Audit of Wellesley Housing Authority Objectives, Scope, and Methodology

An explanation of what this audit examined and how it was conducted.

Overview

In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of certain activities of the Wellesley Housing Authority for the period January 1, 2014 through December 31, 2016. Because of the results of our audit planning procedures, it was necessary to extend our audit period in the area of inventory through May 1, 2017.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Below is a list of our audit objectives, indicating each question we intended our audit to answer; the conclusion we reached regarding each objective; and, if applicable, where each objective is discussed in the audit findings.

Objective	Conclusion
Does the Authority perform and document annual inspections of all housing units?	No; see Finding 3
Are the board of commissioners’ meetings held as required, are there quorums at the meetings, and do the commissioners oversee and govern the Authority’s business affairs?
Does the Authority ensure that eligible tenants are housed in accordance with the requirements of the Department of Housing and Community Development (DHCD)?	No; see Finding 5
Do the Authority’s administrative expenses have adequate supporting documentation, and are the expenses related to the business of the Authority?	Yes
Was the Authority’s management agreement with the Needham Housing Authority approved by DHCD, and are the contract amount and all payments to the Needham Housing Authority under the contract appropriate?	No; see Finding 6
Does the Authority procure goods (specifically ranges, refrigerators, and water heaters) in accordance with Sections 2 and 4 of Chapter 30B of the General Laws?	No; see Finding 2
Does the Authority maintain a complete and up-to-date inventory list of its ranges and refrigerators and conduct an annual physical inventory in accordance with DHCD requirements?	No; see Finding 1
Did the Authority perform rent determinations and annual rent redeterminations during the audit period and correctly calculate rents in accordance with DHCD requirements?	No; see Finding 4

To achieve our audit objectives, we gained an understanding of the internal control environment and tested the relevant internal controls for governance and administrative expenses.

Governance

For our testing of board governance, we obtained and reviewed all the board of commissioners’ meeting minutes to determine whether meetings were attended by a quorum of board members when the board was conducting business, as required by its bylaws and DHCD regulations.

Administrative Expenses

For our administrative expense testing, we selected 60 items randomly and an additional 35 items judgmentally from a population of 2,222 transactions made by the Authority during the audit period. We tested these expenditures to determine whether they were related to the business purposes of the Authority and had adequate supporting documentation.

Annual Unit Site Inspections

To test whether the Authority complied with DHCD requirements for the annual inspection of tenant-occupied units, we selected a nonstatistical sample of 25 tenants from the rent roll of 231 tenants as of December 31, 2016 and reviewed any inspection records the Authority had on file for these tenants’ dwellings.

Procurement

For our testing of procurement, we requested documentation to support the Authority’s procurement of all appliances it purchased during our audit period. We also requested and obtained the Authority’s annual budgets, bidding documents, general ledgers, invoices, check registers, work orders, and inventory list of refrigerators and ranges for the audit period. In addition, to determine whether the Authority could account for its new purchases, we selected and compared the range and refrigerator serial numbers on the work orders to the serial numbers on the invoices. We also selected a judgmental sample of 30 purchase orders (15 for refrigerators and 15 for ranges) that identified specific units where appliances were delivered. For these purchase orders, we inspected the units and determined whether the serial number on each purchase order and related invoice matched the one on an appliance in each unit. We then compared all appliance work orders executed during the audit period to the Authority’s inventory list to determine whether any appliances had been installed in housing units but were not on the inventory list.

Inventory

We requested and obtained the Authority’s most recent inventory list of ranges and refrigerators. We determined whether the list was up to date and whether the Authority conducted an annual inventory. From the rent rolls, we selected a nonstatistical sample of 40 housing units from the rent roll of 231 units as of December 31, 2016. From the 40, we selected 20 units and compared the inventory list of ranges and refrigerators to the appliances in each unit; we then compared an inventory of the appliances in the other 20 units to the inventory list to check for accuracy.

We also reviewed the inventory list to determine whether it complied with DHCD requirements.

Tenant Eligibility

For our review of tenant eligibility, we requested and obtained the Authority’s master waiting list ledger to determine whether the Authority was properly updating it. We also determined whether housing applicants’ names were properly transferred from the master waiting list ledger to the appropriate program waiting list ledgers and whether applicants were notified of vacancies in accordance with DHCD requirements. However, as discussed in the Detailed Audit Findings with Auditee’s Response section of this report, the Authority did not maintain hardcopy program waiting list ledgers, so we were unable to determine whether applicants were selected in accordance with DHCD requirements. We requested the files for the 10 tenants who had moved in most recently during fiscal year 2016. We reviewed these files to determine whether the Authority obtained and maintained all the relevant documentation required by DHCD.

Rent Redeterminations

For rent redeterminations, we selected a nonstatistical sample of 25 tenants from a population of 231 to verify that each tenant’s rent was calculated accurately and that there was supporting documentation for income and deductions. We also reviewed each tenant’s lease addendum for accuracy and compliance with DHCD requirements.

Management Agreement

We requested and obtained the management agreement between the Wellesley Housing Authority and the Needham Housing Authority. We also obtained and reviewed all of the meeting minutes of the Wellesley Housing Authority’s board of commissioners from the audit period to determine whether this agreement was properly authorized by the board and executed by management. We also determined whether DHCD had approved the management agreement as required by DHCD guidelines. Further, we reviewed all monthly payments by the Wellesley Housing Authority to the Needham Housing Authority during the audit period to determine whether they were in accordance with the agreement.

Data Reliability

The Authority contracts its financial reporting to a third-party fee accountant. The fee accountant receives source documents from the Authority’s administrative staff and generates the Authority’s general ledger and financial statements using Client Ledger software. We determined the reliability of data from the Authority’s financial reporting system by tracing certain electronic transactions to original source documents such as invoices, accounts-payable checks, tenant files, and work orders. We compared these documents to the general ledger for accuracy, performed other tests of electronic data, and made relevant inquiries. We also reviewed the rent rolls, expense list, and inventory list for duplicates and missing fields. We determined that the data from the system were sufficiently reliable for the purposes of our audit.

We used nonstatistical sampling and did not project the results of our audit tests to the entire population.

 

Date published:	May 30, 2018