REPORT DIGEST ILLINOIS HOUSING DEVELOPMENT AUTHORITY SINGLE AUDIT AND STATE COMPLIANCE EXAMINATION FOR THE YEAR ENDED JUNE 30, 2017 Release Date: February 14, 2018 FINDINGS THIS AUDIT: 4 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 2 -- 2 Category 2: 0 -- 2 -- 2 Category 3: 0 -- 0 -- 0 TOTAL: 0 -- 4 -- 4 FINDINGS LAST AUDIT: 8 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 (Authority) for the year ended June 30, 2017. A separate Financial Audit as of and for the year ended June 30, 2017, was previously released on November 8, 2017. In total, this report contains 4 findings, two of which were reported in the Financial Audit. SYNOPSIS • (17-3) The Authority did not properly report expenditures on the Schedule of Expenditures of Federal Awards. • (17-4) The Authority did not follow its established policies and procedures for monitoring subrecipients of the Section 8 Project-Based program. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS INACCURATE REPORTING OF FEDERAL EXPENDITURES ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (SEFA) Expenditures were not properly reported on the SEFA provided by the Authority for our final major program determination. Specifically, we noted administrative expenditures were overstated by $399,954 and current year loan disbursements were understated by $336,159 resulting in total expenditure and total amounts passed through to subrecipients being overstated by $63,795. Failure to accurately report federal expenditures and amounts passed through to subrecipients prohibits the completion of an audit in accordance with the Uniform Guidance, which may result in the suspension of federal funding. (Finding 3, pages 21-23) This finding has been repeated since 2015. We recommended the Authority review its current procedures to ensure the SEFA is prepared accurately and in accordance with the Uniform Guidance. Authority officials concurred with the recommendation and stated for the HOME Program, the Accounting staff will review program income payouts to determine its use either to fund administrative reimbursement requests or to fund program loan disbursements. (For the previous Authority response, see Digest Footnote #1.) FAILURE TO FOLLOW ESTABLISHED SUBRECIPIENT MONITORING 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) program. The Authority has implemented procedures whereby program staff perform periodic on- site and desk reviews of subrecipients’ 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 file to be closed within 90 days of the subrecipient being notified of any findings. During our testwork over on-site review procedures performed for 25 subrecipients (with expenditures of $45,311,692) 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 written responses to the findings of the on-site reviews for two subrecipients (with expenditures of $9,442,992) and appropriate follow-up action was not taken. • The Authority did not complete the on-site reviews for one subrecipient (with expenditures totaling $4,978,732) within 90 days. The delay in completing the on-site reviews was 28 days. • The Authority did not notify one subrecipient (with expenditures totaling $4,464,260) of findings from the on-site monitoring review in a timely manner. Specifically, the finding notification was sent 75 days after the review of the inspection (30 day requirement) and 78 days after the inspection was conducted (60 day requirement). (Finding 4, pages 24-25) This finding has been repeated since 2011. We recommended the Authority ensure on-site monitoring files are completed and closed in accordance with established policies and procedures. Authority officials agreed with the recommendation and stated the Asset Management department is being reorganized to help clarify roles and responsibilities to ensure tasks are completed in accordance with procedures. (For the previous Authority response, see Digest Footnote #2.) AUDITOR’S OPINIONS The financial audit report was previously released. The auditors stated the financial statements of the Authority as of and for the year ended June 30, 2017, are fairly stated in all material respects. The auditors also conducted a Single Audit of the Authority as required by the Uniform Guidance. 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 the Authority’s major federal programs for the year ended June 30, 2017. ACCOUNTANT’S OPINION The accountants conducted a compliance examination of the Authority for the year ended June 30, 2017, as required by the Illinois State Auditing Act. The accountants stated the Authority complied, in all material respects, with the requirements described in the report. This Single Audit and State Compliance Examination were conducted by KPMG LLP. Jane Clark Division Director This report is transmitted in accordance with Section 3-14 of the Illinois State Auditing Act. FRANK J. MAUTINO Auditor General FJM:TLK DIGEST FOOTNOTES #1 - INACCURATE REPORTING OF FEDERAL EXPENDITURES ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (SEFA) 2016: The Authority concurs with the recommendation and a review of current procedures for the Schedule of Expenditures of Federal Awards will occur. Accounting staff responsible for preparation of the SEFA will review reporting updates for the 2016 OMB 2 C.F.R. 200, Appendix XI Compliance Supplement. As new updates are listed in the Compliance Supplement, the Accounting staff will implement the updates into the SEFA. #2 - FAILURE TO FOLLOW ESTABLISHED SUBRECIPIENT MONITORING PROCEDURES FOR THE SECTION 8 PROJECT-BASED CLUSTER PROGRAM 2016: Asset Management Services will review its existing procedures to ensure on-site monitoring files are completed and closed in accordance with established policies and procedures. IHDA will take further action to ensure existing procedures and timelines are adhered to.