HOUSING AUTHORITY OF THE CITY OF POTEET

REFERENCE NUMBER: 2025-001

FEDERAL PROGRAM: Section 8 Housing Choice Vouchers

ASSISTANCE LISTING NUMBER: 14.871

NAME OF FEDERAL AGENCY: U.S. Department of Housing and Urban Development (HUD)

COMPLIANCE REQUIREMENT: Reporting/HUD tenant data submissions, including PIC-related reporting

REPEAT FINDING: No

Criteria Under the Uniform Guidance, the auditor is required to perform procedures to determine whether the auditee complied with federal statutes, regulations, and the terms and conditions of federal awards that may have a direct and material effect on each major program. 2 CFR § 200.514(d) requires the auditor to perform transaction tests and other audit procedures necessary to determine compliance for each major program. The OMB Compliance Supplement is the mandatory framework for identifying compliance requirements subject to audit.

The Section 8 Housing Choice Voucher program is administered by public housing authorities under an Annual Contributions Contract with HUD and is governed by HUD regulations at 24 CFR parts 5 and 982–985. Reporting requirements may be material when they support a recipient’s entitlement to HUD assistance, including tenant certifications and HAP-related reporting.

Condition

During our testing of tenant files for the Section 8 Housing Choice Voucher major program, we selected a sample of 3 tenant files from a population of 24 tenant files / voucher participants for the fiscal year ended September 30, 2025.

We noted that 2 of the 3 tenant files tested did not have evidence that required PIC submissions were completed.

Questioned Costs - None No questioned costs were identified as a direct result of this finding because the exceptions related to missing evidence of required PIC submissions rather than identified unsupported HAP payments. However, questioned costs are subject to change if additional procedures identify unsupported or ineligible payments related to the affected tenant files. Cause The Authority did not appear to have adequate procedures in place to ensure that required PIC submissions were prepared, reviewed, and submitted timely for all applicable tenant actions. In addition, the Authority’s review controls over tenant file completion did not identify the missing PIC submissions before the files were selected for audit.

Effect

Failure to complete required PIC submissions may result in inaccurate or incomplete reporting of tenant and voucher activity to HUD. Incomplete PIC reporting may affect HUD’s monitoring of the Housing Choice Voucher program and may impair the Authority’s ability to demonstrate compliance with applicable HUD reporting requirements. Because reporting requirements can be directly related to HUD assistance and HAP-related reporting, noncompliance could be material to the major program depending on the nature and extent of the errors

Recommendation

We recommend that the Authority strengthen its procedures over PIC submissions by: • Maintaining a tracking log of all required PIC submissions, including the tenant action type, effective date, due date, submission date, and confirmation of acceptance. • Requiring supervisory review of tenant files to verify that PIC submissions have been completed and retained in the file. • Performing periodic reconciliations between tenant file activity and PIC submission records. • Providing refresher training to staff responsible for tenant file processing and HUD reporting requirements. • Implementing a corrective review of tenant files processed during the audit period to determine whether additional PIC submissions were missed and to submit or correct any outstanding items, as applicable.

Management’s response:

The Authority agrees with the finding. Management will implement additional controls, monitoring procedures, and supervisory review requirements to ensure PIC/HUD-50058 submissions are prepared, submitted, and retained timely and completely for all tenant actions.

REFERENCE NUMBER: 2025-002

FEDERAL PROGRAM: Section 8 Housing Choice Vouchers

ASSISTANCE LISTING NUMBER: 14.871

NAME OF FEDERAL AGENCY: U.S Department of Housing and Urban Development (HUD)

COMPLIANCE REQUIREMENT: Special Test and Provisions: Inspections and Rent Reasonableness

REPEAT FINDING: No

Criteria

Under 2 CFR § 200.514(d), the auditor is required to perform transaction tests and other audit procedures necessary to determine whether the recipient complied with federal statutes, regulations, and the terms and conditions of federal awards that may have a direct and material effect on each major program. The OMB Compliance Supplement identifies compliance requirements that the federal government expects auditors to consider in a Uniform Guidance compliance audit, and use of the Compliance Supplement is mandatory.

The Section 8 Housing Choice Voucher program is administered by PHAs under an Annual Contributions Contract with HUD and is governed by 24 CFR parts 5 and 982–985. The program is intended to assist eligible families in leasing safe, decent, and affordable housing. For the Housing Choice Voucher program: • Rent reasonableness: 24 CFR § 982.507 requires the PHA to determine that the rent to owner is reasonable before approving a lease and at other required times. • Inspections / Housing Quality Standards: 24 CFR § 982.405 and 24 CFR part 982, subpart I establish inspection and housing quality standards requirements applicable to assisted units.

Condition During our testing of tenant files for the Section 8 Housing Choice Voucher major program, we selected a sample of 3 tenant files from a population of 24 tenant files / voucher participants for the fiscal year ended September 30, 2025.

We noted the following exceptions related to Special Tests and Provisions: • We noted one instance in which the tenant files did not include evidence that the Authority completed and retained the required rent reasonableness determination. • We noted one instance in which the tenant file did not include evidence that the required inspection was performed and documented. Cause The Authority did not appear to have adequate controls to ensure that required rent reasonableness determinations and inspection documentation were completed, reviewed, and retained in tenant files before HAP payments were approved or continued. Existing tenant file review procedures did not consistently identify missing documentation.

Questioned Costs – None No questioned costs were identified as a direct result of this finding because the audit procedures did not identify specific ineligible HAP payments. However, the absence of required documentation increases the risk that unsupported or ineligible payments could have occurred.

Effect Failure to document rent reasonableness determinations may result in the Authority approving rents that are not supported as reasonable in accordance with HUD requirements. Failure to document required inspections may result in HAP payments being made for units for which the Authority cannot demonstrate compliance with applicable housing quality standards or inspection requirements.

These conditions increase the risk that HAP payments may be made for units with unsupported rent levels or units that have not been documented as meeting required inspection standards. The HCV program is intended to provide assistance for safe, decent, and affordable housing. The auditor should evaluate the significance of nonmonetary noncompliance using professional judgment, including the exception rate when applicable.

Recommendation We recommend that the Authority strengthen controls over inspections and rent reasonableness determinations by: • Requiring completion and supervisory review of rent reasonableness documentation before lease approval, rent increase approval, or execution of the HAP contract, as applicable. • Maintaining standardized rent reasonableness forms or system-generated documentation in each tenant file. • Requiring inspection documentation to be completed, reviewed, and retained before HAP payments are initiated or continued, as applicable. • Implementing a tenant file checklist that includes PIC reporting, rent reasonableness, inspection documentation, lease approval, HAP contract execution, and other required eligibility and special test elements. • Performing periodic internal quality control reviews of tenant files to verify that required documentation is present and complete. • Providing training to program staff on HUD requirements for rent reasonableness determinations, inspections, and retention of supporting documentation. • Reviewing the population of tenant files active during the audit period to determine whether additional files are missing rent reasonableness or inspection documentation and taking corrective action where needed.Management’s response: The Authority agrees with the finding. Management will strengthen documentation and supervisory review controls to ensure rent reasonableness determinations and required inspections are completed, supported, and retained in tenant files in accordance with HUD requirements.