HOUSING AUTHORITY OF THE CITY OF NOGALES

FAL number and name: 14.871 Section 8 Housing Assistance Payments and 14.EHV Emergency Housing Vouchers Award numbers and years: N/A and 2023 Federal agency: U.S. Department of Housing and Urban Development Compliance requirements: Eligibility Questioned Costs: N/A Criteria: In accordance with 24 CFR 5.601, Public Housing Agencies (PHAs) should maintain effective internal control policies and procedures to determine income eligibility requirements and calculate tenants' rent payments. Condition: The Authority did not have someone other than the preparer review and approve the eligibility determinations. Cause: The Authority lacked proper internal control over the tenants' eligibility determination process. Effect: There is an increased risk that eligibility determinations could contain errors that the Authority may not detect or correct in a timely manner. Recommendation: The Authority should establish policies and procedures to ensure that tenants' eligibility determinations will be reviewed and approved by an employee that is independent of the initial eligibility determination.

2022 ? 002 Federal Agency: Department of Housing and Urban Development Federal Program Name: Public and Indian Housing Assistance Listing Number: 14.850 Federal Award Identification Number and Year: AZ023 and 2022 Award Period: April 1, 2021 ? March 31, 2022 Type of Finding: ? Significant Deficiency in Internal Control over Compliance ? Other Matters Criteria or specific requirement: A current Declaration of Trust/Declaration of Restrictive Covenants, in a form acceptable to HUD, must be recorded against all public housing property owned by public housing authorities (or private entities for public housing developed under 24 CFR Part 905, Subpart F) that has been acquired, developed, maintained, or assisted with funds from the US Housing Act of 1937. In addition, CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of special provision. The Authority should have internal controls designed to ensure compliance with those provisions. Condition: During our testing, we noted the Authority did not have adequate internal controls designed to ensure declaration of trust/declaration of restrictive covenants were recorded against the Authority?s properties. The Authority was either unable to locate the declaration of trust or noted that the declaration of trust was on the wrong form for the properties. Questioned costs: None Context: During our testing, it was noted that the Authority did not retain or submit the required declaration of trust in a form acceptable to HUD for 86 of the 90 projects. A declaration of trust was able to be located for project numbers AZ20P023010, AZ023003, AZ16P023004, AZ20P023904Z. Cause: The Authority was aware of the requirement and was notified by HUD. However, subsequent actions were not taken to ensure the Authority filed the required forms. Effect: The lack of internal controls over the compliance requirements resulted in the Authority?s noncompliance over specific requirement mentioned above. Recommendation: We recommend the Authority design and implement controls to declaration of trust were prepared and recorded against all public housing properties owned by the Authority. Views of responsible officials: There is no disagreement with the audit finding.

2022 ? 003 Federal Agency: Department of Housing and Urban Development Federal Program Name: Public and Indian Housing Assistance Listing Number: 14.850 Federal Award Identification Number and Year: AZ023 and 2022 Award Period: April 1, 2021 ? March 31, 2022 Type of Finding: ? Significant Deficiency in Internal Control over Compliance ? Other Matters Criteria or specific requirement: PHAs are required to enter into General Depository Agreements with their financial institution using the HUD-51999 (OMB No. 2577-0075) or a form as required by HUD in the ACC. The agreements serve as safeguards for federal funds and provide third party rights to HUD (Section 9 of the ACC). In addition, CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of special provision. The Authority should have internal controls designed to ensure compliance with those provisions. Condition: During our testing, we noted the Authority did not have adequate internal controls designed to ensure the HUD-approved form 51999 was executed and submitted as required by HUD in the ACC. Questioned costs: None Context: During our testing, it was noted that the Authority did not complete or submit the required general depository agreement in a form approved by HUD. Cause: Lack of management oversight in following HUD guidelines for the completion and submission of the HUD-51999 for all federal grant bank accounts. Effect: The lack of internal controls over the compliance requirements resulted in the Authority?s noncompliance over specific requirement mentioned above. Recommendation: We recommend the Authority design and implement controls to ensure the required general depository agreements are executed and submitted to HUD utilizing the HUD-51999 form. Views of responsible officials: There is no disagreement with the audit finding.

Finding 2021-001 ? Reporting ? Section 3 Summary Reporting Public and Indian Housing ? CFDA 14.850; for the year ended March 31, 2021 Public Housing Capital Fund ? CFDA 14.872; for the year ended March 31, 2021 Criteria: In accordance with 24 CFR Part 135.90 information for Section 3 Report Form, HUD 60002, must be entered using the Section 3 Performance Evaluation and Registry System (SPEARS) no later than sixty days after the recipient?s year end. Condition & Cause: The Authority did not submit the required HUD 60002 within sixty days of its year end as required by HUD. There was not a procedure in place to ensure that it was filed on time. Effect: The Authority is not in compliance with requirements for the Public and Indian Housing Program or the Public Housing Capital Fund Program. Repeat Finding: Yes, Finding 2020-001. Questioned Costs ? None Identified Recommendation: We recommend the Authority establish review procedures for Section 3 summary reporting to ensure the reports are submitted on a timely basis for future years. Reply: The Authority will establish procedures over the Section 3 Summary reporting to ensure the report is filed timely in the future. Robert Thompson, Interim Executive Director, expects the deficiencies which led to this finding to be cleared in the 2022 fiscal year audit.

Finding 2020-001 ? Reporting ? Section 3 Summary Reporting Public and Indian Housing ? CFDA 14.850; for the year ended March 31, 2020 Public Housing Capital Fund ? CFDA 14.872; for the year ended March 31, 2020 Criteria: In accordance with 24 CFR Part 135.90 information for Section 3 Report Form, HUD 60002, must be entered using the Section 3 Performance Evaluation and Registry System (SPEARS) no later than sixty days after the recipient?s year end. Condition & Cause: The Authority did not submit the required HUD 60002 within sixty days of its year end as required by HUD. There was not a procedure in place to ensure that it was filed on time. Effect: The Authority is not in compliance with requirements for the Public and Indian Housing Program or the Public Housing Capital Fund Program. Repeat Finding: Yes, Finding 2019-001. Questioned Costs ? None Identified Recommendation: We recommend the Authority establish review procedures for Section 3 summary reporting to ensure the reports are submitted on a timely basis for future years. Reply: The Authority will establish procedures over the Section 3 Summary reporting to ensure the report is filed timely in the future. Robert Thompson, Interim Executive Director, expects the deficiencies which led to this finding to be cleared in the 2021 fiscal year audit.

Finding 2019-001 ? Reporting ? Section 3 Summary Reporting Public and Indian Housing ? CFDA 14.850; for the year ended March 31, 2019 Public Housing Capital Fund ? CFDA 14.872; for the year ended March 31, 2019 Criteria: In accordance with 24 CFR Part 135.90 information for Section 3 Report Form, HUD 60002, must be entered using the Section 3 Performance Evaluation and Registry System (SPEARS) no later than sixty days after the recipient?s year end. Condition & Cause: The Authority did not submit the required HUD 60002 within sixty days of its year end as required by HUD. There was not a procedure in place to ensure that it was filed on time. Effect: The Authority is not in compliance with requirements for the Public and Indian Housing Program or the Public Housing Capital Fund Program. Questioned Costs ? None Identified Recommendation: We recommend the Authority establish review procedures for Section 3 summary reporting to ensure the reports are submitted on a timely basis for future years. Reply: The Authority will establish procedures over the Section 3 Summary reporting to ensure the report is filed timely in the future. Robert Thompson, Acting Deputy City Manager, expects the deficiencies which led to this finding to be cleared in fiscal year 2020. -

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