Financial Statement Audit – Fiscal Year Ended June 30, 2023

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Report Summary

Background

The mission of the Delaware State Housing Authority (DSHA) is to efficiently provide, and assist others to provide, quality, affordable housing opportunities and appropriate supportive services to low- and moderate-income Delawareans.

This engagement was performed in accordance with 31 Del.C. §4015, 29 Del. C. §2906, and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).

Key Information and Findings

Repeat Findings

For five (5) of the ten (10) findings, a similar condition was noted in the fiscal year 2022 report and are considered repeat findings:

• Finding 2023-001, Financial Reporting Close Process
• Finding 2023-002, Financial Reporting – Federal Data Submission
• Finding 2023-003, Internal Control Over Compliance – United States Emergency Rental Assistance Program
• Finding 2023-004, Significant Deficiency in Internal Controls over Compliance Requirement: Eligibility
• Finding 2023-005, Significant Deficiency in Internal Controls over Compliance Requirement: Reporting; Special Tests and Provisions

Financial Statement Findings

Auditors found misstatements of the financial statement balances requiring auditors to make material adjusting journal entries to Governmental Funds. Additionally, auditors needed to make material adjustments to the financial data schedule on DSHA’s Financial Data Submission to the U.S. Department of Housing and Urban Development Real Estate Assessment Center (HUD REAC) to present it without material misstatement.

• DSHA Management concurred with the finding and committed to implementation of the auditor’s recommendations. Additionally, DSHA responded that it is in the process of updating its report structures to properly prepare the financial data submission to the HUD REAC.

DSHA identified potential errors in the processing and payment of assistance totaling approximately $7,090. Auditors considered the design over the processing of payments to be an internal control design weakness applicable to the financial statement findings as well as a finding on the Schedule of Expenditures of Federal Awards.

DSHA Management committed to a Corrective Action Plan comprised of three key elements:

• Management to review & enhance financial closing process and conduct secondary reviews
• Prepare reconciliations for all significant year-end balances
• Hire an outside accounting firm to assist with the REAC & HUD reconciliations

Auditors found two (2) assistance processing errors resulting in overpayments. Although the amount of the overpayments appears immaterial, auditors assessed that weaknesses in the design, implementation, and operation of internal controls over compliance allowed application processing errors to occur and not be detected.

• DSHA management consented to review program policies and procedures to ensure compliance with statutory requirements. DSHA agreed to ensure that staff responsible for processing Delaware Housing Assistance applications are trained effectively to adhere to program policies and procedures consistently.

Federal Awards Findings

Auditors determined that internal controls over compliance were not appropriately designed, implemented, or operating to appropriately address the risk of noncompliance with federal program requirements for the federal award of the COVID-19 Emergency Rental Assistance (ERA) Program.

Audit testing revealed cases in which applicants received assistance in excess of the allowable maximum assistance and some cases that received the correct amount of assistance were not processed in accordance with the program requirements.

Audit testing of a sample of rental assistance applications revealed process errors and errors in monthly rental assistance payments using ERA funds.

• DSHA management developed corrective action plans for the financial statement findings to adequately addresses issues with the compliance findings for federal award reporting.

Auditors found that DSHA was non-compliant with the requirements of the COVID-19 Emergency Rental Assistance Program, the COVID-19 Homeowner Assistance Fund Program and the Moving to Work Demonstration Program. Reports required by the U.S. Treasury were not submitted timely and accurately and were not supported by proper documentation.

Auditors also found inaccuracies in financial and non-financial data reporting on the quarterly reports submitted to the U.S. Treasury and found that refunded assistance payments were not remitted timely to DSHA.

Homeowner assistance applications did not correctly determine homeowner income which resulted in assistance overpayments.

• DSHA management noted that in September 2022, DSHA implemented new processes for preparing and submitting ERA reports to U.S. Treasury (UST).