oversight

Inglewood Housing Authority, Inglewood, CA, Did Not Effectively Manage the Financial Operations of Its Housing Choice Voucher Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2016-09-30.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

          Inglewood Housing Authority,
                 Inglewood, CA
                  Housing Choice Voucher Program




Office of Audit, Region 9          Audit Report Number: 2016-LA-1013
Los Angeles, CA                                    September 30, 2016
To:            Marcie Chavez, Director, Office of Public Housing, Los Angeles, CA, 9DPH

               //SIGNED//
From:          Tanya E. Schulze, Regional Inspector General for Audit, 9DGA
Subject:       Inglewood Housing Authority, Inglewood, CA, Did Not Effectively Manage the
               Financial Operations of Its Housing Choice Voucher Program


Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of the Inglewood Housing Authority’s financial
management of its Housing Choice Voucher program.
HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.
The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.
If you have any questions or comments about this report, please do not hesitate to call me at 213-
534-2471.
                   Audit Report Number: 2016-LA-1013
                   Date: September 30, 2016

                   Inglewood Housing Authority, Inglewood, CA, Did Not Effectively Manage
                   the Financial Operations of Its Housing Choice Voucher Program



Highlights

What We Audited and Why
We audited the Inglewood Housing Authority’s financial management of its Housing Choice
Voucher program due to a hotline complaint allegation and the U.S. Department of Housing and
Urban Development (HUD), Los Angeles Office of Public Housing’s concerns about the
Authority’s financial management of its program. Our audit objective was to determine whether
the Authority managed the financial operations of its program in compliance with HUD rules and
requirements.

What We Found
The complainant’s allegations and HUD’s Los Angeles Office of Public Housing’s concerns
were valid. The Authority did not manage the financial operations of its program in accordance
with HUD rules and requirements. Specifically, it (1) disbursed $796,186 in program funds for
unsupported transactions, (2) misclassified program fraud recovery proceeds, (3) did not
terminate program assistance to noncompliant participants, and (4) did not void or reconcile its
outstanding checks in a timely manner. These conditions occurred because the Authority lacked
adequate written policies and procedures to ensure compliance with program rules and
requirements, and had staffing issues. In addition, its management was ineffective in ensuring
that the financial operations of the program complied with HUD rules and requirements.

What We Recommend
We recommend that the Director of HUD’s Los Angeles Office of Public Housing require the
Authority to (1) provide supporting documentation or reimburse its program $796,186 from non-
Federal funds for unsupported allocated overhead and personnel costs charged, (2) develop and
implement procedures and controls to ensure that the financial management of the program
meets rules and requirements, (3) ensure staff is available to monitor and enforce repayments
agreements, and (4) provide HUD training and technical assistance to ensure compliance with
HUD rules and requirements that pertain to the financial operations of its program. In addition,
we recommend that the Director of HUD’s Los Angeles Office of Public Housing review current
and future cost allocation plans to ensure compliance with HUD rules and requirements.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding: The Authority Did Not Effectively Manage the Financial Operations
         of Its Program in Accordance With HUD Rules and Requirements ........................... 4

Scope and Methodology .........................................................................................10

Internal Controls ....................................................................................................11

Appendixes ..............................................................................................................13
         A. Schedule of Questioned Costs .................................................................................. 13

         B. Auditee Comments and OIG’s Evaluation ............................................................. 14

         C. Criteria ....................................................................................................................... 20

         D. Summary of Questioned Costs ................................................................................. 23




                                                                     2
Background and Objective
The Inglewood Housing Authority is a blended component unit of the City of Inglewood, CA,
Economic and Community Development Department. The governing body of the Authority is
comprised of members of the City Council and the mayor. It approves the Authority’s budget
and appoints its management. The Authority primarily focuses on improving service delivery to
clients, expanding housing choice voucher options for clients, providing safe environments in
which to live, and improving compliance with changing U.S. Department of Housing and Urban
Development (HUD) policies.

The financial activities of the Authority are reported as a special revenue fund. The Authority
has a baseline allocation of 1,002 housing choice vouchers and oversees additional vouchers
from portable participants. Portable participants are eligible families that have been issued a
housing choice voucher in one public housing agency’s jurisdiction but have chosen to lease a
unit in another public housing agency’s jurisdiction. Between its fiscal year ending September
30, 2014, and its current fiscal year through February 29, 2016, it had revenues and expenditures
totaling more than $34.9 and $34.8 million, respectively.

The City of Inglewood’s Finance, Payroll, and Accounts Payable Departments perform many of
the financial functions for the Authority. These financial functions include maintaining the
portable receivable account, submitting the Voucher for payment of annual contributions and
operating statement to HUD, and issuing housing assistance payments.

Our objective was to determine whether the Authority managed the financial operations of its
program in compliance with HUD rules and requirements.




                                                3
Results of Audit

Finding: The Authority Did Not Effectively Manage the Financial
Operations of Its Program in Accordance With HUD Rules and
Requirements
The Authority did not manage the financial operations of its program in accordance with HUD
rules and requirements. Specifically, it (1) disbursed $796,186 in program funds for unsupported
transactions, (2) misclassified program fraud recovery proceeds, (3) did not terminate program
assistance to noncompliant participants, and (4) did not void or reconcile its outstanding checks
in a timely manner. These conditions occurred because the Authority lacked adequate written
policies and procedures and staffing to ensure program compliance. In addition, its management
was ineffective in ensuring that the financial management of the program complied with HUD
rules and requirements. As a result, the Authority did not ensure that at least $796,186 in
questioned transactions was used for eligible program expenses that may affect its ability to
ensure that funds are available to provide housing assistance to eligible participants.

The Authority Did Not Support Program Transactions
The Authority paid $796,186 in unsupported transactions that were disbursed from its program.
This amount included $605,614 in unsupported allocated overhead costs and $190,572 in
unsupported personnel costs.

The Authority Did Not Support Its Cost Allocation Plans
The City’s cost allocation plans used to distribute overhead costs to the Authority’s program
violated the applicable regulations at 24 CFR (Code of Federal Regulations) Part 200, appendix
V (appendix C). In July 2015, HUD monitored the Authority and reviewed the City’s cost
allocation plans used during its fiscal years ending September 30, 2013, and September 30, 2014.
Based on the review, HUD requested that the Authority repay the allocated overhead costs
charged for the years reviewed. The repayment was based on the Authority not preparing its cost
allocation plans and failing to complete the required certifications by the required deadline. In
addition, it did not have support for cost data used to distribute the costs included in the plans.
As a result, the Authority reimbursed its administrative fee account $659,730 for ineligible
allocated overhead costs charged in its fiscal years ending September 30, 2013, and September
30, 2014.

For the City’s fiscal years ending September 30, 2015, and September 30, 2016, it could not
support the overhead cost allocation plans with the required documents. The City used
Microsoft Excel spreadsheets to document its cost allocation plans. The figures used in the
worksheets were from the City’s budget. However, neither the spreadsheets nor the City’s
budget included narratives to describe each of the allocated services provided to the Authority.
Neither document identified the following required elements: the departments providing and
receiving services, the details of the expenses incurred from providing services, and the


                                                 4
methodology for sharing costs among the benefiting departments. As a result, we were unable to
understand the City’s methodology for allocating overhead costs charged to the Authority’s
program. City staff explained that these cost allocation plans were submitted to HUD in July
2015. HUD staff acknowledged receiving the plans but did not provide the City with comments
regarding the adequacy of the plans. Therefore, City and Authority staff was surprised that the
cost allocation plans did not meet the applicable requirements. The City had paid from the
Authority’s program allocated overhead costs totaling $605,614 for its fiscal year ending
September 30, 2015, and its current fiscal year ending September 30, 2016. Since the
Authority’s cost allocation plans used to distribute the program costs were incomplete, it
disbursed $605,614 in unsupported allocated overhead costs.

The Authority Did Not Support Personnel Costs
The Authority charged $174,941 to its program for City personnel costs that were not supported
with appropriate source documentation as required by 24 CFR 85.20 (b)(6) and section 14(A) of
the Authority’s HUD-approved consolidated annual contributions contract (appendix C). These
costs were related to two City police department employees and one accountant. These costs
were charged to the Authority’s program through unsupported payroll entries in its fiscal years
ending September 30, 2013, September 30, 2014, and September 30, 2015, and yearend
adjusting entries in its fiscal years end ending September 30, 2014, and September 30, 2015.
Overall, the City did not track these employees’ time by program activity. Specifically, the City
employees’ time and attendance records did not show how much of their time was spent working
on the program versus how much time they spent on other programs and activities. A City
finance staff member explained that she did not agree with charging the accountant’s personnel
costs to the Authority’s program as it had not been done that way before the fiscal year that
ended in September 30, 2014. Therefore, she had obtained approval from the City’s assistant
finance director to adjust $21,209 for the accountant’s personnel costs for the fiscal year ending
September 30, 2015. However, she was unable to reverse a similar yearend adjusting entry for
the fiscal year ending September 30, 2014, since the City had already completed its general
ledger for that fiscal year. As a result, the City continued to charge the Authority’s program for
unsupported City personnel costs totaling $153,732. Further, other City departments, such as the
Finance Department, provided services to several City departments, and those costs were
allocated using the City’s cost allocation plans. The $153,732 in unsupported City personnel
costs may have been charged to the Authority’s program as part of allocated overhead costs
previously discussed in this report.

Additionally, the Authority charged its program for $36,840 in personnel costs that was not
supported by the source documentation required by 24 CFR 85.20(b)(6) (appendix C). The
Authority charged its program through a yearend adjusting journal entry. Specifically, this
adjustment shifted an Authority staff member’s payroll costs from the Authority’s State of
California-funded Affordable Housing program to its program. During the fiscal year, it
adjusted this staff member’s job-costing codes to show changes in work performed. City finance
staff provided a copy of an email instructing staff to make the yearend adjusting entry. However,
there was no source documentation to show that this staff member worked on the program for
more time than what had been adjusted. Additionally, City staff could not provide an



                                                5
explanation for the basis of this adjustment. The Authority’s action resulted in $36,840 in
unsupported Authority personnel costs.

Overall, the Authority paid $190,572 ($153,732 + $36,840) in unsupported personnel costs that
were disbursed from its program.

The Authority Misclassified Fraud Recovery Proceeds
The City’s finance staff credited the Authority’s program fraud recovery proceeds 1 to a wrong
account. While we did not note an issue with the proceeds recorded for fiscal years ending
September 30, 2014, and September 30, 2015, the City’s finance staff mistakenly credited these
funds to the City’s general fund. This portion of the fraud recovery proceeds should have been
credited to the Authority’s administrative fee reserve account. A City finance staff member
attributed the misclassification to a misinterpretation of HUD’s rules and requirements on how to
account for the proceeds. The City finance staff member recalled that during a non-HUD
training, it was explained that the Authority could keep up to 50 percent of fraud recovery
proceeds. However, there was no clarification as to where these proceeds were to be credited.
This matter was brought to the Authority’s attention, and City finance staff corrected the error.
As a result, no further action related to this issue is warranted. However, the Authority must
ensure that future instances are eliminated.

The Authority Did Not Terminate Program Assistance to Noncompliant Participants
The Authority did not terminate program assistance to participants who failed to meet the terms
of their repayment agreements 2. The Authority had 74 outstanding repayment agreements with
current program participants totaling $128,313. Of those 74 outstanding repayment agreements,
the Authority had 24 outstanding repayment agreements that totaled $49,017 from participants in
continuous default status. The Authority had last mailed delinquency notices on December 17,
2015. As a result of our inquiries, in May 2016, the Authority mailed delinquency notices and
collection notices to those participants who were delinquent and those who had been removed
from the program. At the end of our fieldwork, the Authority had removed 8 of the 24 program
participants, 8 participants were current with their accounts, and 6 participants had paid off their
debts. The Authority was researching the remaining two repayment agreements to determine and
proceed with the appropriate actions. An Authority official explained that staffing issues were a



1
  Regulations at 24 CFR 792.202 allow the Authority to retain up to 50 percent of the amount it collects from a
judgment, litigation, or an administrative repayment agreement that is due as a result of a participant’s fraud and
abuse. Further, Office of Public and Indian Housing (PIH) Notice PIH-2015-17 states that this portion of fraud
recovery proceeds is to be credited to the Authority’s administrative fee reserve account (appendix C).
2
  A repayment agreement is a formal document executed with an owner or tenant in which the owner or tenant
acknowledges and agrees to repay a debt, in a specific amount, and agrees to repay the amount due at a specific
time(s). (The Authority executes these agreements with owners or participants due to participants’ underreported or
unreported income (appendix C - 24 CFR 792.103).) If a payment is not received, the Authority sends the owner or
participants a delinquency notice, giving them 10 business days to make the late payment. If the late payment is not
received, it will be considered a breach of the agreement, and the Authority will terminate assistance (appendix C -
the Authority’s administrative plan for the Housing Choice Voucher program, chapter 16, part IV, section IV.B, and
24 CFR 982.552(c)(1)(vii)).

                                                           6
factor in its shortcomings in monitoring and enforcing repayment agreements. While we agree
with the Authority’s explanation, it did not have formal written procedures for monitoring the
agreements and sufficient personnel to monitor and enforce these agreements. Additionally, the
Authority’s management failed to ensure that staffing was available to monitor and enforce these
repayment agreements.

The Authority Did Not Void or Reconcile its Outstanding Checks in a Timely Manner
The Authority had uncertainties regarding its payments of program funds, including uncashed
checks, as it did not maintain the required controls 3 over its program funds. It was unable to
provide a listing of uncashed program checks from its program management software system.
An Authority official claimed that all of the program checks had been cleared. However, an
Authority staff member stated that the Authority had not been reconciling its disbursements. The
Authority official later explained that the reconciliation of payments did not reconcile the status
of its payments. Instead, the reconciliation of payments settled the total of the payments
recorded in the Authority’s program management software system with the total payments
recorded and paid in the City’s financial management system. Further, the Authority official
admitted that these types of reconciliations had not been performed since December 2011 and
that the responsibility of reconciliations had not been formally assigned to anyone at the
Authority. However, the Authority staff member stated that this duty had been assigned to the
Authority official, not staff. This condition occurred because the Authority’s management failed
to ensure that designated staff performed the reconciliations. As a result, management’s lack of
actions raised concerns of uncertainties regarding the Authority’s payments of program funds.

The City’s Finance Department provided us a listing of uncashed checks totaling $17,192. Of
this amount, we sampled 12 checks totaling $11,108 and determined that the Authority did not
properly void 4 checks totaling $4,408. Based on our inquiries, the Authority voided two checks
totaling $2,112 for canceled trainings. It voided the remaining two checks totaling $2,296 for
housing assistance payments. The Authority’s program management software system included
notes regarding these checks. One check totaling $1,804 had been returned to the Finance
Department in November 2013. Another check totaling $492 was for an overpayment in housing
assistance to a participant. An Authority official did not provide an explanation for the untimely
voiding of checks. However, the official assured us that the Authority followed the practice of
sending the check to the City’s Finance Department. The Authority’s actions raised concerns of
uncertainties regarding its payments of program funds.




3
 Regulations at 24 CFR 85.20(b)(3) require that the financial management system of the Authority have effective
control and accountability for all cash, real and personal property, and other assets. The Authority must adequately
safeguard all such property and ensure that it is used solely for authorized purposes (appendix C).


                                                          7
The Authority’s Management Lacked an Understanding of Rules and Requirements
The Authority’s management was not aware that it had violated HUD rules and requirements.
Additionally, the Authority’s management and former housing manager 4 could not implement
existing policies and procedures, as they lacked an understanding of HUD rules and requirements
related to the financial aspects of the Authority’s program.

Conclusion
The Authority did not manage the financial operations of its program in accordance with HUD
rules and requirements. This condition occurred because the Authority lacked adequate written
policies and procedures and staffing to ensure compliance. Further, Authority management was
ineffective in ensuring that the program’s financial operations complied with HUD rules and
requirements. Based on the results of this audit, the complainant’s allegations and HUD’s
concerns about the Authority’s financial management of its program were valid. As a result of
its mismanagement, the Authority charged its program at least $796,186 (appendix D) in
unsupported expenses, which may affect its ability to ensure that funds are available to provide
housing assistance to eligible participants.

Recommendations
We recommend that the Director of HUD’s Los Angeles Office of Public Housing require the
Authority to

        1A.      Support the eligibility of $605,614 used for unsupported allocated overhead costs
                 charged for the fiscal year ending September 30, 2015, and its current fiscal year
                 through June 30, 2016, or reimburse its administrative fee reserve account using
                 non-Federal funds.

        1B.      Support the eligibility of $190,572 used for personnel costs or reimburses its
                 administrative fee reserve account using non-Federal funds.

        1C.      Develop and implement adequate internal controls over its financial management
                 of program funds. At a minimum, the internal controls should address the
                 weaknesses cited in this report and include policies and procedures to ensure that
                 costs are reviewed, documented, and supported as required by HUD; fraud
                 recovery proceeds are classified correctly; repayment agreements are monitored
                 and enforced; and disbursements are reconciled in its program management
                 software system.

        1D.      Ensure that staffing is available to monitor and enforce repayment agreements
                 executed with noncompliant program participants.




4
  Our audit period included the period of the former housing manager’s tenure. During the period of our review, the
former housing manager was on administrative leave. Specifically, this individual was not at the Authority from
October 2015 to May 2016, or the month when this individual was removed from the housing manager position.

                                                         8
      1E.    Obtain HUD training and technical assistance for its management, program staff,
             and applicable City finance staff to ensure that the financial management of its
             program complies with HUD rules and requirements.

We recommend that the Director of HUD’s Los Angeles Office of Public Housing to:

      1F.    Review the Authority’s current and future cost allocation plans to ensure
             compliance with HUD rules and requirements. Specifically, these cost allocation
             plans should include the following required elements: the departments providing
             and receiving the services, the details of the expenses incurred from providing
             services, and the methodology for sharing costs among the benefitting
             departments.




                                              9
Scope and Methodology
We performed our audit work at the Authority’s office in Inglewood, CA, and our office in Los
Angeles, CA, from February 25 to July 22, 2016. Our review covered the period October 1,
2012, to June 30, 2016, and was expanded as necessary.
To accomplish our objective, we

•   Reviewed the Authority’s HUD-approved annual contributions contract and applicable HUD
    rules, regulations, and guidance;

•   Obtained an understanding of the Authority’s internal controls;

•   Interviewed Authority officials to obtain an understanding of its program processes;

•   Reviewed the Authority’s independent public accountant reports for fiscal years ending
    September 30, 2013, and September 30, 2014;

•   Reviewed HUD monitoring reports;

•   Reviewed the City’s overhead cost allocation plans for its fiscal years ending September 30,
    2015 and September 30, 2016; and

•   Reviewed payroll, repayment agreements, and outstanding checks data and records.
The audit universe of outstanding checks consisted of 63 checks totaling $17,192 during the
period of October 1, 2013, through March 31, 2016. For our review, we nonstatistically sampled
12 checks totaling $11,108. Overall, the outstanding checks reviewed represented 65 percent
($11,108/$17,192) of the Authority’s total outstanding checks. In addition, we nonstatistically
selected and reviewed $211,781 in personnel costs; $27,395 of fraud recovery proceeds; and
$49,017 in repayment agreements.
We evaluated the reliability of computer-processed data to identify potential weaknesses related
to our audit objective. Specifically, we reviewed the Authority’s financial management system
expenditures and revenues reports and its program management system expenditures report; data
from HUD’s Voucher Management System; and HUD disbursement data. We relied in part on
computer-processed data primarily for obtaining background information on the Authority’s
program. We performed a minimal level of testing and found the data to be sufficiently reliable
to meet the audit objective and for the intended use of the data.
We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.


                                                10
Internal Controls
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

•   Effectiveness and efficiency of operations,
•   Reliability of financial reporting, and
•   Compliance with applicable laws and regulations.
Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.

Relevant Internal Controls
We determined that the following internal controls were relevant to our audit objective:

•   Effectiveness and efficiency of operations – Implementation of policies and procedures to
    reasonably ensure that program objectives are met.

•   Reliability of financial information – Implementation of policies and procedures to
    reasonably ensure that relevant and reliable data are obtained, maintained, and fairly
    disclosed in the required reports.

•   Compliance with laws and regulations – Implementation of policies and procedures to
    reasonably ensure that program expenses are supported and comply with program funding
    guidelines and restrictions.

We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, the
reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or
efficiency of operations, (2) misstatements in financial or performance information, or (3)
violations of laws and regulations on a timely basis.




                                                  11
Significant Deficiencies
Based on our review, we believe that the following items are significant deficiencies:

•   The Authority did not have adequate financial management controls to ensure that expenses
    were adequately supported, program fraud recovery proceeds were classified correctly, and
    program expenses were reconciled (finding).

•   The Authority did not have adequate controls in place to ensure that repayment agreements
    were monitored and enforced (finding).




                                                 12
Appendixes

Appendix A


                             Schedule of Questioned Costs
                           Recommendation
                                             Unsupported 1/
                               number
                                   1A              $605,614
                                   1B               190,572
                                 Totals             796,186


1/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.




                                              13
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG
Evaluation    Auditee Comments




Comment 1


Comment 2




                               14
Comment 3




            15
Comment 4




Comment 5




Comment 6




            16
Comment 7




            17
                         OIG Evaluation of Auditee Comments


Comment 1   We appreciate and commend the Authority for accepting the responsibility to take
            corrective action to ensure that the reported deficiencies are addressed. The
            Authority’s corrective actions should ensure its program funds are used for
            eligible program expenses and that funds are available to provide housing
            assistance to eligible participants. The Authority should work with HUD during
            the audit resolution process to ensure the recommendations are adequately
            addressed.


Comment 2   We acknowledge and commend the Authority for taking corrective action on
            previous issues related to the cost allocation plans for its fiscal years ended
            September 30, 2013, and September 30, 2014. Since those cost allocation plans
            were not included in our review, we cannot comment on the similarities between
            the methodologies of the plans. We included a recommendation for HUD to
            review the Authority’s current and future cost allocation plans. As part of the
            audit resolution, the Authority can work with the HUD local field office in
            ensuring that the current and future cost allocation plans meet HUD requirements.
            The Authority’s approach to addressing the finding should include the following
            required elements: the departments providing and receiving the services, the
            details of the expenses incurred from providing services, and the methodology for
            sharing costs among the benefitting departments. If the Authority implements our
            recommendations, it will ensure its program funds are used for eligible program
            expenses.

            We redacted individuals’ names mentioned in the letter for privacy reasons.

Comment 3   We appreciate the Authority for acknowledging the lack of source documentation
            for payroll costs. We commend the City of Inglewood for sharing essential
            services with the Authority to help manage the program. However, both the
            Authority and the City must ensure that program funds are used for eligible
            payroll program expenses that include accurate tracking of program employees’
            time by the respective program activity. We commend the Authority and the City
            for taking corrective action to ensure that this reported deficiency is addressed.

Comment 4   We appreciate and commend the Authority for taking corrective action to ensure
            that the reported deficiency was addressed. The Authority’s corrective action will
            ensure that its program funds are available to support the program.




                                             18
Comment 5   We appreciate and commend the Authority for taking corrective action to ensure
            that the reported deficiency was addressed. The Authority’s corrective action will
            ensure that its program funds are available to provide housing assistance to
            eligible participants.

Comment 6   We appreciate the City for acknowledging that the Authority did not void or
            reconcile is outstanding checks in a timely manner. We acknowledge that this
            issue is the responsibility of both the Authority and City to ensure coordination
            and communication of program fund transactions are accurate and complete. If
            the required controls are implemented and maintained, the Authority will ensure
            that program funds are used for eligible program expenses and that funds are
            available to provide housing assistance to eligible participants. We commend the
            City and Authority for proactively addressing this reported deficiency.

Comment 7   We commend the City and Authority for taking corrective action to ensure that
            the program and City staff involved in the financial operations of the program are
            trained on HUD rules and requirements. By implementing this recommendation,
            the City and Authority will ensure program funds are used for eligible program
            expenses and that funds are available to provide housing assistance to eligible
            participants.




                                             19
Appendix C
                                            Criteria

The following sections of the consolidated annual contributions contract, the Authority’s
administrative plan, 2 CFR Part 200, 24 CFR Part 85, 24 CFR Part 792, 24 CFR Part 982, and
Office of Public and Indian Housing (PIH) Notice PIH-2015-17 were relevant to our audit of the
Authority’s financial management of its program.

Consolidated Annual Contributions Contract, Section 14, Program Records

(a) The HA [housing agency] must maintain complete and accurate books of account and records
    for a program. The books and records must be in accordance with HUD requirements, and
    must permit a speedy and effective audit.

Authority’s Administrative Plan for the Housing Choice Voucher Program, Chapter 16, Program
Administration, Part IV, Owner or Family Debts to the PHA, Section IV.B. Repayment Policy

Late or Missed Payments
If a payment is not received by the end of the business day on the date due, and prior approval
for the missed payment has not been given by the PHA [public housing agency], the PHA will
send the family a delinquency notice giving the family 10 business days to make the late
payment. If the payment is not received by the due date of the delinquency notice, it will be
considered a breach of the agreement and the PHA will terminate assistance in accordance with
the policies in Chapter 12.

2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit
Requirements for Federal Awards, Appendix V, State/Local Government and Indian Tribe-Wide
Central Service Cost Allocation Plans

A. General
    1. …All costs and other data used to distribute the costs included in the plan should be
     supported by formal accounting and other records that will support the propriety of the
     costs assigned to Federal awards.

E. Documentation Requirements for Submitted Plans
    2. Allocated Central Services. For each allocated central service, the plan must also include
    the following: a brief description of the service, an identification of the unit rendering the
    service and the operating agencies receiving the service, the items of expense included in
    the cost of the service, the method used to distribute the cost of the service to benefitted
    agencies, and a summary schedule showing the allocation of each service to the specific
    benefitted agencies. If any self-insurance funds or fringe benefits costs are treated as
    allocated (rather than billed) central services, documentation discussed in subsections 3.b.
    and c. must also be included.


                                                 20
24 CFR Part 85, Administrative Requirements for Grants and Cooperative Agreements to State,
Local and Federally Recognized Indian Tribal Governments, Section 85.20, Standards for
financial management systems

(b) The financial management systems of other grantees and subgrantees must meet the
following standards:

       (3) Internal control. Effective control and accountability must be maintained for all grant
       and subgrant cash, real and personal property, and other assets. Grantees and subgrantees
       must adequately safeguard all such property and must assure that it is used solely for
       authorized purposes.

       (6) Source documentation. Accounting records must be supported by such source
       documentation as cancelled checks, paid bills, payrolls, time and attendance records,
       contract and subgrant award documents, etc.

24 CFR Part 792, Public Housing Agency Section 8 Fraud Recoveries, Section 792.103,
Definitions

Repayment agreement. Repayment agreement means a formal document signed by a tenant or
owner and provided to a PHA in which a tenant or owner acknowledges a debt, in a specific
amount, and agrees to repay the amount due at specific time period(s).

24 CFR Part 792, Public Housing Agency Section 8 Fraud Recoveries, Section 792.202, PHA
retention of proceeds

(a) Where the PHA is the principal party initiating or sustaining an action to recover amounts
from tenants that are due as a result of fraud and abuse, the PHA may retain, the greater of:

       (1) Fifty percent of the amount it actually collects from a judgment, litigation (including
       settlement of lawsuit) or an administrative repayment agreement pursuant to, or
       incorporating the requirements of, § 982.555 of this title.

24 CFR Part 982, Section 8 Tenant-Based Assistance: Housing Choice Voucher Program,
Section 982.552, PHA denial or termination of assistance for family

(c) Authority to deny admission or terminate assistance—

       (1) Grounds for denial or termination of assistance. The PHA may at any time deny
       program assistance for an applicant, or terminate program assistance for a participant, for
       any of the following grounds:

               (vii) If the family breaches an agreement with the PHA to pay amounts owed to a
               PHA, or amounts paid to an owner by a PHA. (The PHA, at its discretion, may
               offer a family the opportunity to enter an agreement to pay amounts owed to a

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              PHA or amounts paid to an owner by a PHA. The PHA may prescribe the terms
              of the agreement.)

Notice PIH-2015-17, Use and Reporting of Administrative Fee Reserves, Section 2, Background

Pursuant to 24 CFR 982.155, PHAs maintain a UNP [unrestricted net position], which is a single
administrative fee reserve account for the Housing Choice Voucher (HCV) program. On an
annual basis, PHAs credit to the UNP the total of:

       (4) the portion of fraud recoveries actually collected that flows to the administrative fee
       reserves (usually 50% of total collected).




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Appendix D
                          Summary of Questioned Costs


                           Description                            Amount

                       Unsupported allocated overhead costs
               Fiscal year ending September 30, 2015              $343,589
               Fiscal year ending September 30, 2016               262,025
         Subtotal of unsupported allocated overhead costs          605,614
                            Unsupported personnel costs
                   City police department officer                  120,360
             City police department civilian employee                3,393
                City Finance Department accountant                  29,979
                 Authority former housing manager                   36,840
              Subtotal of unsupported personnel costs              190,572
    Total of unsupported allocated overhead and personnel costs    796,186




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