City should design and implement a process for ensuring that vendors with whom the City spends more than $25,000 of federal monies with are not suspended or debarred. Views of Responsible Officials See Corrective Action Plan.