Ashland Housing Opportunities, Inc.

SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Identification of the Federal Program - HUD 811 Project Rental Assistance Contract (PRAC) a non-major program. Criteria or Specific Requirement - The project is required to have internal controls in place over compliance with federal program requirements. Project occupancy staff are required to compute tenant rents and assistance payments in accordance with HUD?s regulations and administrative procedures. Internal controls related to this process were deficient. Condition: The project lacked strong internal controls over compliance with the HUD requirements related to income certification. Cause: Staff preparing the HUD Form 50059 lacked secondary review. Effect or Potential Effect: Staff could incorrectly calculate and document income during the certification process and not be detected by internal controls. This could cause incorrect tenant rent and HAP payment calculation. Questioned Costs: $0 Context: This is a non-major program and based on the population that this project serves income amounts in question are relatively immaterial. However, income calculation is a very important issue. Recommendation: Implement internal controls over income and rent calculations to reduce the risk that an error could occur and not be detected on a timely basis.

CORRECTIVE ACTION PLAN Respondent: Options for Southern Oregon. Project sponsor and property management agent. Concur or Disagree: We have reviewed the finding and agree with it. Corrective Actions: We are taking immediate steps to address this issue. We will implement internal controls that specifically address all income and rent calculations. Our goal will be to reduce risk to a very low level that errors related to income and rent calculations could occur and not be detected. This will include staff training and checklists that require multiple parties to review all income and rent calculations and document all such reviews prior to finalization.