HOUSING AUTHORITY OF CITY OF HOUSTON

Eligibility Moving to Work Demonstration Program AL No. 14.881 Material Weakness in Internal Control over Compliance Material Noncompliance (Repeated from prior year, Finding No. 2024-002)

Condition: Out of an approximate population of 17,500 of Section 8 Housing Choice Voucher and 2,200 Low Rent Public Housing tenants the following deficiencies were noted:

Section 8 Housing Choice Voucher (a total of 19 tenants selected for testing): • Nineteen files did not have annual recertification performed during the year. Low Rent Public Housing (a total of 40 tenants selected for testing): • One file did not have a required annual recertification performed during the year. Criteria: The Authority’s ACOP, Administrative Plan, 24 CFR 960.259, and 24 CFR 982.516 require internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding timely, complete, and accurate tenant files.

Context: The auditor randomly selected tenant files out of the population from each program as outlined, which we consider to be a statistically valid sample size. The auditor reviewed the tenant files and support to ensure that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files.

Cause: The Authority experienced staffing and operational challenges which included a large backlog of past due recertifications and did not have the available staff to follow the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to verify eligibility and calculate accurate housing assistance payments.

Effect: The Authority is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided.

Questioned Costs: Unknown.

Auditor Recommendations: The Authority should reevaluate their established procedures and controls in place to ensure full compliance in regards to eligibility and the timeliness of recertifications. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor’s sample.

Eligibility Housing Voucher Cluster Material Weakness in Internal Control over Compliance Material Noncompliance (Repeated from prior year, Finding No. 2024-003)

Condition: Out of an approximate population of 1,500 of Housing Voucher Cluster tenants we tested 18 tenants and the following deficiencies were noted: • Eighteen files did not have annual recertification performed during the year. Criteria: The Authority’s Administrative Plan and 24 CFR 982.516 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding timely, complete, and accurate tenant files.

Context: The auditor randomly selected tenant files out of the population from each program as outlined, which we consider to be a statistically valid sample size. The auditor reviewed the tenant files and support to ensure that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files.

Cause: The Authority experienced staffing and operational challenges which included a large backlog of past due recertifications and did not have the available staff to follow the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to verify eligibility and calculate accurate housing assistance payments.

Effect: The Authority is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided.

Questioned Costs: Unknown.

Auditor Recommendations: The Authority should reevaluate their established procedures and controls in place to ensure full compliance in regards to eligibility and the timeliness of recertifications. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor’s sample.

Eligibility Section 8 Project-Based Cluster Material Weakness in Internal Control over Compliance Material Noncompliance (Repeated from prior year, Finding No. 2024-004)

Condition: Out of an approximate population of 240 of tenants, 12 tenant files were tested and the following deficiencies were noted: • Twelve files did not have annual recertification performed during the year. Criteria: 24 CFR 983.353 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding timely, complete, and accurate tenant files.

Context: The auditor randomly selected tenant files out of the population as outlined, which we consider to be a statistically valid sample size. The auditor reviewed the tenant files and support to ensure that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files.

Cause: The Authority experienced staffing and operational challenges which included a large backlog of past due recertifications and did not have the available staff to follow the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to verify eligibility and calculate accurate housing assistance payments.

Effect: The Authority is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided.

Questioned Costs: Unknown.

Auditor Recommendations: The Authority should reevaluate their established procedures and controls in place to ensure full compliance in regards to eligibility and the timeliness of recertifications. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor’s sample.

2024-001 Financial Reporting Material Weakness in Internal Control Material Noncompliance Condition: During our audit of the Authority’s financial statements, numerous adjustments were needed to properly report the financial statements in accordance with generally accepted accounting principles. Certain accounts had not been properly reconciled and corrective entries were not readily available. Significant audit adjustments were necessary for several audit areas and the audit was significantly delayed due to these adjustments. Context: We obtained the financial information from the Authority’s general ledger system. As part of our audit process, the financial information was compared to the unaudited submission sent to the U.S. Department of Housing and Urban Development Real Estate Assessment Center (“REAC”). While applying audit procedures, significant adjustments were identified as necessary to properly reflect the financial data in accordance with generally accepted accounting principles and to reflect the data schedule in accordance with HUD requirements. The required audit procedures were unable to be completed. Criteria: In accordance with AU-C 265, when a deficiency or a combination of deficiencies in internal control is identified, which indicates that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected and corrected on a timely basis, a material weakness should be reported. Cause: The Authority was unable to maintain proper oversight of its financial closing processes and recordkeeping during an accounting software conversion and staff transitions. As a result the Authority did not have access to accurate closing schedules and was not able to implement the internal controls and processes to ensure that the general ledger and the unaudited REAC submission was complete and accurate. Effect: The general ledger and the unaudited data submitted to REAC required numerous and material audit adjustments that delayed the audit, and therefore HUD could not provide proper timely financial oversight based on the unaudited REAC submission. Auditor’s Recommendations: The Authority should continue to develop and implement internal controls over both internal and external reporting, and the year-end close process to ensure reporting remains accurate and timely, with any unexpected financial data being investigated and corrected before it is reported. The Authority should consider additional staff training on development activities. Management Response: See Corrective Action Plan. Delayed Financial Reporting Material Weakness in Internal Control Material Noncompliance Moving to Work Demonstration Program AL No. 14.881 Housing Voucher Cluster Section 8 Project-Based Cluster Same as Financial Statement Audit Finding 2024-001 above Management Response: See Corrective Action Plan.

Eligibility Moving to Work Demonstration Program AL No. 14.881 Material Weakness in Internal Control Material Noncompliance Condition: Out of an approximate population of 17,500 of Section 8 Housing Choice Voucher and 2,200 Low Rent Public Housing tenants the following deficiencies were noted: Section 8 Housing Choice Voucher (a total of 11 tenants selected for testing): • One file did not have annual recertifications performed during the year, • Two files did not have 9886 release of information forms within 15 months of annual recertification, • Three files did not have an annual recertification performed within 12 months of the previous certification, • Two files did not have an utility allowance calculation sheet during annual recertification, • Three files did not have documentation necessary to verify the reported income, • Two files did not have a inspections performed during the period, and • Two files did not utilize the correct payment standard. Eligibility (continued) Moving to Work Demonstration Program AL No. 14.881 Material Weakness in Internal Control Material Noncompliance Low Rent Public Housing (a total of 12 tenants selected for testing): • Three files did not contain flat rent options forms, • Four files did not have documentation necessary to verify the reported income, • Six files did not have a 214 declaration for a member of the household, and • One file did not have support necessary to verify income allowances, Criteria: The Authority’s ACOP, Administrative Plan, 24 CFR 960.259, and 24 CFR 982.516 require internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Context: The auditor randomly selected tenant files out of the population from each program as outlined, which we consider to be a statistically valid sample size. The auditor reviewed the tenant files and support to ensure that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Cause: The Authority experienced staffing and operational challenges during the onset of COVID- 19 and did not have the available staff to follow the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to verify eligibility and calculate accurate housing assistance payments. Effect: The Authority is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided. Questioned Costs: Unknown. Auditor Recommendations: The Authority should reevaluate their established procedures and controls in place to ensure full compliance in regards to eligibility and the timeliness of recertifications. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor’s sample. Management Response: See Corrective Action Plan.

Eligibility Housing Voucher Cluster Material Weakness in Internal Control Material Noncompliance Condition: Out of an approximate population of 1,500 of Housing Voucher Cluster tenants we tested 11 tenants and the following deficiencies were noted: • Five files did not have an annual recertification performed with 12 months of the previous certification • Two files did not have inspection documentation during the period, • One file did not have an annual recertification performed, • One file did not have documentation to support HAP amount reported, • One file used an incorrect payment standard, • One file did not have dependency documentation for a dependent member of the household, • One file was missing documentation to support income claimed during recertification, and • One file will missing rent reasonableness documentation and approval. Criteria: The Authority’s Administrative Plan and 24 CFR 982.516 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Context: The auditor randomly selected tenant files out of the population from each program as outlined, which we consider to be a statistically valid sample size. The auditor reviewed the tenant files and support to ensure that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Cause: The Authority experienced staffing and operational challenges during the onset of COVID- 19 and did not have the available staff to follow the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to verify eligibility and calculate accurate housing assistance payments. Effect: The Authority is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided. Questioned Costs: Unknown. Auditor Recommendations: The Authority should reevaluate their established procedures and controls in place to ensure full compliance in regards to eligibility and the timeliness of recertifications. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor’s sample. Management Response: See Corrective Action Plan.

Eligibility Section 8 Project-Based Cluster Material Weakness in Internal Control Material Noncompliance Condition: Out of an approximate population of 240 of tenants, 11 tenant files were tested and the following deficiencies were noted: • Four files did not have annual recertifications performed during the year, • Two files did not have a 214 declaration form for all members of the household, • Two files used incorrect income based on the support provided during the annual recertification, • One file did not have documentation necessary to verify the reported income, and • One files did not have utility allowance documentation. Criteria: 24 CFR 983.353 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Context: The auditor randomly selected tenant files out of the population as outlined, which we consider to be a statistically valid sample size. The auditor reviewed the tenant files and support to ensure that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files. Cause: The Authority experienced staffing and operational challenges during the onset of COVID- 19 and did not have the available staff to follow the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to verify eligibility and calculate accurate housing assistance payments. Effect: The Authority is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided. Questioned Costs: Unknown. Auditor Recommendations: The Authority should reevaluate their established procedures and controls in place to ensure full compliance in regards to eligibility and the timeliness of recertifications. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor’s sample. Management Response: See Corrective Action Plan.

2023-001 Financial Reporting Material Weakness in Internal Control Material Noncompliance

Condition: During our audit of the Authority’s financial statements, numerous adjustments were needed to properly report the financial statements in accordance with generally accepted accounting principles. Certain accounts had not been properly reconciled and corrective entries were not readily available. Significant audit adjustments were necessary for several audit areas and the audit was significantly delayed due to these adjustments.

Context: We obtained the financial information from the Authority’s general ledger system. As part of our audit process, the financial information was compared to the unaudited submission sent to the U.S. Department of Housing and Urban Development Real Estate Assessment Center (“REAC”). While applying audit procedures, significant adjustments were identified as necessary to properly reflect the financial data in accordance with generally accepted accounting principles and to reflect the data schedule in accordance with HUD requirements. The required audit procedures were unable to be completed.

Criteria: In accordance with AU-C 265, when a deficiency or a combination of deficiencies in internal control is identified, which indicates that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected and corrected on a timely basis, a material weakness should be reported.

Cause: The Authority was unable to maintain proper oversight of its financial closing processes and recording keeping during COVID. As a result the Authority did not have access to accurate closing schedules and was not able to implement the internal controls and processes to ensure that the general ledger and the unaudited REAC submission was complete and accurate.

Effect: The general ledger and the unaudited data submitted to REAC required numerous and material audit adjustments that delayed the audit, and therefore HUD could not provide proper timely financial oversight based on the unaudited REAC submission.

Auditor’s Recommendations: The Authority should continue to develop and implement internal controls over both internal and external reporting, and the year-end close process to ensure reporting remains accurate and timely, with any unexpected financial data being investigated and corrected before it is reported. The Authority should consider additional staff training on development activities.

Management Response: See Corrective Action Plan.

2023-002 Eligibility Moving to Work Demonstration Program AL No. 14.881 Material Weakness in Internal Control Material Noncompliance

Condition: Out of an approximate population of 18,300 of Section 8 Housing Choice Voucher and 2,300 Low Rent Public Housing tenants the following deficiencies were noted: Section 8 Housing Choice Voucher (a total of 40 tenants selected for testing):

• Thirty-five files did not have annual recertifications performed during the year, • Nine files did not have 9886 release of information forms within 15 months of annual recertification, • Four files did not have an annual recertification performed with 12 months of the previous certification, • Three files did not have an inspection performed during the year • Three files did not have documentation necessary to verify the reported income, • Two files did not have a 214 declaration for a member of the household, and • Two files did not have documentation necessary to verify custody of dependent • Fourteen files did not contain flat rent options forms, • Ten files did not have documentation necessary to verify the reported income, • Seven files did not have the annual recertification performed or documented, • Five files did not have a 214 declaration for a member of the household, • Three files did not have support necessary to verify income allowances, • Two files did not have 9886 release of information from within 15 months of the annual recertification, and • One file did not have annual recertifications performed within 12 months of the previous annual certification.

Criteria: The Authority’s ACOP, Administrative Plan, 24 CFR 960.259, and 24 CFR 982.516 require internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding timely, complete, and accurate tenant files.

Context: The auditor randomly selected tenant files out of the population from each program as outlined, which we consider to be a statistically valid sample size. The auditor reviewed the tenant files and support to ensure that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files.

Cause: The Authority experienced staffing and operational challenges during the onset of COVID- 19 and did not have the available staff to follow the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to verify eligibility and calculate accurate housing assistance payments.

Effect: The Authority is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided.

Questioned Costs: Unknown.

Auditor Recommendations: The Authority should reevaluate their established procedures and controls in place to ensure full compliance in regards to eligibility and the timeliness of recertifications. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor’s sample.

Management Response: See Corrective Action Plan.

2023-003 Eligibility Housing Voucher Cluster Material Weakness in Internal Control Material Noncompliance

Condition: Out of an approximate population of 1,500 of Housing Voucher Cluster tenants the following deficiencies were noted:

Mainstream Voucher AL #14.879 (a total of 5 tenants selected for testing): • Five files did not have supporting documents needed to determine eligibility.

Emergency Housing Voucher AL #14.871 (a total of 5 tenants selected for testing): • Four files did not have supporting documents needed to determine eligibility, and • One files did not have an annual recertification performed.

Criteria: The Authority’s Administrative Plan and 24 CFR 982.516 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding timely, complete, and accurate tenant files.

Context: The auditor randomly selected tenant files out of the population from each program as outlined, which we consider to be a statistically valid sample size. The auditor reviewed the tenant files and support to ensure that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files.

Cause: The Authority experienced staffing and operational challenges during the onset of COVID- 19 and did not have the available staff to follow the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to verify eligibility and calculate accurate housing assistance payments.

Effect: The Authority is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided.

Questioned Costs: Unknown.

Auditor Recommendations: The Authority should reevaluate their established procedures and controls in place to ensure full compliance in regards to eligibility and the timeliness of recertifications. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor’s sample. Management Response: See Corrective Action Plan.

2023-004 Eligibility Section 8 Project-Based Cluster Material Weakness in Internal Control Material Noncompliance

Condition: Out of an approximate population of 670 of tenants, 20 tenant files were tested and the following deficiencies were noted:

• Nine files did not have annual recertifications performed during the year, •Eight files did not have 9886 release of information forms within 15 months of annual recertification, • Six files did not have an annual recertification performed within 12 months, • Six files did not have documentation necessary to verify the reported income, and • Three files did not have a 214 declaration form for all members of the household.

Criteria: 24 CFR 983.353 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding timely, complete, and accurate tenant files.

Context: The auditor randomly selected tenant files out of the population as outlined, which we consider to be a statistically valid sample size. The auditor reviewed the tenant files and support to ensure that proper procedures are being followed and that the Authority is in compliance with HUD requirements regarding timely, complete, and accurate tenant files.

Cause: The Authority experienced staffing and operational challenges during the onset of COVID- 19 and did not have the available staff to follow the established internal controls to ensure proper compliance with regards to timely recertifications and collection of required HUD documentation to verify eligibility and calculate accurate housing assistance payments.

Effect: The Authority is not in compliance with HUD requirements regarding eligibility which could result in the incorrect amount of rental assistance provided.

Questioned Costs: Unknown.

Auditor Recommendations: The Authority should reevaluate their established procedures and controls in place to ensure full compliance in regards to eligibility and the timeliness of recertifications. The Authority needs to correct the deficiencies noted in the tested files and consider the impact to the rest of the population of tenant files that were not selected as part of the auditor’s sample.

Management Response: See Corrective Action Plan.

2023-005 Special Tests and Provisions - Waiting List Moving to Work Demonstration Program AL No. 14.881 Other Matter to be Reported Under the Uniform Guidance

Condition: While testing of applicants that reached the top of the waiting list during the year ended December 31, 2023, the Authority was unable to provide sufficient documentation for one of the applicants to support their position on the list.

Criteria: 24 CFR 960.202 requires internal controls to be in place to ensure proper procedures are being followed to be in compliance with HUD requirements regarding waiting list applicant selection.

Context: The auditor selected the 40 applicants that had reached the top of the waiting list, which we consider to be a statistically valid sample size. The auditor reviewed the applicant’s file and support to ensure that proper procedures for selection from the waiting list are being followed and that the Authority is in compliance with HUD requirements regarding waiting list selection.

Cause: The Authority experienced staffing and operational challenges during the onset of COVID- 19 and did not have the available staff to follow the established internal controls to ensure proper compliance with all regulations. This resulted in the Authority not maintaining the appropriate documentation to adequately provide information required by federal regulations so the waiting list could be monitored for proper compliance.

Effect: The Authority does not have adequate controls in place to ensure they are in compliance with HUD requirements regarding the waiting list applicant selection process.

Questioned Costs: Unknown.

Auditor Recommendations: The Authority should reevaluate their established procedures and controls in place to ensure full compliance in regards to waiting list selection process and document retention requirements.

Management Response: See Corrective Action Plan.