LA JOYA HOUSING AUTHORITY

Criteria Management is responsible for establishing and maintaining effective internal controls over financial reporting to ensure transactions are completely and accurately recorded and supported. Effective controls should include maintaining complete tenant occupancy and billing records, reconciling subsidiary records to the general ledger, and periodically reviewing tenant billing activity to ensure rental revenue and tenant receivable balances are accurately recorded. Condition During audit procedures, the Authority could not provide a tenant rent roll for the period January 1, 2025, through April 30, 2025. For the remainder of the audit period, the Authority provided a tenant rent roll containing tenant names and rent charges; however, it was incomplete and did not reconcile to tenant billing records maintained in the general ledger. The tenant files had these exceptions: • The tenant billing activity was not recorded in the general ledger for two (2) of the twenty (20) tenants sampled from the tenant records. • Three (3) of twenty (20) tenants tested were billed amounts that differed from the amounts supported by tenant rent documentation and HUD Form 50058 records. • The Authority did not maintain formal written policies or procedures requiring the preparation, maintenance, review, or reconciliation of tenant rent roll information to tenant billing records and the general ledger. Although tenant files selected for testing contained supporting HUD Form 50058 documentation, the Authority did not maintain adequate controls to ensure tenant billing information was complete, accurate, and consistently reconciled to accounting records throughout the audit period. Cause The Authority had not established or implemented adequate written policies and procedures to: • Maintain complete tenant rent roll records throughout the year; • Retain tenant rent roll information for all reporting periods; • Reconcile tenant rent rolls to tenant billing records and the general ledger; • Verify billing amounts agree with approved tenant rent calculations; and • Perform documented supervisory review over tenant billing and occupancy records. Effect The lack of complete tenant rent roll records and reconciliation procedures increased the risk that tenant billings, tenant accounts receivable, and rental revenue could be incomplete or inaccurate. As a result: • Certain tenants were not reflected in tenant billing records maintained in the general ledger. • Certain tenant billing amounts differed from approved rent calculations. • Management could not readily demonstrate the completeness and accuracy of tenant billing activity for the entire audit period. • Errors and omissions may not be identified and corrected in a timely manner. Although the identified billing discrepancies were not material to the financial statements, the exceptions indicate that internal controls over tenant billing and related financial reporting were not operating effectively. Questioned Costs None Identified.

Repeat Finding No

Criteria HUD regulations require public housing authorities to determine and document that the rent charged to Housing Choice Voucher participants is reasonable in comparison to rents charged for comparable unassisted units in the private market. Rent reasonableness determinations must be performed before executing a Housing Assistance Payments (HAP) contract and whenever there is a rent increase request from the owner. The Authority must maintain documentation supporting the determination in the tenant file. Condition During our testing of Housing Choice Voucher tenant files, we noted that the Authority did not consistently perform and/or adequately document rent reasonableness determinations prior to approving Housing Assistance Payments contracts and rent increase requests. Specifically, of the 20 tenant files tested, 2 tenants had billing activity not recorded in the general ledger, and 3 files lacked sufficient documentation evidencing that a rent reasonableness review was performed and approved before the effective date of the HAP contract or rent adjustment. As a result, the Authority could not demonstrate compliance with HUD rent reasonableness requirements for these transactions. The exception rate identified during testing was 5 out of 20 files tested, representing approximately 25% of the sample selected for compliance testing. Cause The Authority's procedures for ensuring that rent reasonableness determinations are completed and documented were not operating effectively. Management did not maintain adequate supervisory review controls to verify that supporting documentation was completed, retained, and included in tenant files before approval of rental assistance payments. Effect Failure to perform and document rent reasonableness determinations increases the risk that the Authority may approve assistance payments for units with rents that exceed comparable market rents. As a result, federal funds may not be expended in accordance with HUD requirements.

For the calendar year 2024, the housing authority did not submit the required IRS Form 941s and did not pay all payroll tax liabilities in full. While the authority calculated and reported its payroll tax liabilities on its Financial Data Schedule (FDS) submission, the required forms were not filed, and certain payroll tax payments remained outstanding as of year-end. The necessary Form 941s were not filed for Quarters 2, 3, and 4 of the 2024 calendar year.

During our testing of tenant files for compliance with rent reasonableness requirements, we found that 11 files (55%) lacked documentation of rent reasonableness determinations.

Program Name: Housing Choice Vouchers AL Number: 14.871

2023-001 Housing Quality Standards Inspection/HQS Enforcement - RF (2022-003) Special Test & Provisions(N)

Criteria: The PHA must inspect the unit leased to a family at least bi-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 §§982.405, 983.103). Additionally, 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). Condition: The above requirements were not met for the 2023, audit. Context: During our audit, the Authority was unable to provide us with a reliable listing of HQS Inspections or any supporting documentation that any HQS inspections had taken place during the fiscal year under examination. Therefore, we were not able to perform the necessary procedures as described in the Uniform Guidance Part IV HUD 14.871 to ensure compliance with the above criteria. Cause: Controls over compliance associated with the Authority’s grants of federal funds are inadequate. Effect: The Authority is non-compliant with the federal regulations over this federal program, this could potentially result in significant operating and financial penalties. Recommendations: We suggest the Authority structure a system capable of properly overseeing compliance with regulations relative to these grants as well as maintaining more accurate and complete documentation of adherence to compliance. Management Views: Management agrees with the finding and have outlined a plan of action in the corrective action plan section of this report.

Program Name: Housing Choice Vouchers AL Number: 14.871 2023-002 Utilities Allowance Calculation - RF (2022-004) Special Test & Provisions(N) Criteria: In accordance with the 2014 Appropriations Act Section 242, the utility allowance for a family shall be the lower of: (1) The utility allowance amount for the family unit size; or (2) the utility allowance amount for the unit size of the unit rented by the family. However, upon the request of a family that includes a person with disabilities, the PHA must approve a utility allowance higher than the applicable amount if such a higher utility allowance is needed as a reasonable accommodation in accordance with HUD's regulations in 24 CFR part 8 to make the program accessible to and usable by the family member with a disability. This provision applies only to vouchers issued after the effective date of this notice (June 12, 2014) and to current program participants. For current program participants, a PHA must implement the new allowance at the family's next annual reexamination, provided that the PHA is able to provide a family with at least 60 days' notice prior to the reexamination. Condition: The above requirements were not met for the 2023, audit. Context: During the audit we selected a sample of tenants where tenants did not have an accurate utility allowance calculation. Cause: Personnel responsible for calculating the utility allowances were not informed of requirements and no internal controls were in place to ensure compliance. Effect: The Authority was in violation of the Federal Regulation which resulted in errors in calculating Housing Assistance Payments (HAP) and utility reimbursement payments. Recommendations: We recommend that Management implement procedures to ensure compliance with the above regulations as it relates to the Housing Choice Voucher Program. Management Views: Management agrees with the finding and have outlined a plan of action in the corrective action plan section of this report.

Program Name: Housing Choice Vouchers AL Number: 14.871 2023-003 Rent Reasonableness - RF (2022-005) Special Test & Provisions(N) Criteria: The PHA must determine that the rent to owner is reasonable at the time of initial leasing. Also, the PHA must determine reasonable rent during the term of the contract: (a) before any increase in the rent to owner, and (b) at the HAP contract anniversary if there is a five percent decrease in the published Fair Market Rent in effect 60 days before the HAP contract anniversary. The PHA must maintain records to document the basis for the determination that rent to owner is a reasonable rent (initially and during the term of the HAP contract) (24 CFR sections 982.4, 982.54(d)(15), 982.158(f)(7), and 982.507). Condition: The above requirements were not met for the 2023 audit. Context: During the audit year a reasonableness analysis was not completed for participants. Cause: The Housing Authority did have a payment standard in place, however, they did not complete rent reasonableness analysis. Effect: The Authority was in violation of the Federal Regulation which could have resulted in overpayment of Housing Assistance Payments (HAP). Recommendations: We recommend that Management implement procedures to ensure compliance with the above regulations as it relates to the Housing Choice Voucher Program. Management Views: Management agrees with the finding and have outlined a plan of action in the corrective action plan section of this report.

Program Name: Housing Choice Vouchers AL Number: 14.871

2023-004 Public Housing Waiting List Tenant Selection – RF (2022-006) Special Test & Provisions(N)

Criteria: Except as provided in 24 CFR section 982.203 (Special admission (non-waiting list)), all families admitted to the program must be selected from the waiting list. “Selection” from the waiting list generally occurs when the PHA notifies a family whose name reaches the top of the waiting list to come in to verify eligibility for admission (24 CFR sections 5.410, 982.54(d), and 982.201 through 982.207). Condition: The above requirements were not met for the 2023, audit. Context: During the audit we were able to obtain a waiting list for tenant selection. Cause: Personnel responsible for selecting new tenants from the waiting list did not keep support. Effect: The above condition resulted in the Authority being out of compliance with Federal Regulations. Recommendations: We recommend that Management implement procedures to ensure compliance with the above regulations as it relates to the Housing Choice Voucher Program. Management Views: Management agrees with the finding and have outlined a plan of action in the corrective action plan section of this report.