Housing Authority of the City of Galveston, Texas

Housing Voucher Cluster Material Weakness in Internal Control Material Noncompliance Condition: Out of a population of approximately 1,700 for Housing Voucher Cluster, 40 tenant files were tested and 10 files had the following deficiencies: •Six files had incorrect or missing income calculation support; •Three files had missing 214 declaration form at the time of testing; •Two files were missing or had unsigned 9886 release of information forms for the annual recertification; •Two files were missing identification for an adult member of the household; •Two files did not have annual recertification performed within the 12 month window of the previous certification; and •One file was missing a zero-income declaration for an adult member of the household. 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 40 tenant files out of the population 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 does not have adequate systems and controls in place to ensure all of the eligibility requirements are being followed. 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: $113,329 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 the Corrective Action Plan in this report.

Public Housing Operating Fund Material Weakness in Internal Control Material Noncompliance Condition: Out of a total tenant population of approximately 430 for Public and Indian Housing, 44 tenant files were tested and 23 files had the following deficiencies: •Eleven files had incorrect or documentation needed to determine household income; •Ten files were missing 214 declaration forms for a member of the household; •Two files did not have support provided for the tested annual recertification; •Two files had missing or late 9886 release of information forms; •Two files had missing identification documents for members of the household; and •One file did not have a 50058 recertification document that supported the rent amount charged to the tenant. Criteria: The Authority’s ACOP and 24 CFR 960.257 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding complete and accurate tenant files for all public housing sites. Context: The auditor randomly selected 44 tenant files out of the population 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’s staff at the Public housing sites do not have adequate systems and controls in place to ensure all of the eligibility requirements are being followed. Effect: The Authority is not in full compliance with all of the HUD requirements regarding eligibility and tenant recertification which could result in incorrect amount of rental assistance being provided. Questioned Costs: Unknown. Auditor Recommendations: The Authority should correct the deficiencies noted in the tested files and perform reviews of the remaining universe, for consideration of similar errors. In addition, the Authority should establish quality control review procedures to ensure proper monitoring of compliance with the requirements related to tenant eligibility. Management Response: See the Corrective Action Plan in this report.

Housing Voucher Cluster Other matters required to be reported Under the Uniform Guidance Condition: The Authority’s selection for SEMAP Indicator 6 HQS Enforcement did not have the correct sample based on the population of failed inspection during the year. As a result the testing performed for Indicator 6 was not in compliance with HUD program requirements. Context: SEMAP is used by HUD to evaluate the performance of housing authorities administering the HCV program. Housing authorities are required to maintain documentation supporting the data used in their SEMAP self-assessments. As part of our audit procedures over the Housing Voucher Cluster, we requested documentation supporting the SEMAP indicators reported by the Authority. Management was unable to provide sufficient documentation to support the self-assessed score. Criteria: Per 24 CFR 985, for HQS enforcement, the Authority is required to select and test an annual sample of failed inspection at a minimum sample sized based on the universe size of annual failed inspections. In addition, the Authority is required to establish and maintain records sufficient to support compliance with HUD program requirements, as well as establishing internal controls to ensure compliance with applicable regulations. Cause: The Authority did not have effective procedures in place to ensure that documentation supporting SEMAP indicators and self-assessed scoring was reviewed. Effect: The Authority’s is not in compliance HUD program requirements related to SEMAP testing for Indicator 6 HQS Enforcement. Questioned Costs: Unknown. Auditor Recommendations: The Authority should implement procedures to review and retain SEMAP supporting documentation prior to certification, ensure records are retained in accordance with HUD and federal record-retention requirements, and provide training to staff responsible for SEMAP reporting to promote ongoing compliance. Management Response: See Corrective Action Plan.

2024-001 Eligibility Housing Voucher Cluster Significant deficiency in internal control Other Matter to be Reported Under the Uniform Guidance

Condition: Out of a population of approximately 1,700 for Housing Voucher Cluster, 41 tenant files were tested and 4 files had the following deficiencies:

• Two files had incorrect payment standard; • One file had incorrect income calculation standard; and • One file was missing an EIV report for the annual recertification.

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 41 tenant files out of the population 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 does not have adequate systems and controls in place to ensure all of the eligibility requirements are being followed.

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 the Corrective Action Plan in this report

2024-002 Eligibility Public and Indian Housing Significant deficiency in internal control Other Matter to be Reported Under the Uniform Guidance

Condition: Out of a total tenant population of approximately 430 for Public and Indian Housing, 44 tenant files were tested and 8 files had the following deficiencies:

• Six files had incorrect or missing flat rent option sheets; • One file was missing a custody information; and • One file had incorrect income calculation.

Criteria: The Authority’s ACOP and 24 CFR 960.257 requires internal controls to be in place to ensure proper procedures are being followed in compliance with HUD requirements regarding complete and accurate tenant files for all public housing sites.

Context: The auditor randomly selected 44 tenants out of the population, which we consider to be a statistically valid sample size, for testing tenant files for eligibility. The auditor reviewed the tenant file and support to ensure controls over compliance were operating effectively.

Cause: Public housing sites do not have adequate systems and controls in place to ensure all of the eligibility requirements are being followed.

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

Questioned Costs: Unknown

Auditor Recommendations: The Authority should correct the deficiencies noted in the tested files and perform reviews of the remaining universe, for consideration of similar errors. In addition, the Authority should establish quality control review procedures to ensure proper monitoring of compliance with the requirements related to tenant eligibility.

Management Response: See the Corrective Action Plan in this report.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Housing Choice Voucher Program Assistance Listing Number: 14.871 Federal Award Identification Number and Year: TX017 - 2023 Award Period: July 1, 2022 through June 30, 2023

Type of Finding:  Significant Deficiency in Internal Control over Compliance  Other Matters

Criteria or Specific Requirement: HUD-50058, Family Report (OMB No. 2577-0083) – The PHA is required to submit this form electronically to HUD 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 (24 CFR Part 908 and 24 CFR section 982.158).

Prior Year Finding: This finding is a repeat finding in the immediate prior year. Prior year finding number was 2022-001.

Condition: During our testing, it was noted the Authority did not have adequate internal controls designed to ensure that special reporting requirements were being met.

Questioned Costs: None

Context: Of the 40 HUD-50058’s tested; we noted that 2 out of 40 were not uploaded timely to HUD’s PIH Information Center (PIC). Our sample was a statistically valid sample.

Cause: The Authority does not have controls in place to ensure that special reporting requirements are being met.

Effect: The Authority is not in compliance with program requirements over special reporting.

Recommendation: The Authority should implement processes to ensure HUD-50058 submissions are submitted into the PIC system timely.

View of Responsible Officials: There is no disagreement with this finding.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Housing Choice Voucher Program Assistance Listing Number: 14.871 Federal Award Identification Number and Year: TX017 – 2023 Award Period: July 1, 2022 through June 30, 2023

Type of Finding:  Significant Deficiency in Internal Control over Compliance  Other Matters

Criteria or Specific Requirement: Most PHAs devise their own application forms that are filled out by the PHA staff during an interview with the tenant. 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).

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). (2) For both family income examinations and reexaminations, obtain and document in the family file third party verification of (1) reported family annual income; (2) the value of assets; (3) expenses related to deductions from annual income; and (4) other factors that affect the determination of adjusted income or income-based rent (24 CFR section 982.516). (3) Determine income eligibility and calculate the tenant’s rent payment using the documentation from third party verification in accordance with 24 CFR Part 5 Subpart F (24 CFR section 5.601 et seq.) (24 CFR sections 982.201, 982.515, and 982.516). (4) Select tenants from the HCVP waiting list (see III.N.1, “Special Tests and Provisions – Selection from the Waiting List”) (24 CFR sections 982.202 through 982.207). (5) Reexamine family income and composition at least once every 12 months and adjust the tenant rent and housing assistance payment as necessary using the documentation from third party verification (24 CFR section 982.516).

Prior Year Finding: This finding is a repeat finding in the immediate prior year. Prior year finding number was 2022-002.

Condition: During our testing, we noted the Authority did not have adequate internal controls designed to ensure that eligibility requirements were being met.

Questioned Costs: None

Context: Out of 40 tenants tested, there were exceptions in 9 tenant files. Our sample was a statistically valid sample.  One instance where there was a difference of income reported on the HUD-50058 and the third party verification  One instance where Medicare expenses were not included as a medical allowance  Seven instances where annual recertifications were not processed annually

Cause: The Authority does not have controls in place to ensure it is meeting all eligibility requirements set by HUD.

Effect: The Authority is not in compliance with program requirements over eligibility.

Recommendation: The Authority should implement processes to ensure that all documentation is received and that the correct inputs are being accurately reported on the HUD-50058.

View of Responsible Officials: Management agrees with the finding.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Housing Choice Voucher Program Assistance Listing Number: 14.871 Federal Award Identification Number and Year: TX017 – 2023 Award Period: July 1, 2022 through June 30, 2023

Type of Finding:  Significant Deficiency in Internal Control over Compliance  Other Matters

Criteria or Specific Requirement: For units under HAP contract that fail to meet HQS, the PHA must require the owner to correct any life threatening HQS deficiencies within 24 hours after the inspections and all other HQS deficiencies within 30 calendar days or within a specified PHA-approved extension. If the owner does not correct the cited HQS deficiencies within the specified correction period, the PHA must stop (abate) HAPs beginning no later than the first of the month following the specified correction period or must terminate the HAP contract. The owner is not responsible for a breach of HQS as a result of the family’s failure to pay for utilities for which the family is responsible under the lease or for tenant damage. For family-caused defects, if the family does not correct the cited HQS deficiencies within the specified correction period, the PHA must take prompt and vigorous action to enforce the family obligations (24 CFR sections 982.158(d) and 982.404). The PHA must inspect the unit leased to a family at least annually to determine if the unit meets Housing Quality Standards (HQS) and the PHA must conduct quality control re-inspections. The PHA must prepare a unit inspection report (24 CFR sections 982.158(d) and 982.405(b)).

Prior Year Finding: This finding is a repeat finding in the immediate prior year. Prior year finding number was 2022-003.

Condition: During our testing, we noted the Authority did not have adequate internal controls designed to ensure that HQS inspection requirements were being met.

Questioned Costs: None

Context: Of the 40 annual HQS inspections tested, it was noted:  1 instance where a unit failed inspection and was not reinspected within 30 days of the initial failure date  2 instances where the passed inspection of a previously failed unit was not properly documented  2 instances where the Authority failed to process abatements for units that failed inspections  1 instance where the Authority failed to process termination in a timely manner.

Of the 11 quality control re-inspections tested, it was noted that:  7 quality control inspections were not performed within 90 days of the original inspection date.  1 instance where the quality control inspection was performed by the same inspection of the original inspection.

Our sample was a statistically valid sample.

Cause: The Authority does not have adequate internal controls designed to ensure that HQS inspection requirements were being met.

Effect: The Authority is not in compliance with program requirements over HQS Inspections.

Recommendation: The Authority should implement processes to ensure all HQS re-inspections are completed timely and that there is proper documentation of approved extensions and abatements.

View of Responsible Officials: Management agrees with the finding.