Single audits—required for all non-federal entities expending over $750,000 in federal assistance during the fiscal year—examine an organization’s financial statements and compliance with federal award requirements. Single audits look at an entity’s financial records, policies, documentation, and internal controls, as well as how the organization spends its financial awards. These audits are a key element of oversight of federal funds, helping to detect mismanagement of funds, noncompliance, fraud, and waste. Below are five common findings in HUD single audits, as well as best practices PHAs can follow to avoid these findings.

1. Lack of Controls Over Eligibility

PHAs are required to maintain internal controls to provide reasonable assurance of compliance with grant/program requirements, including controls over program eligibility. During an audit, the PHA’s internal controls are documented and tested. Common control weaknesses found include (1) no formal checklist or process to ensure all HUD-required documentation is collected, and (2) no supervisory review of tenant files before completion.

 Best Practice: Lacking internal controls over eligibility can lead to improper payments, admission of ineligible individuals, and repeat audit findings. PHAs can avoid these findings by maintaining a checklist for housing representatives to use during the admission and/or recertification process for each potential tenant to ensure all compliance requirements are met. The checklist should be signed or initialed by the housing representative performing the admission/recertification, reviewed and signed by a supervisor, and maintained in the tenant’s file to serve as documentation that all compliance requirements were verified.

2. Noncompliance with Federal Procurement Standards

PHAs are required to follow procurement standards including: maintaining a written procurement policy that complies with federal, state, and local regulations, using procurement methods by various procurement thresholds approved by HUD, conducting procurements in a manner that provides full and open competition, avoiding conflicts of interest, and ensuring contractors are not debarred or suspended. Common compliance findings include (1) no written procurement policy or outdated procurement policies that do not align with Uniform Guidance, (2) failure to follow procurement methods based on size of purchase, (3) failure to maintain proper records documenting procurement details, and (4) failure to verify that selected contractors were not suspended or debarred.

Best Practice: PHAs can avoid these findings by periodically reviewing and updating their procurement policies to ensure they are current and in line with appropriate laws and regulations. PHAs should also implement internal controls to ensure that proper procurement methods are used, document procurements thoroughly and maintain documentation in a secure location, and establish a process for verifying that vendors are not debarred or suspended before contracting with them.

3. Reporting Errors

PHAs are required to follow various reporting requirements depending on the programs they administer which can include Voucher Management System (“VMS”), Section 8 Management Assessment Program (“SEMAP”), form HUD-50058, and Financial Data Schedule (“FDS”). These reports are reviewed during the audit process. Common issues found during review include (1) mismatched financial data between the accounting system and reports being submitted to HUD, (2) failure to submit data, (3) failure to submit reports in a timely manner, and (4) missing forms.

Best Practice: PHAs can avoid these findings by implementing proper controls over each reporting requirement. For VMS reporting, PHAs should create a monthly reconciliation checklist and compare VMS entries against the accounting system. For HUD-50058, PHAs should submit these forms promptly (within 60 days of any tenant action), review error reports, automate data quality checks, and have a supervisor review the work of lower-level employees. For the SEMAP reporting, PHAs should implement a control to ensure this is submitted timely. SEMAP indicators should be tracked throughout the year to ensure timeliness. To ensure the FDS is submitted to the REAC FASS system timely and accurately, PHAs should establish clear controls and responsibilities amongst staff and third-party accountants. Accounts should be reconciled routinely to ensure there are no reporting delays at year-end. Documentation should be maintained for all reporting requirements.

4. Housing Quality Standards and Enforcement

PHAs are required to meet minimum physical standards which requires the PHA to have initial and routine unit inspections performed. Any failed inspection must be remedied in a timely manner. Common audit findings include (1) lack of evidence of inspection performed, (2) failure to correct deficiencies in a timely manner, and (3) failure to abate rent on units where deficiencies are not corrected in a timely manner.

Best Practice: To avoid audit findings related to housing quality standards and enforcement, PHAs should use inspection tracking software, maintain a listing of all inspections performed including any failures and dates of reinspections, maintain copies of unit inspections in the tenant’s files, and ensure rent is abated for any units where deficiencies are not remedied timely.

5. Recording of Declarations of Trust

A current Declaration of Trust, in a form acceptable by HUD, must be recorded against all public housing property owned by PHAs that have been acquired, developed, maintained, or assisted with funds from the U.S. Housing Act of 1937. During testing, common audit findings related to Declarations of Trust include the inability to locate the required documents for properties of the PHA.

Best Practice: To avoid audit findings, PHAs should complete and maintain a Declaration of Trust for all properties of the PHA and establish controls over these forms to ensure they are completed, current, and maintained in a secure location.

Further Guidance

For additional guidance on single audit preparation, please don’t hesitate to reach out to RBT CPAs. Connect with our experts today and find out how we can be Remarkably Better Together.