Housing Authority of Lincoln CountyLocal Government

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Housing Voucher Cluster – Program Documentation (Significant Deficiency) Assistance Listing Number: 14.871 Federal Award Identification Number and Year: OR005 – 2024 Award Period: January 1, 2024 – December 31, 2024 Compliance Requirement: Special Tests and Provisions – Reasonable Rent Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or Specific Requirement: According to the OMB Compliance Supplement for HCVP program. "The PHA’s administrative plan must state the method used by the PHA to determine that the rent to owner is reasonable in comparison to rent for other comparable unassisted units. The PHA determination must consider unit attributes such as the location, quality, size, unit type, and age of the unit, and any amenities, housing services, maintenance, and utilities provided by the owner." Condition: HALC was unable to provide the necessary documentation to support the following Housing Voucher Cluster compliance requirements: Special Tests: -Reasonable rent Context: During our testing over reasonable rent, auditor noted 1 of the 40 selections tested had no documentation that their determination of rent to owners is reasonable in accordance with their administrative plan at initial leasing and during the term of the contract as required. Questioned costs: None Cause: The Authority did not have adequate internal controls designed to ensure that reasonable rent files are processed accordingly. Effect: The Authority is not in compliance with program requirements over reasonable rent. Recommendation: We recommend that the Authority implement internal controls to ensure tenant reasonable rent files are maintained with adequate documentation. Views of responsible officials: There is no disagreement with the audit finding.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Housing Voucher Cluster – Program Documentation (Significant Deficiency) Assistance Listing Number: 14.871 Federal Award Identification Number and Year: OR005 – 2024 Award Period: January 1, 2024 – December 31, 2024 Compliance Requirement: Special Tests and Provisions – Reporting PIC Assistance Listing Number: 14.871 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or Specific Requirement: According to the OMB Compliance Supplement for the Moving To Work Program, "The information on [HUD-50058, Family Report] is submitted to HUD through the Inventory Management System/Public and Indian Housing Information Center (IMS/PIC). [...] Data must be submitted each time the PHA completes an admission, annual reexamination, interim reexamination, portability move-in, or other change of unit for a family. The PHA must also submit the Family Report when a family ends participation in the program or moves out of the PHA’s jurisdiction under portability." Condition: The Authority did not have adequate internal controls designed to ensure that all HUD-50058s were properly uploaded to the PIC system. Special Tests: -PIC testing Context: During our testing over PIC, auditor noted 1 of the 40 selections tested had no updated HUD-50058 form in accordance with OMB Compliance Supplement criteria. Questioned costs: None Cause: The Authority did not have adequate internal controls designed to ensure that PIC uploads were processed accordingly. Effect: The Authority is not in compliance with federal regulations regarding the recertification of household circumstances within 12 months. The Authority is also not in compliance with its own administrative policy on the HCV program. Recommendation: We recommend that the Authority implement a higher-level review of the HUD-50058 listing that gets uploaded to the PIC system. View of Responsible Officials: There is no disagreement with the audit finding.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Housing Voucher Cluster – Program Documentation (Significant Deficiency) Assistance Listing Number: 14.871 Federal Award Identification Number and Year: OR005 – 2024 Award Period: January 1, 2024 – December 31, 2024 Compliance Requirement: Special Tests and Provisions – Eligibility Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or Specific Requirement: (1) According to the Authority's internal procedures, case managers are to complete a checklist to keep in tenant file any time a new computation is created, be that for an annual, interim, or special reexamination. This must be signed and dated by the completing caseworker. (2) According to the compliance supplement for the Housing Voucher Cluster, "The PHA must do the following: (1) As a condition of admission or continued occupancy, require the tenant and other family members to provide necessary information, documentation, and releases for the PHA to verify income eligibility (24 CFR sections 5.230, 5.609, and 982.516). The head of the household signs (a) one or more release forms to allow the PHA to obtain information from third parties; (b) a federally prescribed general release form for employment information; and (c) a privacy notice. Under some circumstances, other members of the family are required to sign these forms (24 CFR sections 5.212 and 5.230). Condition: The Authority did not have adequate internal controls designed to ensure that all proper documentation was signed. Special Tests: -Eligibility Context: During our testing over eligibility, auditor noted 3 of the 40 selections tested had missing signed documentation that the Authority had to have the tenant sign in accordance with the Authority’s internal procedures and compliance supplement for Housing Voucher Cluster program. Questioned costs: None Cause: The Authority did not have adequate internal controls designed to ensure it is meeting eligibility requirements set by HUD. Effect: The Authority is not in compliance with program requirements over eligibility. Recommendation: We recommend the Authority implement processes to ensure that all proper documentation is being maintained during the process for every tenant. Views of Responsible Officials: There is no disagreement with the audit finding.

HCVP Depository Agreement Federal Agency: U.S. Department of Housing and Urban Development Federal Program Title: Housing Voucher Cluster Federal Award Identification Number and Year: OR005 – 2024 Assistance Listing Number: 14.871 / 14.879 Award Period: January 1, 2024 through December 31, 2024 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or Specific Requirement: PHAs are required to enter into depository agreements with their financial institutions in the form required by HUD. The agreements serve as safeguards for federal funds and provide third-party rights to HUD. Among the terms in many agreements are requirements for funds to be placed in an interest-bearing account (24 CFR section 982.156). Condition: The Authority did not have adequate internal controls designed to ensure that depository agreements are maintained for banks that hold HUD funds. Context: During our testing, we noted the Authority did not have a depository agreement with its’ financial institution in the form required by HUD funds. Questioned costs: None Cause: The Authority does not have controls in place to ensure it is meeting all requirements set by HUD. Effect: The Authority is not in compliance with program requirements. Recommendation: The Authority should obtain depository agreements for all bank accounts required by HUD. View of Responsible Officials: There is no disagreement with the audit finding.

Finding 2023-001 – U.S Department of Housing and Urban Development – Housing Voucher Cluster – Program Documentation (Significant Deficiency) Criteria: The Uniform Guidance requires that HALC maintain proper documentation to demonstrate compliance with the requirements of the program. Condition: HALC was unable to provide the necessary documentation to support the following Housing Voucher Cluster compliance requirements: •Special Tests: o Reasonable rent o Utility allowance schedule o Waiting list During our testing over reasonable rent, auditor noted 1 of the 60 selections tested had no documentation that their determination of rent to owners is reasonable in accordance with their administrative plan at initial leasing and during the term of the contract as required. During our testing over the utility allowance schedule, auditor noted that the updated utility allowance rates were received on July 20, 2023. However during our file review, the updated rates were not used in re-certifications until December 2023. During our testing over the waiting list, HALC was unable to provide support the waiting list was pulled or examined by the Housing Program Manager ensuring accuracy of the list order and mailing of the top of the list letters for 8 of the 25 selections. Seven of the deficient samples were in the first 6 months of the year, prior to the FY22 audit findings. The control over the waiting list appears to have been implemented more effectively in the second half of the year. Additionally, auditor noted 2 of the 25 selections were admitted into the program but no support was provided indicating the participants top of list letter agreed to the monthly waiting list report and in proper order with other applicants on the monthly waiting list report. Cause: The Authority experienced a high degree of personnel turnover from 2020 through 2022. HALC’s Executive Director who had many years of HUD experience retired in December 2022 and personally performed several duties related to the Housing Choice Voucher program, as well as the Authority experiencing several housing assistant staff turnovers annually. Along with experiencing a high degree of personnel turnover, the Authority also experienced insufficient staffing levels overall. Effect: Lack of reasonable rent comparisons, utility allowance updates, and waiting list compliance could result in improper rental payments, housing that does not meet quality standards, insufficient utility payments, or applicants admitted into the program out of order. Identification of Repeat Finding: This is a repeat finding from prior year (See 2022-002), although this year they have been downgraded from material weaknesses to significant deficiencies because the number of deficiencies decreased and the proper utility rates were used in December. Recommendation: The Authority should: • Strengthen the training available to staff that are responsible for determining and documenting compliance with each of the compliance requirements. • Strengthen the review process of tenant files by management so that errors will be identified prior to payments being made to landlords on the tenant’s behalf. • Train additional members of management and staff to perform and back-up the compliance duties related to the Section 8 program. Views of Responsible Officials and Planned Corrective Action Plan: There is no disagreement with these findings. Management has taken steps to remedy the errors, such as hiring a third-party vendor to assist in the calculation and determination of utility allowances, cross-train current staff to perform other duties related to the Housing Choice Voucher program and attend additional Housing Choice Voucher trainings.

Finding 2023-002 – U.S Department of Housing and Urban Development – Housing Voucher Cluster – Program Documentation (Material Weakness) Criteria: The Uniform Guidance requires that HALC maintain proper documentation to demonstrate compliance with the requirements of the program. Condition: HALC was unable to provide the necessary documentation to support the following Housing Voucher Cluster compliance requirements: •Special Tests: o Housing quality standards enforcement During our procedures over the population of housing quality standards enforcement, auditor noted there were only 2 failed inspections. Upon further inspection and inquiry, it was determined that inspection staff were improperly trained and were going back into the original inspection file and changing the fail to a pass which overwrites the fail in the system. Since an accurate sample could not be provided, the auditor passed on testing the enforcement requirement. The auditor observed failed and corrected enforcement activity within sample files selected for other procedures. Cause: The Authority experienced a high degree of personnel turnover from 2020 through 2022. HALC’s Executive Director who had many years of HUD experience retired in December 2022 and personally performed several duties related to the Housing Choice Voucher program, as well as the Authority experiencing several housing assistant staff turnovers annually. Along with experiencing a high degree of personnel turnover, the Authority also experienced insufficient staffing levels overall. Effect: The HAP payment related to the HQS enforcement participant could be disallowed. Since the population is unknown, questioned costs cannot be calculated. Identification of Repeat Finding: This is not a repeat finding from prior year. Recommendation: The Authority should: • Strengthen the training available to staff that are responsible for determining and documenting compliance with each of the compliance requirements. • Strengthen the review process of tenant files by management so that errors will be identified prior to payments being made to landlords on the tenant’s behalf. • Train additional members of management and staff to perform and back-up the compliance duties related to the Section 8 program. Views of Responsible Officials and Planned Corrective Action Plan: There is no disagreement with these findings. Management has taken steps to remedy the errors. HQS training with the Authority’s software provider and the housing staff has been scheduled. The training will be recorded for access by future staff and as a reference source for current staff. The training will be incorporated into the Authority’s procedures manual.

Criteria: The Uniform Guidance requires HALC have proper controls in place for the purpose of preventing or detecting noncompliance related to the operation of the program. Condition: During our testing of internal controls over expenditures, HALC was unable to provide copies of invoices, payroll timesheets, or journal vouchers with proper approval for 27 of the 52 selections. During our testing of internal controls over eligibility, HALC could not provide the Housing Manager?s internal review document that is performed monthly at the time a participant has been recertified by a housing assistant staff. Further, during our testing of internal controls over the waiting list, HALC was unable to support the waiting list was pulled or examined by the Executive Director ensuring accuracy of the list order and mailing of the top of the list letters. Cause: The Authority experienced a high degree of personnel turnover from 2020 through 2022. HALC?s Executive Director who had many years of HUD experience retired during 2022 and personally performed several duties related to the Section 8 program, as well as the Authority experiencing several housing assistant staff turnovers annually. Effect: Ineffective internal controls can lead to unallowable costs being paid and ineligible participants receiving incorrect HAP payments. Identification of Repeat Finding: Not a repeat finding. Recommendation: We recommend the Authority retain copies of proper approved invoices, payroll timesheets, and journal vouchers to support allowable costs related to the Housing Voucher Program expenditures. We recommend the Housing Manager retain each internal review file conducted during the year as support the Authority completed the programs required self-audit related to recertifications of participants. We further recommend the Authority document and retain managements review of the waiting list following the pull for top of the list letters. Views of Responsible Officials and Planned Corrective Action Plan: There is no disagreement with this finding.

Criteria: The Uniform Guidance requires that HALC maintain proper documentation to demonstrate compliance with the requirements of the program. Condition: HALC was unable to provide the necessary documentation to support the following Housing Voucher Cluster compliance requirements: ? Reporting - SEMAP certification. During our testing over compliance related to the Authority?s SEMAP certification, HALC was unable to provide the auditors with supporting documentation over the submitted certified performance indicators during the year. ? Special Tests: o Waiting list o Reasonable rent o Utility allowance schedule o Housing quality standards enforcement During our testing over the waiting list, auditor noted 3 of the 14 selections tested were admitted into the program but no support was provided indicating the participants top of the list letter agreed to the monthly waiting list report and in proper order with other applicants on the monthly waiting list report. During our testing over reasonable rent, HALC was unable to provide supporting documentation over all 40 selections that their determination of rent to owners is reasonable in accordance with their administrative plan at initial leasing and during the term of the contract as required. During our testing over the utility allowance schedule, HALC was unable to provide support the utility allowance schedule was maintained for an up-to-date utility allowance schedule as the Authority must review utility rate data for each utility category each year and must adjust its utility allowance schedule if there has been a rate change of 10 percent or more for a utility category or fuel type since the last time the utility allowance schedule was revised. During our testing over housing quality standards enforcement, auditor noted 2 of the 5 selections tested, the participant received a 4-month extension at the time of inspection by the contracted inspector and HALC management was unable to provide documentation to support the reason why an extension was granted at the time of failure. Further, auditor noted no notice of deficiency in the participant?s file had been sent to the property owner. Auditor noted in 1 of the 5 selections tested, the documents retained in the participant file were unclear as to when the unit passed inspection. There was contradicting dates and information scattered throughout the file. Auditor noted in 1 of the 5 selections tested, the participants file had no notice of deficiency for the inspection failure on 8/30/2022, as well as no other indication of follow-up by HALC to enforce the family obligation to correct the failure. Auditor noted in 1 of the 5 selections tested, a notice of deficiency for a 24-hour life threatening deficiency dated 6/15/2022, but no support documenting the repair had been completed within the 24-hour required timeframe. Auditor further noted the file had a second failure notice sent on 8/4/2022 was responded to with a self-certification form dated 8/10/2022 by the landlord and tenant stating the repair had been completed on 6/15/2022. The participant file did not show a notice of abatement for failure to remedy the 24-hour repair deficiency as of 6/16/2022. Cause: The Authority experienced a high degree of personnel turnover from 2020 through 2022. HALC?s Executive Director who had many years of HUD experience retired during 2022 and personally performed several duties related to the Section 8 program, as well as the Authority experiencing several housing assistant staff turnovers annually. Effect: The HAP payment related to the HQS enforcement participant could be disallowed. The known HAP payment for the two-month period was $2,050 and the sample size was 20% of the total population. The amount does not rise to a questioned cost level. Identification of Repeat Finding: Not a repeat finding. Recommendation: The Authority should: ? Strengthen the training available to staff that are responsible for determining and documenting compliance with each of the compliance requirements. ? Strengthen the review process of tenant files by management so that errors will be identified prior to payments being made to landlords on the tenant?s behalf. ? Train additional members of management and staff to perform and back-up the compliance duties related to the Section 8 program. Views of Responsible Officials and Planned Corrective Action Plan: There is no disagreement with these findings. Management has taken steps to remedy the errors, such as hiring a third-party vendor to assist in the calculation and determination of utility allowances, cross-train current staff to perform other duties related to the Section 8 program and attend additional Section 8 trainings.

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