REPORT DIGEST

ILLINOIS HOUSING DEVELOPMENT AUTHORITY

SINGLE AUDIT AND COMPLIANCE EXAMINATION
For the Year Ended: June 30, 2015

Release Date:  March 31, 2016

FINDINGS THIS AUDIT:  14

CATEGORY:  NEW -- REPEAT -- TOTAL
Category 1:  3 -- 1 -- 4
Category 2:  4 -- 6 -- 10
Category 3:  0 -- 0 -- 0
TOTAL:  7 -- 7 -- 14

FINDINGS LAST AUDIT: 11

Category 1:	Findings that are material
weaknesses in internal control and/or a
qualification on compliance with State
laws and regulations (material
noncompliance).
Category 2:	Findings that are
significant deficiencies in internal
control and noncompliance with State laws
and regulations.
Category 3:	Findings that have no
internal control issues but are in
noncompliance with State laws and
regulations.

State of Illinois, Office of the Auditor
General
FRANK J. MAUTINO, AUDITOR GENERAL

To obtain a copy of the Report contact:
Office of the Auditor General, Iles Park
Plaza, 740 E. Ash Street, Springfield, IL
62703
(217) 782-6046 or TTY (888) 261-2887

This Report Digest and Full Report are
also available on the worldwide web at
www.auditor.illinois.gov

INTRODUCTION

This digest covers our Single Audit and
Compliance Examination of the Illinois
Housing Development Authority for the year
ended June 30, 2015. A separate Financial
Audit as of and for the year ended June
30, 2015, was previously released on
December 23, 2015. In total, this report
contains 14 findings, three of which were
reported in the Financial Audit.

SYNOPSIS

• (15-4) The Authority reported Federal
expenditures inaccurately for its Federal
Programs.

• (15-5) The Authority failed to provide
documentation to support various amounts
on financial reports submitted for the
Section 8 Project-Based Cluster Program.

• (15-7) The Authority’s established
policies and procedures were not followed
for monitoring subrecipients of the
Section 8 Project-Based Cluster Program.
• (15-8) The Authority lacked adequate
reviews for OMB Circular A-133 audit
reports received from its subrecipients
for the Community Development Block Grant
Cluster and Home Investment Partnerships
Program.

FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

NEED TO IMPROVE REPORTING OF FEDERAL
EXPENDITURES ON THE SCHEDULE OF
EXPENDITURES OF FEDERAL AWARDS

The Authority did not accurately report
Federal expenditures under the Home
Investment Partnership Program (HOME),
Section 8 Project-Based Program (Section
8), Community Development Block Grants
Cluster (CDBG), Neighborhood Stabilization
Program (NSP), and the National
Foreclosure Mitigation Counseling (NFMC)
programs.

Federal expenditures reported on the
initial draft of the Schedule of
Expenditures of Federal Awards (SEFA) did
not agree to the Authority’s financial
records. Specifically, we noted the
following differences for the year ended
June 30, 2015:

Program // Federal Expenditures Reported
in the Authority’s Records // Federal
Expenditures Initially Reported on the
SEFA // Difference
HOME // $25,976,631 // $22,705,798 //
$3,270,833
NSP // $876,477 // ? // $876,477
NFMC // $1,634,767 // $108,686 //
$1,526,081

In addition to compilation errors in
preparing the initial SEFA, we noted
several of the differences above related
to the fact that the Authority did not
properly report program income amounts
relative to its federal programs on the
initial SEFA. We also noted the Authority
did not properly identify the expenditures
for the NFMC program were received from a
pass through entity.

Additionally, the following differences
were identified relative to amounts passed
through to subrecipients for the following
programs:

Program // Amounts Passed-Through Reported
in the Authority Records // Amounts
Initially Reported on SEFA // Difference
Section 8 // $108,253,754 // $113,777,801
// $5,524,047
HOME // $23,728,290 // $22,705,798 //
$1,022,492
NFMC // $1,526,081 // $108,686 //
$1,417,395
CDBG // $2,285,620 // $1,409,143 //
$876,477

In addition to the reporting errors noted
above, we identified two disbursements of
program income (totaling $1,385,899) out
of six tested (totaling $4,547,980) were
reported by the Authority in the incorrect
fiscal year. Specifically, we noted these
transactions should have been reported in
fiscal year 2014. (Finding 4, pages 27-29)

We recommended the Authority establish
procedures to accurately report Federal
expenditures, including program income, on
the SEFA in the correct accounting period.
We also recommended the Authority
implement procedures to ensure amounts
passed through to subrecipients are
accurately reported.

Authority officials agreed with our
recommendations and stated they will
develop procedures to accurately report
federal expenditures on the SEFA in the
current accounting period and ensure
amounts are supported by financial
activity in the general ledger.

UNSUPPORTED AMOUNTS IN FINANCIAL REPORTS

The Authority was unable to provide
documentation to support various amounts
on financial reports submitted for the
Section 8 Project-Based (Section 8)
Cluster program.

The Authority is required to prepare
HUD-52633, Requisition for Partial Payment
of Annual Contributions (OMB No.
2577-0169), on an annual basis at the
beginning of the fiscal year, and
HUD-52681, Voucher for Payment of Annual
Contributions and Operating Statement (OMB
No. 2577-0169), on an annual basis at the
end of the fiscal year. These reports are
required to be prepared for each of the
Authority’s open grant awards.

During our testwork over the annual
HUD-52633 reports and the annual HUD-52681
reports submitted for seven open grant
awards, we noted the Authority was unable
to provide supporting documentation for
several key line items on each report.
Specifically, we noted the Authority could
not provide support for amounts reported
on the following line items:

Line Item from HUD Report 52663:
• Number of Units Under Lease to Eligible
Families as of Date of Requisition
• Average Monthly Housing Assistance
Payment Per Unit as of Date of Requisition
• Estimated Number of Units to be under
Lease at End of Requested Year
• Unit Months Under Lease Year to Date
• Average Monthly Housing Assistance
Payment per Unit Year to Date
• Estimated Housing Assistance Payments
(Account 4715)
• Estimated Ongoing Administrative Fee
• Independent Public Accountant Audit
Costs (Section 8 Only)

Line Item from HUD Report 52681:
• Number of Unit Months under lease by
Bedroom Size:
• 1Bedroom
• 2Bedroom
• 3Bedroom
• 4Bedroom
• Other
• Average Tenant Contribution
• HA Actual Total – 4715 Housing
Assistance Payments
• Approved Budget Estimates – 4715 Housing
Assistance Payments
• HA Actuals Total – Ongoing
Administrative Fees Earned
• Approved Budget Estimates – Ongoing
Administrative Fees Earned
• HA Actuals Total – Actual Independent
Accountant Audit Costs
• Approved Budget Estimates – Actual
Independent Public Accountant Audit Costs
• HA Actuals Total – Total Partial
Payments Approved by HUD for Fiscal Year
• Approved Budget Estimates – Total
Partial Payments Approved by HUD for
Fiscal Year
(Finding 5, pages 30-32)

We recommended the Authority review the
process and procedures in place to prepare
financial reports required for the Section
8 Project-Based Cluster program and
implement procedures to ensure the reports
are accurate and supporting documentation
is maintained.

Authority officials agreed with our
recommendation and stated that for fiscal
year 2016 they will review the process and
procedures in place and implement new
procedures to ensure the reports are
accurate and the supporting documentation
is maintained.

NEED TO FOLLOW ESTABLISHED SUBRECIPIENT

PROCEDURES FOR THE SECTION 8 PROJECT-BASED
CLUSTER PROGRAM

The Authority did not follow its
established policies and procedures for
monitoring subrecipients of the Section 8
Project-Based (Section 8) Cluster program.

The Authority has implemented procedures
whereby program staff perform periodic on-
site and desk reviews of subrecipient
compliance with regulations applicable to
the Section 8 Cluster program administered
by the Authority. These reviews are
formally documented and include the
issuance of a report of the review results
to the subrecipient summarizing the
procedures performed, results of the
procedures, and any findings or
observations for improvement noted. The
Authority’s policies require the
subrecipient to respond to each finding by
providing a written response.

During our testwork over on-site review
procedures performed for 25 subrecipients
(with expenditures of $45,577,355) of the
Section 8 Cluster program, we noted the
Authority did not follow its established
on-site monitoring procedures as follows:

• The Authority did not receive timely
written responses (within 60 days) to the
findings of the on-site reviews for one
subrecipient (with expenditures of
$1,649,364) and appropriate follow-up
action was not taken. Delay in obtaining
the written response was 37 after the
required timeframe.

• The Authority did not receive written
responses to the findings after
communicating the on-site/management desk
review findings for five subrecipients
(with expenditures of $12,783,596).
Further, we noted the Authority did not
follow up to obtain responses from these
subrecipients.

• The Authority was unable to provide
documentation to support when the written
responses were received for the on-site
and desk review findings for two
subrecipients (with expenditures of
$3,925,142). As a result, the timeliness
of the subrecipient response cannot be
determined.

• The Authority did not perform a
monitoring review for two subrecipients
(with expenditures of $2,179,525) in
fiscal year 2015 in accordance with the
Authority’s policies and procedures.

• The Authority did not maintain evidence
of the completion and supervisory review
of the on-site review monitoring tool for
one subrecipient (with expenditures of
$1,383,024).

• The Authority did not timely close out
(within 90 days) the on-site review for
two subrecipients (with expenditures of
$4,913,034). Delays in closing out the on-
site reviews ranged from 9 to 32 days.

• The Authority was unable to provide
documentation to support when the on-site
monitoring file was closed for four
subrecipients (with expenditures of
$6,609,349). As a result, the timeliness
of the file closure cannot be determined.

• The Authority did not have evidence in
the on-site monitoring review file that
the monitoring file was closed for four
subrecipients (with expenditures of
$11,400,572).

Additionally, the Authority does not have
policies and procedures in place for the
timely issuance of a findings notification
letter after the inspection/desk review
date. During our testwork over on-site and
desk reviews, we noted for 10 of the 25
subrecipients (with expenditures of
$22,937,949), the Authority did not
communicate a findings notification letter
to the subrecipient within 60 days of the
inspection/desk review date.

Specifically, the number of days a letter
was issued after the on-site inspection/
desk review date ranged from 66 to 213
days. Further, the Authority was unable to
provide documentation to support when the
finding notification letter was sent to
one subrecipient (with expenditures of
$1,383,024). As a result, the timeliness
of the finding notification issuance
cannot be determined. (Finding 7, pages
35-37) This finding has been repeated
since 2011.

We recommended the Authority ensure on-
site monitoring reviews are performed and
documented for subrecipients in accordance
with established policies and procedures.
We also recommended the Authority review
its process for reporting and following up
on findings relative to subrecipient on-
site monitoring reviews to ensure timely
corrective action is taken.

Authority officials agreed with our
recommendations and stated they will
complete the recommended actions in the
fiscal year ending June 30, 2016. (For
previous Authority response, see Digest
Footnote #1)

INADEQUATE REVIEW OF OMB CIRCULAR A-133
AUDIT REPORTS

The Authority did not adequately review
OMB Circular A-133 audit reports received
from its subrecipients for the Community
Development Block Grant (CDBG) Cluster and
Home Investment Partnerships (HOME)
programs.

Subrecipients who receive more than
$500,000 in federal awards are required to
submit an OMB Circular A-133 audit report
to the Authority. The Authority is
responsible for reviewing these reports
and working with program personnel to
issue formal management decisions on any
findings applicable to the Authority’s
programs.

During our testwork over 5 CDBG Cluster
subrecipients (with expenditures of
$1,409,143) and 20 subrecipients of the
HOME program (with expenditures of
$5,293,176), we noted the Authority had
not obtained OMB Circular A-133 reports or
issued management decisions in accordance
with federal regulations for all of its
subrecipients. Specifically, we noted the
following:

• OMB Circular A-133 reports were not
obtained and reviewed during the fiscal
year for three CDBG Cluster subrecipients
(with expenditures of $1,221,381) and one
HOME subrecipient (with expenditures of
$165,765). We also noted the Authority had
not performed procedures to follow up with
these subrecipients to obtain audit
reports or otherwise verify the
subrecipient had complied with audit
requirements and had no reportable
findings.

•OMB Circular A-133 reports were obtained,
but a review of the reports was not
documented for two CDBG subrecipients
(with expenditures of $186,762).

•Management decisions were not issued for
one HOME subrecipient (with expenditures
of $113,505).
Additionally, we noted that a standard
desk review checklist was not used to
document the review of subrecipient A-133
reports received from subrecipients of the
CDBG Cluster program to determine whether:
(1) the audit reports met the audit
requirements of OMB Circular A-133; (2)
federal funds reported in the schedule of
expenditures of federal awards reconciled
to CDBG records to ensure subrecipients
properly included amounts in the SEFA; and
(3) Type A programs were audited at least
every three years. (Finding 8, pages
38-40)

We recommended the Authority establish
procedures to ensure subrecipient A-133
audit reports are obtained and reviewed
within established deadlines, management
decisions are issued for all findings
affecting its federal programs in
accordance with OMB Circular A-133, and
follow up procedures are performed to
ensure subrecipients have taken timely and
appropriate corrective action.

Authority officials agreed with our
recommendations.

OTHER FINDINGS

The remaining findings are reportedly
being given attention by Authority
officials. We will review progress toward
implementation of our recommendations in
our next audit.

AUDITOR’S OPINION

The financial audit report was previously
released. The auditors stated the
financial statements of the Illinois
Housing Development Authority as of and
for the year ended June 30, 2015, are
fairly stated in all material respects.

The auditors also conducted a Single Audit
of the Authority as required by OMB
Circular A-133. The auditors qualified
their report on compliance for the Section
8 Project-Based Cluster Program. Except
for the noncompliance described in Finding
2015-005, the auditors stated the
Authority complied, in all material
respects, with the types of compliance
requirements that could have a direct and
material effect on each of the Authority’s
major federal programs for the year ended
June 30, 2015.

ACCOUNTANT’S OPINION

The accountants conducted a compliance
examination of the Authority for the year
ended June 30, 2015, as required by the
Illinois State Auditing Act. The auditors
stated the Authority complied, in all
material respects, with the requirements
described in the report.

FRANK J. MAUTINO
Auditor General

FJM:TLK

SPECIAL ASSISTANT AUDITORS

KPMG LLP were our Special Assistant
Auditors.

DIGEST FOOTNOTES

#1 – Need to Follow Established
Subrecipient Procedures for the Section 8
Project Based Cluster Program

2014: Authority management concurs with
the recommendation. The Asset Management
department will work to alleviate these
delays by providing assets managers with
reminder e-mails as the required tasks
near the deadlines required in the
policies and procedures. In addition Asset
Management has hired two new asset
managers to fill staff vacancies; the new
staff start on March 16, 2015. The
department will review and/or update
internal policies and procedures as needed
to ensure they address instances in which
exceptions to required timelines or other
requirements may be allowed.