Loading...
HomeMy WebLinkAboutAudit Reports - Public - Housing Program Compliance Audit - 3/24/2023 FINAL REPORT City of Glendale HOUSING PROGRAM COMPLIANCE AUDIT March 24, 2023 Moss Adams LLP 999 Third Avenue, Suite 2800 Seattle, WA 98104 (206) 302-6500 Housing Program Compliance Audit Report FOR INTERNAL USE OF CITY OF GLENDALE ONLY Table of Contents Executive Summary 1 A. Objectives 1 B. Conclusions 1 C. Commendations 2 Detailed Report 4 A. Introduction 4 B. Background 4 C. Scope and Methodology 4 Findings and Recommendations 6 Appendix A: Definitions of Audit Finding Rankings 14 Housing Program Compliance Audit Report | 1 FOR INTERNAL USE OF CITY OF GLENDALE ONLY EXECUTIVE SUMMARY Moss Adams LLP (Moss Adams) was contracted by the City of Glendale (the City) to perform a compliance audit related to the City’s Housing Choice Voucher (HCV) and Conventional Public Housing (CPH) programs, administered through the Glendale Community Services Department. We performed a variety of procedures to test and assess the overall program function for compliance with City and U.S. Department of Housing and Urban Development (HUD) requirements. Our procedures included reviewing HCV and CPH internal policies, procedures, and fee schedules. Additionally, we assessed the City’s maintenance and retention of documentation, and conducted interviews of City personnel involved in housing verification, recertification, and inspection processes. We also tested City documentation demonstrating eligibility verification and recertification for HCV and CPH programs, and documentation demonstrating completion of required housing inspections for HCV programs. This engagement was performed in accordance with Standards for Consulting Services established by the American Institute of Certified Public Accountants. Accordingly, we provide no opinion, attestation, or other form of assurance with respect to our work or the information upon which our work is based. This report was developed based on information gained from our interviews and analyses of sample documentation. The procedures we performed do not constitute an examination in accordance with generally accepted auditing standards or attestation standards. Our objectives for this engagement were to assess the following for the HCV and CPH programs administered by the Glendale Housing Authority (GHA), from 2019–2022: • The extent to which GHA conducted HCV housing inspections in alignment with HUD requirements • The extent to which GHA conducted resident eligibility assessments in alignment with HUD requirements for both HCV and CPH • The extent to which GHA conducted resident recertifications in alignment with HUD requirements The procedures and testing performed identified four areas that warrant improvement. These are highlighted in the table that follows. FINDINGS AND RECOMMENDATIONS MEDIUM RISK File Management 1. Finding Documentation used to demonstrate reexamination of household income, composition, and inspection of housing units for which housing choice vouchers use, was not maintained in all cases Recommendations For those files that were lost, develop a plan to ensure that required documentation is gathered and stored. Clarify the records retention policies Housing Program Compliance Audit Report | 2 FOR INTERNAL USE OF CITY OF GLENDALE ONLY FINDINGS AND RECOMMENDATIONS and develop a process for preventing the destruction of records out of alignment with the required retention period LOW RISK File Identification 2. Finding Initial documents provided by GHA failed to consistently demonstrate adherence to HUD requirements. While GHA was able to furnish the records after several attempts, the initial documents GHA provided gave the impression of a much larger set of exceptions than were the case. Recommendations GHA should ensure staff are trained in their responsibilities during an audit. This should include training on documentation used to demonstrate compliance with key HUD requirements. LOW RISK Missing Verification Consent Form 3. Finding GHA did not gather HUD required verification consent forms for one eligible noncitizen. Recommendations GHA should obtain the signed consent form that was identified as missing, retrain relevant staff on required documentation for eligible noncitizens, and update the CPH policy accordingly LOW RISK Resident Admitted Above t he Income Threshold 4. Finding GHA admitted one household that was not income eligible for CPH. Recommendations GHA should retrain relevant staff on HUD eligibility requirements, prevent overrides of eligibility criteria in the Lindsey Software system if possible, and implement spot-checks of key HUD required documents. Although the focus of this compliance audit was to identify areas of noncompliance with City and HUD requirements and opportunities for improvement, it is important to note the areas that are operating well. The City should be commended for the following accomplishments: • City policy documents largely align with HUD requirements, and in some cases are more stringent. The Admissions and Continued Occupancy policy for conventional public housing (CPH policy) and HCV policy for housing choice vouchers both consistently align with HUD requirements for confirming the initial eligibility of benefit recipients, recertifying benefit recipient eligibility, and conducting inspections of housing choice voucher applicable housing units. Processes described in interviews largely aligned with these policies, with only minor deviations identified that did not impact adherence to HUD requirements, aside from requirements relating to records retention described in Finding 1. • Alignment of City practices with HUD eligibility and inspection requirements was largely confirmed from testing. For most attributes tested, the City did not have any exceptions to compliance. While we found a higher number of exceptions initially, the City was able to provide additional documentation that addressed most exceptions identified. Housing Program Compliance Audit Report | 3 FOR INTERNAL USE OF CITY OF GLENDALE ONLY • The City aligned with HUD income targeting requirements for CPH. HUD requires that at least 40% of households admitted into CPH programs each fiscal year must be extremely low income 1. The City exceeded this requirement for each year assessed, with 63% of new CPH entrants in 2019 being extremely low income, 73% in 2020, 70% in 2021, and 67% in 2022. We would like to thank City staff and management for their time and efforts in assisting with this project. 1 HUD defines “Extremely Low-Income” as income that does not exceed the higher of the federal poverty level or 30 percent of AMI. Housing Program Compliance Audit Report | 4 FOR INTERNAL USE OF CITY OF GLENDALE ONLY DETAILED REPORT Moss Adams was contracted by the City to perform a compliance audit over the Community Services Department, which is the Glendale Housing Authority (GHA). This audit assessed household eligibility verification practices and recertification practices for HCV and CPH programs, as well as inspection practices for HCV housing. This compliance audit was performed as part of the Fiscal Year (FY) 2022 Annual Audit Plan developed by the City’s Independent Internal Audit Program (IIAP). Our compliance audit was performed between November 2022 and February 2023. Please refer to Appendix A for definitions of audit finding rankings. The City’s Community Services Department is responsible for addressing affordable rental needs as the GHA. Their responsibilities include managing 155 CPH rental units across three different properties as well as providing housing choice vouchers to eligible residents for use in the private rental market. In 2022, the City served over 1,200 households in public housing by providing these services. The GHA provides these services in conjunction with HUD, which provides funding for public housing agencies such as GHA to provide public housing and housing choice vouchers. HUD sets standards dictating which households are eligible for public housing through these programs, how their eligibility must be assessed, and how frequently their eligibility must be reassessed to ensure they continue to be eligible for the programs and are paying an appropriate level of rent. HUD also requires public housing agencies that provide housing choice vouchers to regularly inspect the market housing these vouchers are used for to ensure that the housing is safe and maintained at reasonable living standards. As a provider of both housing choice vouchers and conventional public housing, GHA is responsible for ensuring compliance with these standards. Our objectives for this engagement were to assess the following for the HCV and CPH programs administered by GHA from 2019–2022: • The extent to which GHA conducted HCV housing inspections in alignment with HUD requirements • The extent to which GHA conducted resident eligibility assessments in alignment with HUD requirements for both HCV and CPH • The extent to which GHA conducted resident recertifications in alignment with HUD requirements To obtain an understanding of the specific processes and controls, and overall GHA functions, we conducted interviews with personnel of the GHA. The employees we interviewed had designated responsibilities related to the HCV and CPH programs, including initial verification of household eligibility for each program, recertification of eligibility of households, and inspection of HCV-funded housing for compliance with HUD livability requirements. In addition, we reviewed the City’s policies and procedures provided during the internal audit to ensure they aligned with HUD requirements. We performed the following detailed testing and analysis procedures: Housing Program Compliance Audit Report | 5 FOR INTERNAL USE OF CITY OF GLENDALE ONLY • Income Targeting Analysis: We requested the income targeting report through the GHA Lindsey Software System, which includes the income and household size of new households entering CPH by year. We used this data to assess how many households fell under the “Extremely Low Income” threshold set by HUD. Under 24 Code of Federal Regulations (CFR) 982.201, HUD requires that at least 75% of households admitted to CPH programs per year have incomes that are less than or equal to the higher of poverty guidelines or 30% Area Median Income (AMI). We analyzed all CPH entries for 2019, 2020, 2021, and 2022 for whether they exceeded this threshold. • Process Analysis: We reviewed the Admissions and Continued Occupancy policy for the CPH program and HCV policy for the HCV program to assess whether the design of internal controls aligned with HUD requirements. We then spoke to staff responsible for assessing household eligibility for HCV and CPH programs to see if the processes they described aligned with HUD requirements and the processes outlined in the relevant policies. Additionally, we interviewed staff responsible for overseeing housing inspections to understand the extent to which stated practices align with the City’s policies described above and HUD requirements. • Household Eligibility Testing: To assess GHA’s compliance with HUD requirements relative to household eligibility requirements, we assessed a judgmental sample of 29 HCV households and 12 CPH households. Elements assessed included requirements relating to household income, composition, and residency status. We also assessed whether the documentation used to support the eligibility determinations was sufficient, whether proper consent forms were gathered for eligible noncitizens, and whether other required documentation was gathered. • Household Recertification Testing: To assess GHA’s compliance with HUD requirements relative to household eligibility recertification requirements, we assessed the same judgmental sample of 29 HCV households and 12 CPH households as above. Elements assessed included requirements relating to frequency of recertification, and household income at the time of recertification. We also assessed whether the documentation used to support the recertification determinations was sufficient. • Household Inspection Testing: To assess GHA’s compliance with HUD requirements relative to inspection requirements, we assessed the same judgmental sample of 29 HCV households as above. Elements assessed included requirements relating to frequency of inspections, documentation of inspections, and documentation of remediation of identified issues. Housing Program Compliance Audit Report | 6 FOR INTERNAL USE OF CITY OF GLENDALE ONLY FINDINGS AND RECOMMENDATIONS 1. Finding Documentation used to demonstrate reexamination of household income, composition, and inspection of housing units for which housing choice vouchers use, was not maintained in all cases Recommendations For those files that were lost, develop a plan to ensure that required documentation is gathered and stored. Clarify the records retention policies and develop a process for preventing the destruction of records out of alignment with the required retention period Condition: While required documents were available for most files tested, we identified two instances out of the total sample of 41 files wherein documents were referenced but were missing from the provided files, indicating that files were lost at some point in the process. These files included documents used to demonstrate reexamination of household income and composition as well as documents demonstrating inspection of housing units. The documents that were missing were within the HUD required retention period of three years. GHA was also unable to retrieve file folders for two households included in our sample of CPH files. As such, for the 41 files tested, four were missing one or more documents. Criteria: HUD requires that information from applicants and approved eligible families be maintained and retained for at least three years, including the Form HUD-50058 and supporting documentation, demonstrating inspection of HCV paid units. Relevant HUD guidance relating to record keeping requirements include the following: • 24 CFR, § 982.158 • 24 CFR, § 908.101 • Public and Indian Housing (PIH) Notice 2017-12 Cause: The exceptions we identified are driven by records maintenance issues, which GHA policy contradictions may contribute to. In the income verification section of both the HCV and CPH policies, the policies indicate that GHA will retain records for four years after the conclusion of the tenancy period, but also indicated that GHA is required to maintain at a minimum, the last three years of documentation used to support annual and interim reexaminations 2. The HCV policy also indicated that GHA will keep documents in accordance with HUD and City records retention requirements and policies but did not detail what these requirements are 3. Of note, neither policy indicated what files, if any, may be disposed of prior to four years following the conclusion of the tenancy period, with the only section pertaining to records retention periods appeared to apply only to income documentation through its placement in the “Income Verification” section. Staff indicated that some files may have been lost when files were moved off-site. They indicated that most household documents in files are kept in the office in active files for two years, after which they 2 Sections 12.5.4 of HCV policy and 13.9 of CPH policy 3 HCV policy Section 2.2 Housing Program Compliance Audit Report | 7 FOR INTERNAL USE OF CITY OF GLENDALE ONLY are moved to an alternative storage location. Staff indicated that files could have been lost or been accidentally destroyed at this point of transition. Effect: Without sufficient documentation used to demonstrate the eligibility of residents or required inspection of units, GHA increases the risk of being found noncompliant with these requirements as well as HUD designated records retention requirements. This noncompliance has the potential to result in federal audit findings and potential sanctions against GHA. Recommendations: 1. GHA should document the files that were lost and develop a plan to ensure that required documentation for these households is gathered and stored in the tenant file. 2. GHA should clarify records retention requirements for tenant documentation in the relevant policies. Additionally, GHA should clarify a general retention period and files for which this retention period does not apply. 3. GHA should develop a process for preventing the destruction of records out of alignment with the required retention period. The process should be designed such that only those files that meet the necessary conditions for destruction are destroyed. Such a process may include: a. Indexing and organizing documents by time period and relevant retention requirements, b. Changing the year threshold for the movement of documents into storage c. Implementing records management training Housing Program Compliance Audit Report | 8 FOR INTERNAL USE OF CITY OF GLENDALE ONLY MANAGEMENT RESPONSE Management Agreement Concur Owner Maria Gonzales – Interim Housing Program Manager Vacant – Housing Supervisor Target Completion Date December 31, 2023 Action Plan Glendale Housing Authority (GHA) abides by the Arizona State Library Archives & Public Records Schedule and Housing Procedure #0011A titled Records Management. Housing Procedures for Records Management will be updated, and all staff trained. One staff member has been designated as the Records Management monitor and will ensure policy and procedures are maintained/updated annually. This staff member will be responsible for training and ensure procedures are adhered to by all staff members. Tenant file records (Active) will have the three most recent years in the tenant file folder in-house. 10 case files for each program will be pulled beginning with the May recertifications to ensure all documents are listed in the tenant file. Files over three years old for both active and inactive will be boxed, labeled and routed to the city clerk’s office. Boxes will be easily identified for contents and destroy dates. GHA will prioritize electronic records management initiatives as part of future technology upgrades. 2. Finding Initial documents provided by GHA failed to consistently demonstrate adherence to HUD requirements. While GHA was able to furnish the records after several attempts, the initial documents GHA provided gave the impression of a much larger set of exceptions than were the case. Recommendations GHA should ensure staff are trained in their responsibilities during an audit. This should include training on documentation used to demonstrate compliance with key HUD requirements. Condition: While GHA was able to furnish most required records, the initial set of records provided were missing a significant number of documents that initially gave the impression of a larger number of exceptions than were the case. Upon following up with GHA representatives several times, the Housing Program Compliance Audit Report | 9 FOR INTERNAL USE OF CITY OF GLENDALE ONLY audit team was able to gather additional documentation to resolve most of the exceptions initially identified; however, this required multiple document transfers. Criteria: HUD requirements indicate both that public housing authorities must maintain files for a certain period, and that they must maintain records in a manner that permits a speedy and effective audit (24 CFR, § 982.158). Cause: This audit was conducted virtually, which required GHA staff to locate files that were maintained manually and scan them for file transfer. GHA staff stated that past audits were conducted in person. GHA staff indicated that the staff responsible for scanning records for this audit were not fully fluent in the relevant HUD requirements, particularly given the fact that in the past the auditors had direct access to the files and scanning on the part of GHA was not necessary. GHA staff indicated that in the future they would ensure that staff with more familiarity with HUD requirements would be assigned to ensure that all documents required for an audit are transferred. Effect: If documentation is not provided to HUD in a comprehensive and timely manner, this increases the likelihood that HUD will deem GHA out of compliance with HUD requirements, even if the files were actually retained. This noncompliance has the potential to result in federal audit findings and potential sanctions against GHA. Recommendations: GHA should ensure staff are trained in their responsibilities during an audit. This should include training on documentation used to demonstrate compliance with key HUD requirements. MANAGEMENT RESPONSE Management Agreement Concur Owner Maria Gonzales – Interim Housing Program Manager Target Completion Date Completed Action Plan The Community Service Representative (CSR), most familiar with tenant files, will have the responsibility of reviewing all documentation needed and ensuring the file is in order before handing it off to office support for scanning. The scanned documentation will be delivered to the CSR for a final review. This procedure will ensure documentation will be provided in a comprehensive and timely manner for all reviews. Housing Program Compliance Audit Report | 10 FOR INTERNAL USE OF CITY OF GLENDALE ONLY 3. Finding GHA did not gather HUD required verification consent forms for one eligible noncitizen. Recommendations GHA should obtain the signed consent form that was identified as missing, retrain relevant staff on required documentation for eligible noncitizens, and update the CPH policy accordingly Condition: GHA did not ensure that the required verification consent form for eligible noncitizens was signed in one of the three relevant households within the test population (households with eligible noncitizens). While the consent form was collected in the exception identified, the form was not signed by the relevant household member, which could lead to the risk that the household member did not consent to having their residency information shared with other federal agencies. Criteria: HUD requires each noncitizen who declares an eligible immigration status to sign a verification consent form. The verification consent form informs the individual that the housing authority may release evidence of the individual’s eligible immigration status to other federal agencies for purposes of verification (24 CFR § 5.508). Cause: Given that GHA has a standardized form for consent of eligible immigration status information sharing, and that the form in this case was gathered but not signed, this exception was likely due to human error and a failure in controls meant to identify instances where all required documentation was not collected. While the HCV policies mandate the collection of a verification consent form from eligible noncitizens, the CPH policies do not. Effect: Without receiving consent to share a household’s immigration status with other federal agencies, GHA is both out of compliance with HUD requirements and removes the household’s choice in determining how personal information is shared. This noncompliance has the potential to result in federal audit findings and potential sanctions against GHA. Recommendations: 1. GHA should obtain and document the household identified in this audit’s consent for the release of evidence of eligible immigration status to federal agencies. 2. GHA should retrain relevant staff on required documentation for eligible noncitizens, including the requirement for the signed verification consent form. 3. GHA should update the CPH policy to include language mandating the collection of a signed verification consent form for eligible noncitizens. Housing Program Compliance Audit Report | 11 FOR INTERNAL USE OF CITY OF GLENDALE ONLY MANAGEMENT RESPONSE Management Agreement Concur Owner Maria Gonzales – Interim Program Manager Target Completion Date Complete Action Plan Tenant will be scheduled for appointment to sign and document the release of evidence of eligible immigration status to federal agencies. This document will be placed in the correct area of the tenant file. The Interim Program Manager scheduled a CSR Meeting on March 8th to reeducate the Public Housing and HCV Community Service Representatives on the required documentation for eligible noncitizens, including the requirement for the signed verification consent form. The verification consent form was handed out at the meeting and noted all areas where a signature is needed from the applicant. Section 8’s new lease checklist for eligibility was used as a guide. GHA has updated the Public Housing ACOP with the same language as the HCV Admin plan mandating the signed verification consent form. 4. Finding GHA admitted one household that was not income eligible for CPH. Recommendations GHA should retrain relevant staff on HUD eligibility requirements, prevent overrides of eligibility criteria in the Lindsey Software system if possible, and implement spot-checks of key HUD required documents. Condition: In our assessment of the income verification documentation for nine HCV and CPH households that were admitted to housing programs since 2019, we identified one instance where a resident was admitted to CPH despite being above the income threshold. At the time of the household’s 2020 move-in, the household’s adjusted annual income was $136,157 for a household of six. The income threshold in 2020 for a low-income family of this size was $72,250. GHA collected the correct information at the time of entry, including filling out Form HUD-50058 with the correct income and household size, but GHA nevertheless admitted this household. Criteria: HUD has a series of eligibility requirements for households receiving public housing benefits. “At a minimum, the applicant must be a family” (as defined by HUD) and must be income eligible, with “no family other than a low-income family [being] eligible for admission to a [public housing authority’s] public housing program” (24 CFR § 960.201). Cause: Given that GHA policy aligns with HUD requirements on household income limits, this exception was likely due to human error and a failure of oversight and internal controls. GHA staff indicated that this specific instance may have also been due to staff confusion over COVID-era changes to HUD requirements. GHA staff indicated that Lindsey, GHA’s current housing software Housing Program Compliance Audit Report | 12 FOR INTERNAL USE OF CITY OF GLENDALE ONLY system, can be overridden to allow for households outside the HUD income thresholds to be admitted to housing programs. Effect: By admitting a household with an income far above the income threshold to CPH, GHA misses the opportunity to provide limited public housing to other families in need. CPH is a limited resource given that GHA administers only 155 housing units and has an extensive waitlist. This exception also puts GHA out of compliance with HUD requirements. This noncompliance has the potential to result in federal audit findings and potential sanctions against GHA. Recommendations: 1. GHA should retrain relevant staff on HUD eligibility requirements, including income eligibility, and the extent to which COVID-era requirements are still in place. 2. GHA should assess whether eligibility overrides can be blocked in the Lindsey Software system. If possible, GHA should implement system setting blocking unallowable overrides of eligibility criteria. 3. GHA should develop a process for overseeing and spot-checking key documents to ensure consistent alignment with HUD requirements, including those requirements relating to household consent forms, income eligibility, and requirements that permanently or temporarily changed in recent years. Housing Program Compliance Audit Report | 13 FOR INTERNAL USE OF CITY OF GLENDALE ONLY MANAGEMENT RESPONSE Management Agreement Concur Owner Maria Gonzales – Interim Program Manager Target Completion Date Complete Action Plan The Interim Program Manager scheduled a CSR Meeting on March 8th to refresh & re-educate the Public Housing and HCV Community Service Representatives on the requirements related to Income Eligibility. This meeting included discussions on the following: The Housing Software (Lindsey) has a Pop-up that provides you with a warning if the income is over the limit set up in the Income Rent Tables. These tables are updated annually with the release of the HUD Income limits. Tenant Case File Review Audit will include income eligibility testing for over income and correct calculations. File review includes the editing of all documents requiring signatures. Once the case file review is completed, the review is provided to the Housing Program Manager to review with that CSR for corrective action. In the case of the one over income Public Housing family, the Community Service representative admitted the family into the program during the time of COVID waivers in July of 2020. This tenant has been paid the full tenant payment amount (TTP). The local HUD Office was contacted for further directions. The HUD Representative replied to our matter and said since the tenant has been in the unit the PHA has the discretion and provided us with the new HOTMA Ruling. This ruling will become effective on January 1, 2024. The new regulation (rule) will affect all income households that are over income. Any household who falls into this new guideline will be contacted and will be given a two-year period to remain in Public Housing. If they remain over-income after the deadline of the granted two year period they will be removed from the program. The HUD Representative attached PIH Notice 2019-11(HA) for guidance along with the 6057-F-03 HOTMA Income Final Rule. HUD will be offering training and briefings with PHA’s and Software vendors as they prepare for this new update. GHA will ensure to attend all trainings. Housing Program Compliance Audit Report | 14 FOR INTERNAL USE OF CITY OF GLENDALE ONLY APPENDIX A: DEFINITIONS OF AUDIT FINDING RANKINGS We utilized the City IIAP’s risk rankings, presented below, and assigned rankings based on our professional judgment. A qualitative assessment of high, medium, or low helps to prioritize implementation of corrective action as shown in the following table. HIGH Critical control deficiencies that expose the City to a high degree of combined risks. Recommendations from high-risk findings should be implemented immediately (preferably within three months) to address areas with the most significant impact or highest likelihood of loss, misappropriation, or damage related to the City assets. M EDIUM Represents less than critical deficiencies that expose the City to a moderate degree of combined risks. Recommendations arising from moderate risk findings should be implemented in a timely manner (preferably within six months), to address moderate risks and strengthen or enhance efficiency in internal controls on areas with moderate impact and likelihood of exposure. LOW Represents low risk or control deficiencies and the exposure is not likely to expose the City and its assets to significant losses. However, they should be addressed to improve efficiency and effectiveness of operations. Recommendations arising from low-risk findings should be implemented within 12 months.