Finding Number: 2024-001
Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion.
(1) The affordability requirements:
(i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership.
(ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and
(iii) Must be recorded in accordance with State recordation laws.
(2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability.
(3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property.
(4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b).
(h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1).
24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations
(1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h):
(i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family.
(ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request.
(iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit.
Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal
entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal
statutes, regulations and the terms and conditions of the federal award.
Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and
program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals.
Cause
The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information.
Effect or potential effect
The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria.
Questioned costs
None
Context
The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances.
Identification as a repeat finding if applicable
2023-002
Recommendation
We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements.
Views of responsible officials and planned corrective actions
The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway.
The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001
Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion.
(1) The affordability requirements:
(i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership.
(ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and
(iii) Must be recorded in accordance with State recordation laws.
(2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability.
(3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property.
(4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b).
(h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1).
24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations
(1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h):
(i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family.
(ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request.
(iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit.
Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal
entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal
statutes, regulations and the terms and conditions of the federal award.
Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and
program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals.
Cause
The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information.
Effect or potential effect
The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria.
Questioned costs
None
Context
The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances.
Identification as a repeat finding if applicable
2023-002
Recommendation
We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements.
Views of responsible officials and planned corrective actions
The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway.
The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001
Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion.
(1) The affordability requirements:
(i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership.
(ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and
(iii) Must be recorded in accordance with State recordation laws.
(2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability.
(3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property.
(4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b).
(h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1).
24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations
(1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h):
(i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family.
(ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request.
(iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit.
Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal
entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal
statutes, regulations and the terms and conditions of the federal award.
Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and
program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals.
Cause
The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information.
Effect or potential effect
The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria.
Questioned costs
None
Context
The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances.
Identification as a repeat finding if applicable
2023-002
Recommendation
We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements.
Views of responsible officials and planned corrective actions
The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway.
The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001
Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion.
(1) The affordability requirements:
(i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership.
(ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and
(iii) Must be recorded in accordance with State recordation laws.
(2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability.
(3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property.
(4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b).
(h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1).
24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations
(1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h):
(i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family.
(ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request.
(iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit.
Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal
entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal
statutes, regulations and the terms and conditions of the federal award.
Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and
program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals.
Cause
The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information.
Effect or potential effect
The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria.
Questioned costs
None
Context
The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances.
Identification as a repeat finding if applicable
2023-002
Recommendation
We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements.
Views of responsible officials and planned corrective actions
The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway.
The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001
Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion.
(1) The affordability requirements:
(i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership.
(ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and
(iii) Must be recorded in accordance with State recordation laws.
(2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability.
(3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property.
(4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b).
(h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1).
24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations
(1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h):
(i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family.
(ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request.
(iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit.
Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal
entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal
statutes, regulations and the terms and conditions of the federal award.
Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and
program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals.
Cause
The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information.
Effect or potential effect
The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria.
Questioned costs
None
Context
The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances.
Identification as a repeat finding if applicable
2023-002
Recommendation
We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements.
Views of responsible officials and planned corrective actions
The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway.
The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001
Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion.
(1) The affordability requirements:
(i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership.
(ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and
(iii) Must be recorded in accordance with State recordation laws.
(2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability.
(3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property.
(4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b).
(h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1).
24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations
(1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h):
(i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family.
(ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request.
(iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit.
Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal
entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal
statutes, regulations and the terms and conditions of the federal award.
Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and
program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals.
Cause
The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information.
Effect or potential effect
The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria.
Questioned costs
None
Context
The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances.
Identification as a repeat finding if applicable
2023-002
Recommendation
We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements.
Views of responsible officials and planned corrective actions
The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway.
The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-002
Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections
Compliance Requirement(s): Special Tests – Housing Quality Standards
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
§ 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements:
…
(iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units.
HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected?
A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows:
Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually.
Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule.
Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards.
The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209.
2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented.
Condition
The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late.
In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251.
Cause
The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year.
Effect or potential effect
Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process.
Questioned costs
None
Context
The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log.
Identification as a repeat finding if applicable
2023-003
Recommendation
We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections.
Views of responsible officials and planned corrective actions
Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections.
The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays.
The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002
Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections
Compliance Requirement(s): Special Tests – Housing Quality Standards
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
§ 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements:
…
(iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units.
HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected?
A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows:
Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually.
Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule.
Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards.
The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209.
2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented.
Condition
The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late.
In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251.
Cause
The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year.
Effect or potential effect
Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process.
Questioned costs
None
Context
The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log.
Identification as a repeat finding if applicable
2023-003
Recommendation
We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections.
Views of responsible officials and planned corrective actions
Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections.
The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays.
The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002
Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections
Compliance Requirement(s): Special Tests – Housing Quality Standards
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
§ 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements:
…
(iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units.
HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected?
A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows:
Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually.
Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule.
Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards.
The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209.
2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented.
Condition
The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late.
In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251.
Cause
The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year.
Effect or potential effect
Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process.
Questioned costs
None
Context
The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log.
Identification as a repeat finding if applicable
2023-003
Recommendation
We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections.
Views of responsible officials and planned corrective actions
Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections.
The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays.
The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002
Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections
Compliance Requirement(s): Special Tests – Housing Quality Standards
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
§ 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements:
…
(iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units.
HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected?
A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows:
Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually.
Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule.
Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards.
The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209.
2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented.
Condition
The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late.
In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251.
Cause
The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year.
Effect or potential effect
Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process.
Questioned costs
None
Context
The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log.
Identification as a repeat finding if applicable
2023-003
Recommendation
We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections.
Views of responsible officials and planned corrective actions
Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections.
The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays.
The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002
Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections
Compliance Requirement(s): Special Tests – Housing Quality Standards
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
§ 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements:
…
(iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units.
HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected?
A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows:
Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually.
Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule.
Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards.
The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209.
2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented.
Condition
The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late.
In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251.
Cause
The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year.
Effect or potential effect
Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process.
Questioned costs
None
Context
The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log.
Identification as a repeat finding if applicable
2023-003
Recommendation
We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections.
Views of responsible officials and planned corrective actions
Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections.
The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays.
The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002
Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections
Compliance Requirement(s): Special Tests – Housing Quality Standards
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
§ 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements:
…
(iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units.
HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected?
A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows:
Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually.
Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule.
Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards.
The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209.
2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented.
Condition
The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late.
In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251.
Cause
The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year.
Effect or potential effect
Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process.
Questioned costs
None
Context
The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log.
Identification as a repeat finding if applicable
2023-003
Recommendation
We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections.
Views of responsible officials and planned corrective actions
Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections.
The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays.
The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-003
Finding Title: Internal Controls and Compliance over the Timeliness of Housing Choice Voucher Participant Re-examination and Recertification
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation)
The PHA must examine family income and composition at least once every 12 months and adjust the tenant rent and housing assistance payment as necessary using the documentation. The Department of Housing and Urban Development (HUD) has provided a grace period of 2 months before they are reported as late.
§ 5.657 Section 8 project-based assistance programs: Reexamination of family income and composition.
(a) Applicability. This section states requirements for reexamination of family income and composition in the Section 8 project-based assistance programs, except for the moderate rehabilitation and the project-based voucher programs.
(b) Regular reexamination. The owner must conduct a reexamination and redetermination of family income and composition at least annually.
(c) Interim reexaminations.
(1) Generally. A family may request an interim reexamination of family income because of any changes since the last examination. The owner must conduct any interim reexamination within a reasonable time after the family request or when the owner becomes aware of an increase in family adjusted income under paragraph (c)(3) of this section. What qualifies as a “reasonable time” may vary based on the amount of time it takes to verify information, but such time generally should not exceed 30 days from the date a family reports changes in income to an owner.
(2) Decreases in the family's annual adjusted income. The owner may decline to conduct an interim reexamination of family income if the owner estimates that the family's adjusted income will decrease by an amount that is less than ten percent of the family's annual adjusted income (or a lower amount established by HUD through notice), or such lower threshold established by the owner.
(3) Increases in the family's annual adjusted income. The owner must conduct an interim reexamination of family income when the owner becomes aware that the family's adjusted income (as defined in § 5.611) has changed by an amount that the owner estimates will result in an increase of ten percent or more in annual adjusted income or such other amount established by HUD through notice, except.
(i) The owner may not consider any increase in the earned income of the family when estimating or calculating whether the family's adjusted income has increased, unless the family has previously received an interim reduction under paragraph (c)(1) of this section during the certification period; and (ii) The owner may choose not to conduct an interim reexamination in the last three months of a certification period.
(4) Policies on reporting changes in family income or composition. The owner must adopt policies consistent with this paragraph (c), prescribing when and under what conditions the family must report a change in family income or composition.
(5) Effective date of rent changes.
(i) If the family has reported a change in family income or composition in a timely manner according to the owner's policies, the owner must provide the family with 30 days advance notice of any rent increase, and such rent increase will be effective the first day of the month beginning after the end of that 30-day notice period. Rent decreases will be effective on the first day of the first month after the date of the actual change leading to the interim reexamination of family income.
(ii) If the family has failed to report a change in family income or composition in a timely manner according to the owner's policies, owners must implement any resulting rent increases retroactively to the first of the month following the date of the change leading to the interim reexamination of family income. Any resulting rent decrease must be implemented no later than the first rent period following completion of the reexamination. However, rent decreases may be applied retroactively at the discretion of the owner, in accordance with the owner's conditions as established in written policy, and subject to paragraph (c)(5)(iii) of this section.
(iii) A retroactive rent decrease may not be applied by the owner prior to the later of the first of the month following:
(A) The date of the change leading to the interim reexamination of family income; or
(B) The effective date of the family's most recent previous interim or annual reexamination (or initial examination if that was the family's last examination).
Condition
For 31 of 60 samples, the Authority did not re-examine eligible participants or redetermine family income on an annual basis (12 months). Of these 31, there were 12 samples completed within the 2-month grace period, before HUD considers the re-examination late for its purposes. The remaining 19 samples were not completed until after 14 months.
Cause
For the participants whose income was not re-examined during the fiscal year, it is due to the volume of participants within the HCV program in relation to the resources available to the Housing Authority of the City to administer the program.
Effect or potential effect
Delays in reviewing participant's eligibility status each 12-month period could lead to noncompliance with HUD regulations. Additionally, it could cause program resources to go to ineligible participants, which would result in unallowable cost to the program.
Questioned costs
None
Context
The Housing Authority of the City of Long Beach’s has 75 employees who are responsible for the administration of the programs over 7,800 participants, or over 100 Re-examinations per employee.
Identification as a repeat finding if applicable
2023-007
Recommendation
We recommend the City continue with its plan to address delays in the recertification processes through steps that are being taken to address resource constraints.
Views of responsible officials and planned corrective actions
The City of Long Beach Housing Authority (HACLB) acknowledges the audit finding and has implemented a comprehensive corrective action plan to address the timeliness of participant re-examinations and recertifications under the Housing Choice Vouchers Program (HCV). To improve program efficiency and compliance, HACLB has expanded staffing through the recruitment and training of new Housing Specialists and the hiring of key administrative officers, however the prolonged timeline for recruitment has resulted in operational challenges that impact overall efficiency, and there are still several supervisory positions that remain vacant after 10 months. HACLB also renewed a contract for support services to address the backlog of reexaminations and implemented a new housing software platform to enhance workflow management and productivity tracking. These combined efforts are expected to significantly reduce delays, enhance operational oversight, and support sustained compliance with HUD requirements. HACLB remains committed to continuously evaluating and improving its internal controls and procedures to ensure the timely completion of all HCV participant reexaminations and recertifications.
Finding Number: 2024-003
Finding Title: Internal Controls and Compliance over the Timeliness of Housing Choice Voucher Participant Re-examination and Recertification
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation)
The PHA must examine family income and composition at least once every 12 months and adjust the tenant rent and housing assistance payment as necessary using the documentation. The Department of Housing and Urban Development (HUD) has provided a grace period of 2 months before they are reported as late.
§ 5.657 Section 8 project-based assistance programs: Reexamination of family income and composition.
(a) Applicability. This section states requirements for reexamination of family income and composition in the Section 8 project-based assistance programs, except for the moderate rehabilitation and the project-based voucher programs.
(b) Regular reexamination. The owner must conduct a reexamination and redetermination of family income and composition at least annually.
(c) Interim reexaminations.
(1) Generally. A family may request an interim reexamination of family income because of any changes since the last examination. The owner must conduct any interim reexamination within a reasonable time after the family request or when the owner becomes aware of an increase in family adjusted income under paragraph (c)(3) of this section. What qualifies as a “reasonable time” may vary based on the amount of time it takes to verify information, but such time generally should not exceed 30 days from the date a family reports changes in income to an owner.
(2) Decreases in the family's annual adjusted income. The owner may decline to conduct an interim reexamination of family income if the owner estimates that the family's adjusted income will decrease by an amount that is less than ten percent of the family's annual adjusted income (or a lower amount established by HUD through notice), or such lower threshold established by the owner.
(3) Increases in the family's annual adjusted income. The owner must conduct an interim reexamination of family income when the owner becomes aware that the family's adjusted income (as defined in § 5.611) has changed by an amount that the owner estimates will result in an increase of ten percent or more in annual adjusted income or such other amount established by HUD through notice, except.
(i) The owner may not consider any increase in the earned income of the family when estimating or calculating whether the family's adjusted income has increased, unless the family has previously received an interim reduction under paragraph (c)(1) of this section during the certification period; and (ii) The owner may choose not to conduct an interim reexamination in the last three months of a certification period.
(4) Policies on reporting changes in family income or composition. The owner must adopt policies consistent with this paragraph (c), prescribing when and under what conditions the family must report a change in family income or composition.
(5) Effective date of rent changes.
(i) If the family has reported a change in family income or composition in a timely manner according to the owner's policies, the owner must provide the family with 30 days advance notice of any rent increase, and such rent increase will be effective the first day of the month beginning after the end of that 30-day notice period. Rent decreases will be effective on the first day of the first month after the date of the actual change leading to the interim reexamination of family income.
(ii) If the family has failed to report a change in family income or composition in a timely manner according to the owner's policies, owners must implement any resulting rent increases retroactively to the first of the month following the date of the change leading to the interim reexamination of family income. Any resulting rent decrease must be implemented no later than the first rent period following completion of the reexamination. However, rent decreases may be applied retroactively at the discretion of the owner, in accordance with the owner's conditions as established in written policy, and subject to paragraph (c)(5)(iii) of this section.
(iii) A retroactive rent decrease may not be applied by the owner prior to the later of the first of the month following:
(A) The date of the change leading to the interim reexamination of family income; or
(B) The effective date of the family's most recent previous interim or annual reexamination (or initial examination if that was the family's last examination).
Condition
For 31 of 60 samples, the Authority did not re-examine eligible participants or redetermine family income on an annual basis (12 months). Of these 31, there were 12 samples completed within the 2-month grace period, before HUD considers the re-examination late for its purposes. The remaining 19 samples were not completed until after 14 months.
Cause
For the participants whose income was not re-examined during the fiscal year, it is due to the volume of participants within the HCV program in relation to the resources available to the Housing Authority of the City to administer the program.
Effect or potential effect
Delays in reviewing participant's eligibility status each 12-month period could lead to noncompliance with HUD regulations. Additionally, it could cause program resources to go to ineligible participants, which would result in unallowable cost to the program.
Questioned costs
None
Context
The Housing Authority of the City of Long Beach’s has 75 employees who are responsible for the administration of the programs over 7,800 participants, or over 100 Re-examinations per employee.
Identification as a repeat finding if applicable
2023-007
Recommendation
We recommend the City continue with its plan to address delays in the recertification processes through steps that are being taken to address resource constraints.
Views of responsible officials and planned corrective actions
The City of Long Beach Housing Authority (HACLB) acknowledges the audit finding and has implemented a comprehensive corrective action plan to address the timeliness of participant re-examinations and recertifications under the Housing Choice Vouchers Program (HCV). To improve program efficiency and compliance, HACLB has expanded staffing through the recruitment and training of new Housing Specialists and the hiring of key administrative officers, however the prolonged timeline for recruitment has resulted in operational challenges that impact overall efficiency, and there are still several supervisory positions that remain vacant after 10 months. HACLB also renewed a contract for support services to address the backlog of reexaminations and implemented a new housing software platform to enhance workflow management and productivity tracking. These combined efforts are expected to significantly reduce delays, enhance operational oversight, and support sustained compliance with HUD requirements. HACLB remains committed to continuously evaluating and improving its internal controls and procedures to ensure the timely completion of all HCV participant reexaminations and recertifications.
Finding Number: 2024-004
Finding Title: Internal Controls and Compliance Over Federally Funded Equipment
Compliance Requirement(s): Equipment and Real Property Management
Classification: Significant Deficiency
Programs: Port Security Grant Program
ALN #: 97.056
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Homeland Security
Federal Award Numbers: EMW-2021-PU-00463-S01
Federal Award Year: 2021
Criteria or specific requirement (including statutory, regulatory, or other citation
§ 200.313 Equipment. See also § 200.439.
(a) Title. Title to equipment acquired under the Federal award will vest upon acquisition in the recipient or subrecipient subject to the conditions of this section. This title must be a conditional title unless a Federal statute specifically authorizes the Federal agency to vest title in the recipient or subrecipient without further responsibility to the Federal Government (and the Federal agency elects to do so). A conditional title means a clear title is withheld by the Federal agency until conditions and requirements specified in the terms and conditions of a Federal award have been fulfilled. Title for equipment vested in a recipient or subrecipient is subject to the following conditions:
(1) Use the equipment for the authorized purposes of the project during the period of performance or until the property is no longer needed for the purposes of the project.
(2) While the equipment is being used for the originally authorized purpose, the recipient or subrecipient must not dispose of or encumber its title or other interests without the approval of the Federal agency or pass-through entity.
(3) Use and dispose of the property in accordance with paragraphs (b), (c), and (e) of this section.
(b) General. A State must use, manage and dispose of equipment acquired under a Federal award in accordance with State laws and procedures. Indian Tribes must use, manage, and dispose of equipment acquired under a Federal award in accordance with tribal laws and procedures. If such laws and procedures do not exist, Indian Tribes must follow the guidance in this section. Other recipients and subrecipients, including subrecipients of a State or Indian Tribe, must follow paragraphs (c) through (e) of this section.
(c) Use.
(1) The recipient or subrecipient must use equipment for the project or program for which it was acquired and for as long as needed, whether or not the project or program continues to be supported by the Federal award. The recipient or subrecipient must not encumber the equipment without prior approval of the Federal agency or pass-through entity. The Federal agency may require the submission of the applicable common forms for reporting on equipment. When no longer needed for the original project or program, the equipment may be used in other activities in the following order of priority:
(i) Activities under other Federal awards from the Federal agency that funded the original program or project; then
(ii) Activities under Federal awards from other Federal agencies. These activities include consolidated equipment for information technology systems.
(2) During the time that equipment is used on the project or program for which it was acquired, the recipient or subrecipient must also make the equipment available for use on other programs or projects supported by the Federal Government, provided that such use will not interfere with the purpose for which it was originally acquired. First preference for other use of the equipment must be given to other programs or projects supported by the Federal agency that financed the equipment. Second preference must be given to programs or projects under Federal awards from other Federal agencies. Use for non-federally funded projects is also permissible, provided such use will not interfere with the purpose for which it was originally acquired. The recipient or subrecipient should consider charging user fees as appropriate.
(3) Notwithstanding the encouragement in § 200.307 to earn program income, the recipient or subrecipient must not use equipment acquired with the Federal award to provide services for a fee that is less than a private company would charge for similar services unless specifically authorized by Federal statute. This restriction is effective as long as the Federal Government retains an interest in the equipment.
(4) When acquiring replacement equipment, the recipient or subrecipient may either trade-in or sell the equipment and use the proceeds to offset the cost of the replacement equipment.
(d) Management requirements. Regardless of whether equipment is acquired in part or its entirety under the Federal award, the recipient or subrecipient must manage equipment (including replacement equipment) utilizing procedures that meet the following requirements:
(1) Property records must include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date, the cost of the property, the percentage of the Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property. The recipient and subrecipient are responsible for maintaining and updating property records when there is a change in the status of the property.
(2) A physical inventory of the property must be conducted, and the results must be reconciled with the property records at least once every two years.
(3) A control system must be in place to ensure safeguards for preventing property loss, damage, or theft. Any loss, damage, or theft of equipment must be investigated. The recipient or subrecipient must notify the Federal agency or pass-through entity of any loss, damage, or theft of equipment that will have an impact on the program.
(4) Regular maintenance procedures must be in place to ensure the property is in proper working condition.
(5) If the recipient or subrecipient is authorized or required to sell the property, proper sales procedures must be in place to ensure the highest possible return.
(e) Disposition. When equipment acquired under a Federal award is no longer needed for the original project, program, or for other activities currently or previously supported by a Federal agency, the recipient or subrecipient must request disposition instructions from the Federal agency or pass-through entity if required by the terms and conditions of the Federal award. Disposition of the equipment will be made as follows, in accordance with Federal agency or pass-through entity disposition instructions:
(1) Equipment with a current fair market value of $10,000 or less (per unit) may be retained, sold, or otherwise disposed of with no further responsibility to the Federal agency or pass-through entity.
(2) Except as provided in § 200.312(b), or if the Federal agency or pass-through entity fails to provide requested disposition instructions within 120 days, items of equipment with a current fair market value in excess of $10,000 (per-unit) may be retained or sold by the recipient or subrecipient. However, the Federal agency is entitled to an amount calculated by multiplying the percentage of the Federal agency's contribution towards the original purchase by the current market value or proceeds from the sale. If the equipment is sold, the Federal agency or pass-through entity may permit the recipient or subrecipient to retain, from the Federal share, $1,000 of the proceeds to cover expenses associated with the selling and handling of the equipment.
(3) The recipient or subrecipient may transfer title to the property to the Federal Government or to an eligible third party provided that the recipient or subrecipient must be entitled to compensation for its attributable percentage of the current fair market value of the property.
(4) In cases where a recipient or subrecipient fails to take appropriate disposition actions, the Federal agency or pass-through entity may direct the recipient or subrecipient to take disposition actions.
Condition
As part of our audit procedures, we reviewed internal controls over inventory and asset management, including physical inspection and disposition tracking of equipment. For the Fire Department, we determined that no physical inventory of federally funded equipment had been conducted during the required biennial period, and no reconciliation of equipment records to actual assets had been performed. While informal tracking logs and asset purchase records existed, they were incomplete and lacked standardized documentation of asset tag numbers, inspection dates, asset condition, and verification signatures. Moreover, there was no evidence of centralized or departmental oversight to ensure routine physical inventory and compliance with Federal property standards.
In addition, we identified the Harbor department failed to properly record the disposition of a federally funded asset. The asset was still marked as “in service” within the equipment listing provided to us during the audit; however the item had in fact been disposed of during the audit period.
Cause
The Fire Department’s grants team oversees the compliance with required federal equipment procedures, the grants team indicated capacity issues were the main contributor towards the lack of a reconciliation or inventorying of the equipment.
The Harbor Departments property related to a vehicle which was disposed of after an accident. This occurred between the departments inventory processes leading to the listing not being updated by mistake.
Effect or potential effect
The Departments were out of compliance with federal requirements surrounding equipment management, maintenance, and disposal.
Questioned costs
None
Context
The Harbor Department special vehicle which had an estimated book value of $0 that was involved in a collision before being disposed of. There were $0 in proceeds received related to the disposal.
Identification as a repeat finding if applicable
N/A
Recommendation
We recommend the departments enhance internal controls to ensure its property records include all the requirements under the Uniform Guidance and properly identify all property and equipment purchased with federal funds.
We recommend the Fire Department implement a plan to address staffing needs and formalize procedures regarding the reconciliation, tracking, and maintenance of federally funded equipment. We recommend the Harbor Department enhance their procedures on equipment disposals.
Views of responsible officials and planned corrective actions
The Fire Department will ensure that all grant funds are expended in compliance with grant guidelines, including the completion of a biennial Equipment Inventory and the submission of a certification letter verifying its accuracy to the grantor every other year.
Effective June 16, 2025, the Fire Department will conduct an Equipment Inventory and submit a verification letter to the grantor confirming its completion on a biennial basis. The current Equipment Inventory will be completed by the Support Services Bureau by September 30, 2025. The Fire Department will ensure the accompanying verification letter is sent to the grantor along with the updated inventory list. This biennial requirement will be integrated into the Department’s annual calendar. Following the FY2025 inventory, the next cycle will occur in FY2027 and continue in every odd-numbered fiscal year thereafter.
The Harbor Department will enhance its written procedures on equipment disposals and provide training to appropriate Finance, Security, and Maintenance Division staff in FY 2025 to ensure compliance and timeliness in following equipment disposal procedures.
Finding Number: 2024-004
Finding Title: Internal Controls and Compliance Over Federally Funded Equipment
Compliance Requirement(s): Equipment and Real Property Management
Classification: Significant Deficiency
Programs: Port Security Grant Program
ALN #: 97.056
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Homeland Security
Federal Award Numbers: EMW-2021-PU-00463-S01
Federal Award Year: 2021
Criteria or specific requirement (including statutory, regulatory, or other citation
§ 200.313 Equipment. See also § 200.439.
(a) Title. Title to equipment acquired under the Federal award will vest upon acquisition in the recipient or subrecipient subject to the conditions of this section. This title must be a conditional title unless a Federal statute specifically authorizes the Federal agency to vest title in the recipient or subrecipient without further responsibility to the Federal Government (and the Federal agency elects to do so). A conditional title means a clear title is withheld by the Federal agency until conditions and requirements specified in the terms and conditions of a Federal award have been fulfilled. Title for equipment vested in a recipient or subrecipient is subject to the following conditions:
(1) Use the equipment for the authorized purposes of the project during the period of performance or until the property is no longer needed for the purposes of the project.
(2) While the equipment is being used for the originally authorized purpose, the recipient or subrecipient must not dispose of or encumber its title or other interests without the approval of the Federal agency or pass-through entity.
(3) Use and dispose of the property in accordance with paragraphs (b), (c), and (e) of this section.
(b) General. A State must use, manage and dispose of equipment acquired under a Federal award in accordance with State laws and procedures. Indian Tribes must use, manage, and dispose of equipment acquired under a Federal award in accordance with tribal laws and procedures. If such laws and procedures do not exist, Indian Tribes must follow the guidance in this section. Other recipients and subrecipients, including subrecipients of a State or Indian Tribe, must follow paragraphs (c) through (e) of this section.
(c) Use.
(1) The recipient or subrecipient must use equipment for the project or program for which it was acquired and for as long as needed, whether or not the project or program continues to be supported by the Federal award. The recipient or subrecipient must not encumber the equipment without prior approval of the Federal agency or pass-through entity. The Federal agency may require the submission of the applicable common forms for reporting on equipment. When no longer needed for the original project or program, the equipment may be used in other activities in the following order of priority:
(i) Activities under other Federal awards from the Federal agency that funded the original program or project; then
(ii) Activities under Federal awards from other Federal agencies. These activities include consolidated equipment for information technology systems.
(2) During the time that equipment is used on the project or program for which it was acquired, the recipient or subrecipient must also make the equipment available for use on other programs or projects supported by the Federal Government, provided that such use will not interfere with the purpose for which it was originally acquired. First preference for other use of the equipment must be given to other programs or projects supported by the Federal agency that financed the equipment. Second preference must be given to programs or projects under Federal awards from other Federal agencies. Use for non-federally funded projects is also permissible, provided such use will not interfere with the purpose for which it was originally acquired. The recipient or subrecipient should consider charging user fees as appropriate.
(3) Notwithstanding the encouragement in § 200.307 to earn program income, the recipient or subrecipient must not use equipment acquired with the Federal award to provide services for a fee that is less than a private company would charge for similar services unless specifically authorized by Federal statute. This restriction is effective as long as the Federal Government retains an interest in the equipment.
(4) When acquiring replacement equipment, the recipient or subrecipient may either trade-in or sell the equipment and use the proceeds to offset the cost of the replacement equipment.
(d) Management requirements. Regardless of whether equipment is acquired in part or its entirety under the Federal award, the recipient or subrecipient must manage equipment (including replacement equipment) utilizing procedures that meet the following requirements:
(1) Property records must include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date, the cost of the property, the percentage of the Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property. The recipient and subrecipient are responsible for maintaining and updating property records when there is a change in the status of the property.
(2) A physical inventory of the property must be conducted, and the results must be reconciled with the property records at least once every two years.
(3) A control system must be in place to ensure safeguards for preventing property loss, damage, or theft. Any loss, damage, or theft of equipment must be investigated. The recipient or subrecipient must notify the Federal agency or pass-through entity of any loss, damage, or theft of equipment that will have an impact on the program.
(4) Regular maintenance procedures must be in place to ensure the property is in proper working condition.
(5) If the recipient or subrecipient is authorized or required to sell the property, proper sales procedures must be in place to ensure the highest possible return.
(e) Disposition. When equipment acquired under a Federal award is no longer needed for the original project, program, or for other activities currently or previously supported by a Federal agency, the recipient or subrecipient must request disposition instructions from the Federal agency or pass-through entity if required by the terms and conditions of the Federal award. Disposition of the equipment will be made as follows, in accordance with Federal agency or pass-through entity disposition instructions:
(1) Equipment with a current fair market value of $10,000 or less (per unit) may be retained, sold, or otherwise disposed of with no further responsibility to the Federal agency or pass-through entity.
(2) Except as provided in § 200.312(b), or if the Federal agency or pass-through entity fails to provide requested disposition instructions within 120 days, items of equipment with a current fair market value in excess of $10,000 (per-unit) may be retained or sold by the recipient or subrecipient. However, the Federal agency is entitled to an amount calculated by multiplying the percentage of the Federal agency's contribution towards the original purchase by the current market value or proceeds from the sale. If the equipment is sold, the Federal agency or pass-through entity may permit the recipient or subrecipient to retain, from the Federal share, $1,000 of the proceeds to cover expenses associated with the selling and handling of the equipment.
(3) The recipient or subrecipient may transfer title to the property to the Federal Government or to an eligible third party provided that the recipient or subrecipient must be entitled to compensation for its attributable percentage of the current fair market value of the property.
(4) In cases where a recipient or subrecipient fails to take appropriate disposition actions, the Federal agency or pass-through entity may direct the recipient or subrecipient to take disposition actions.
Condition
As part of our audit procedures, we reviewed internal controls over inventory and asset management, including physical inspection and disposition tracking of equipment. For the Fire Department, we determined that no physical inventory of federally funded equipment had been conducted during the required biennial period, and no reconciliation of equipment records to actual assets had been performed. While informal tracking logs and asset purchase records existed, they were incomplete and lacked standardized documentation of asset tag numbers, inspection dates, asset condition, and verification signatures. Moreover, there was no evidence of centralized or departmental oversight to ensure routine physical inventory and compliance with Federal property standards.
In addition, we identified the Harbor department failed to properly record the disposition of a federally funded asset. The asset was still marked as “in service” within the equipment listing provided to us during the audit; however the item had in fact been disposed of during the audit period.
Cause
The Fire Department’s grants team oversees the compliance with required federal equipment procedures, the grants team indicated capacity issues were the main contributor towards the lack of a reconciliation or inventorying of the equipment.
The Harbor Departments property related to a vehicle which was disposed of after an accident. This occurred between the departments inventory processes leading to the listing not being updated by mistake.
Effect or potential effect
The Departments were out of compliance with federal requirements surrounding equipment management, maintenance, and disposal.
Questioned costs
None
Context
The Harbor Department special vehicle which had an estimated book value of $0 that was involved in a collision before being disposed of. There were $0 in proceeds received related to the disposal.
Identification as a repeat finding if applicable
N/A
Recommendation
We recommend the departments enhance internal controls to ensure its property records include all the requirements under the Uniform Guidance and properly identify all property and equipment purchased with federal funds.
We recommend the Fire Department implement a plan to address staffing needs and formalize procedures regarding the reconciliation, tracking, and maintenance of federally funded equipment. We recommend the Harbor Department enhance their procedures on equipment disposals.
Views of responsible officials and planned corrective actions
The Fire Department will ensure that all grant funds are expended in compliance with grant guidelines, including the completion of a biennial Equipment Inventory and the submission of a certification letter verifying its accuracy to the grantor every other year.
Effective June 16, 2025, the Fire Department will conduct an Equipment Inventory and submit a verification letter to the grantor confirming its completion on a biennial basis. The current Equipment Inventory will be completed by the Support Services Bureau by September 30, 2025. The Fire Department will ensure the accompanying verification letter is sent to the grantor along with the updated inventory list. This biennial requirement will be integrated into the Department’s annual calendar. Following the FY2025 inventory, the next cycle will occur in FY2027 and continue in every odd-numbered fiscal year thereafter.
The Harbor Department will enhance its written procedures on equipment disposals and provide training to appropriate Finance, Security, and Maintenance Division staff in FY 2025 to ensure compliance and timeliness in following equipment disposal procedures.
Finding Number: 2024-005
Finding Title: Internal Controls over Compliance of Reinspection’s to Enforce Housing Quality Standards
Compliance Requirement(s): Special Tests – Housing Quality Standards Enforcement
Classification: Material Weakness
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation
PART 982—SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM
24 CFR 982.54(d)(21) Procedural guidelines and performance standards for conducting required HQS inspections, including:
(i) Any deficiency that the Public Housing Authority (PHA) has adopted as a life-threatening deficiency that is not a HUD-required life-threatening deficiency
(ii) For PHAs that adopt the initial inspection non-life-threatening deficiency option:
a. The PHA's policy on whether the provision will apply to all initial inspections or a portion of initial inspections.
b. The PHA's policy on whether the provision will be applied to only some inspections and how the units will be selected.
c. The PHA's policy on using withheld HAP funds to repay an owner once the unit is in compliance with HQS.
(iii) For PHAs that adopt the alternative inspection provision:
a. The PHA's policy on how it will apply the provision to initial and periodic inspections.
b. he specific alternative inspection method used by the PHA.
c. The specific properties or types of properties where the alternative inspection method will be employed.
d. For initial inspections, the maximum amount of time the PHA will withhold HAP if the owner does not correct the HQS deficiencies within the cure period, and the period of time after which the PHA will terminate the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract.
(iv) The PHA's policy on charging a reinspection fee to owners.
24 CFR 982.54(d)(22) The PHA's policy on withholding HAP for units that do not meet HQS (see § 982.404(d)(1))
24 CFR 982.406(e)(5) The PHA may commence housing assistance payments to the owner and make housing assistance payments retroactive to the effective date of the HAP contract only after the unit passes the PHA's HQS inspection. If the unit does not pass the HQS inspection, the PHA may not make housing assistance payments to the owner until all the deficiencies have been corrected. If a deficiency is life-threatening, the owner must correct the deficiency within 24 hours of notification from the PHA. For other deficiencies, the owner must correct the deficiency within no more than 30 calendar days (or any PHA-approved extension) of notification from the PHA. If the owner corrects the deficiencies within the required cure period, the PHA makes the housing assistance payments retroactive to the effective date of the HAP contract.
PHA POLICY 8-II.F. INSPECTION RESULTS AND REINSPECTIONS FOR UNITS UNDER HAP CONTRACT
The city of Long Beach PHA Admin Plan requires that each deficiency is identified in the NPSIRE standards as either life-threatening, severe, moderate, or low. Further indicating that units under HAP contract, must correct for life-threatening deficiencies within 24 hours after notice has been provided and all others must be corrected within 30 days (or a PHA-approved extension) after notice has been provided.
Life-threatening deficiencies require notifying both parties by telephone or email immediately while Severe or moderate deficiencies will be provided through a written notification within five business days of the inspection. Both will include specifying who is responsible for correcting the violation and the time frame within which the failure must be corrected. If low deficiencies are identified, these deficiencies will only be noted for informational purposes.
The notice will inform the party which caused the deficiencies, whether owner or family, that if life-threatening conditions are not corrected within 24 hours, and non-life-threatening conditions are not corrected within the specified time frame (or any PHA-approved extension), the owner’s HAP will be abated in accordance with PHA policy (Section 8-II.G.) or the family’s assistance will be terminated in accordance with PHA policy (Chapter 12).
2 CFR 200 SUBPART D – POST FEDERAL AWARD REQUIREMENTS
2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The PHA did not have sufficient internal controls in place to ensure timely reinspection of initial inspections for housing quality standard enforcement leading to eighteen re-inspections which were not completed within the required time frames set by PHA policy, created in accordance with federal requirements. The inspections selected were categorized as severe or moderate deficiencies, allowing for a 30 day period starting after providing notification of inspection results which must occur within 5 days of the inspection completion (or effectively 35 days), the eighteen samples mentioned were completed after this window causing the PHA to be noncompliant with PHA policy 8-II.F and 24 CFR 982.406(e)(5).
Additionally, one tenant failed inspection in October 2023 before failing a subsequent reinspection in December 2023. No further action was taken by the PHA, and the case was closed without resolving the deficiencies that caused the inspections to fail leading to noncompliance with 24 CFR 982.406(e)(5) and PHA policy 8-II.F.
Cause
The delayed reinspection’s and mistakenly closed inspection were due to constraints on resources and a change in the system utilized by the authority to administer the program during the year.
Effect or potential effect
The PHA did not perform necessary procedures to enforce owner and/or family obligations to correct deficiencies, which if unresolved, could lead to housing assistance payments to either party which should have been abated.
Questioned costs
None
Context
Sixty inspections requiring reinspection were selected for testing, eighteen were found to be completed after the required reinspection date. Late reinspection’s ranged from 1 day late to over a year late. One of the failed re-inspections cases was closed by management prior to resolution of identified deficiencies. None of the 60 samples selected were categorized as “life threatening”.
Identification as a repeat finding if applicable
2023-008
Recommendation
We recommend the Authority enhance internal controls over the timeliness and completeness of its the housing quality standard enforcement procedures.
Views of responsible officials and planned corrective actions
The HACLB acknowledges the importance of timely reinspections to ensure compliance with Housing Quality Standards (HQS) and has taken concrete steps to strengthen its internal controls and enforcement mechanisms. To strengthen compliance and reduce delays, HACLB implemented an enhanced reinspection scheduling process in December 2024, using its MRI housing software to automatically schedule reinspections within the 30-day remediation period. The system also tracks extension requests and approvals, while staff regularly monitor system-generated reports to ensure timely follow-up and adherence to HUD standards. These improvements are designed to ensure that repairs are verified within the required timeframe, increase program compliance, and improve the overall quality of housing for HCV participants. HACLB is committed to ongoing monitoring and refinement of this process to ensure continuous improvement.
Finding Number: 2024-005
Finding Title: Internal Controls over Compliance of Reinspection’s to Enforce Housing Quality Standards
Compliance Requirement(s): Special Tests – Housing Quality Standards Enforcement
Classification: Material Weakness
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation
PART 982—SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM
24 CFR 982.54(d)(21) Procedural guidelines and performance standards for conducting required HQS inspections, including:
(i) Any deficiency that the Public Housing Authority (PHA) has adopted as a life-threatening deficiency that is not a HUD-required life-threatening deficiency
(ii) For PHAs that adopt the initial inspection non-life-threatening deficiency option:
a. The PHA's policy on whether the provision will apply to all initial inspections or a portion of initial inspections.
b. The PHA's policy on whether the provision will be applied to only some inspections and how the units will be selected.
c. The PHA's policy on using withheld HAP funds to repay an owner once the unit is in compliance with HQS.
(iii) For PHAs that adopt the alternative inspection provision:
a. The PHA's policy on how it will apply the provision to initial and periodic inspections.
b. he specific alternative inspection method used by the PHA.
c. The specific properties or types of properties where the alternative inspection method will be employed.
d. For initial inspections, the maximum amount of time the PHA will withhold HAP if the owner does not correct the HQS deficiencies within the cure period, and the period of time after which the PHA will terminate the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract.
(iv) The PHA's policy on charging a reinspection fee to owners.
24 CFR 982.54(d)(22) The PHA's policy on withholding HAP for units that do not meet HQS (see § 982.404(d)(1))
24 CFR 982.406(e)(5) The PHA may commence housing assistance payments to the owner and make housing assistance payments retroactive to the effective date of the HAP contract only after the unit passes the PHA's HQS inspection. If the unit does not pass the HQS inspection, the PHA may not make housing assistance payments to the owner until all the deficiencies have been corrected. If a deficiency is life-threatening, the owner must correct the deficiency within 24 hours of notification from the PHA. For other deficiencies, the owner must correct the deficiency within no more than 30 calendar days (or any PHA-approved extension) of notification from the PHA. If the owner corrects the deficiencies within the required cure period, the PHA makes the housing assistance payments retroactive to the effective date of the HAP contract.
PHA POLICY 8-II.F. INSPECTION RESULTS AND REINSPECTIONS FOR UNITS UNDER HAP CONTRACT
The city of Long Beach PHA Admin Plan requires that each deficiency is identified in the NPSIRE standards as either life-threatening, severe, moderate, or low. Further indicating that units under HAP contract, must correct for life-threatening deficiencies within 24 hours after notice has been provided and all others must be corrected within 30 days (or a PHA-approved extension) after notice has been provided.
Life-threatening deficiencies require notifying both parties by telephone or email immediately while Severe or moderate deficiencies will be provided through a written notification within five business days of the inspection. Both will include specifying who is responsible for correcting the violation and the time frame within which the failure must be corrected. If low deficiencies are identified, these deficiencies will only be noted for informational purposes.
The notice will inform the party which caused the deficiencies, whether owner or family, that if life-threatening conditions are not corrected within 24 hours, and non-life-threatening conditions are not corrected within the specified time frame (or any PHA-approved extension), the owner’s HAP will be abated in accordance with PHA policy (Section 8-II.G.) or the family’s assistance will be terminated in accordance with PHA policy (Chapter 12).
2 CFR 200 SUBPART D – POST FEDERAL AWARD REQUIREMENTS
2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The PHA did not have sufficient internal controls in place to ensure timely reinspection of initial inspections for housing quality standard enforcement leading to eighteen re-inspections which were not completed within the required time frames set by PHA policy, created in accordance with federal requirements. The inspections selected were categorized as severe or moderate deficiencies, allowing for a 30 day period starting after providing notification of inspection results which must occur within 5 days of the inspection completion (or effectively 35 days), the eighteen samples mentioned were completed after this window causing the PHA to be noncompliant with PHA policy 8-II.F and 24 CFR 982.406(e)(5).
Additionally, one tenant failed inspection in October 2023 before failing a subsequent reinspection in December 2023. No further action was taken by the PHA, and the case was closed without resolving the deficiencies that caused the inspections to fail leading to noncompliance with 24 CFR 982.406(e)(5) and PHA policy 8-II.F.
Cause
The delayed reinspection’s and mistakenly closed inspection were due to constraints on resources and a change in the system utilized by the authority to administer the program during the year.
Effect or potential effect
The PHA did not perform necessary procedures to enforce owner and/or family obligations to correct deficiencies, which if unresolved, could lead to housing assistance payments to either party which should have been abated.
Questioned costs
None
Context
Sixty inspections requiring reinspection were selected for testing, eighteen were found to be completed after the required reinspection date. Late reinspection’s ranged from 1 day late to over a year late. One of the failed re-inspections cases was closed by management prior to resolution of identified deficiencies. None of the 60 samples selected were categorized as “life threatening”.
Identification as a repeat finding if applicable
2023-008
Recommendation
We recommend the Authority enhance internal controls over the timeliness and completeness of its the housing quality standard enforcement procedures.
Views of responsible officials and planned corrective actions
The HACLB acknowledges the importance of timely reinspections to ensure compliance with Housing Quality Standards (HQS) and has taken concrete steps to strengthen its internal controls and enforcement mechanisms. To strengthen compliance and reduce delays, HACLB implemented an enhanced reinspection scheduling process in December 2024, using its MRI housing software to automatically schedule reinspections within the 30-day remediation period. The system also tracks extension requests and approvals, while staff regularly monitor system-generated reports to ensure timely follow-up and adherence to HUD standards. These improvements are designed to ensure that repairs are verified within the required timeframe, increase program compliance, and improve the overall quality of housing for HCV participants. HACLB is committed to ongoing monitoring and refinement of this process to ensure continuous improvement.
Finding Number: 2024-006
Finding Title: Internal controls Over Compliance Participants Reexaminations, Housing Assistance Payments and Related Reporting
Compliance Requirement(s): Special Tests – Housing Assistance Payment, Reporting, Allowed and Unallowed Costs
Classification: Material Weakness
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation
Allowable Costs Principles ; Activities Allowed and Unallowed; Eligibility
§ 982.201 Eligibility and targeting.
(3) The annual income (gross income) of an applicant family is used both for determination of income-eligibility under paragraph (b)(1) of this section and for targeting under paragraph (b)(2)(i) of this section. In determining annual income of an applicant family that includes a person with disabilities, the determination must include the disallowance of increase in annual income as provided in 24 CFR 5.617, if applicable.
(4) The applicable income limit for issuance of a voucher when a family is selected for the program is the highest income limit (for the family size) for areas in the PHA jurisdiction. The applicable income limit for admission to the program is the income limit for the area where the family is initially assisted in the program. At admission, the family may only use the voucher to rent a unit in an area where the family is income eligible.
Housing Assistance Payments
(e) Effective date of reexamination.
(1) The PHA must adopt policies consistent with this section prescribing how to determine the effective date of a change in the housing assistance payment resulting from an interim redetermination.
(2) At the effective date of a regular or interim reexamination, the PHA must make appropriate adjustments in the housing assistance payment in accordance with § 982.505.
(f) Accuracy of family income data. The PHA must establish procedures that are appropriate and necessary to assure that income data provided by applicant or participant families is complete and accurate. The PHA will not be considered out of compliance with the requirements in this section solely due to de minimis errors in calculating family income but is still obligated to correct errors once the PHA becomes aware of the errors. A de minimis error is an error where the PHA determination of family income deviates from the correct income determination by no more than $30 per month in monthly adjusted income ($360 in annual adjusted income).
Reporting
24CFR982.516(d) Family reporting of change. The PHA must adopt policies consistent with this section prescribing when and under what conditions the family must report a change in family income or composition.
HUD collects Tenant data to understand demographic, family profile, income, and housing information for participants in the Public Housing, Section 8 Housing Choice Voucher, Section 8 Project Based Certificate, Section 8 Moderate Rehabilitation, and Moving to Work Demonstration programs. This data also allows HUD to monitor the performance of programs and the performance of public housing agencies that administer the programs.
24 CFR Part 908 and 24 CFR section 982.158 The HUD-50058, Family Report (OMB No. 2577-0083) is required to be submitted by the PHA electronically to HUD each time the PHA completes an issuance, admission, annual reexamination, interim reexamination, portability move-in, expiration, or other change of unit for a family. The PHA must also submit the Family Report when a family ends participation in the program or moves out of the PHA’s jurisdiction under portability.
2 CFR 200 SUBPART D – POST FEDERAL AWARD REQUIREMENTS
2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The Public Housing Authority (PHA) of the City of Long Beach did not have procedures implemented for a secondary review during the process of income tenant income reexamination. Insufficient internal controls around reexaminations of income could lead noncompliance with Eligibility, Reporting, Housing assistance payment, and expenditure allowability requirements.
Cause
The PHA did not have control procedures in place for a secondary review on income reexaminations but is in the process of implementing a control which was not in place for the fiscal year under audit due to understaffing.
Effect or potential effect
Insufficient controls over the reexamination process could lead to ineligible participants in the program, housing assistance payments that are either incorrect or to ineligible participants, and inaccurate reporting to HUD.
Questioned costs
None
Context
We tested 62 reexaminations, none of which included a secondary review.
Identification as a repeat finding if applicable
2023-009
Recommendation
We recommend the PHA establish a secondary review over the reexamination of income of program participants.
Views of responsible officials and planned corrective actions
While HUD does not mandate a secondary review of files or allocate additional funding for such activities, HACLB recognizes the critical importance of accurate participant data, timely housing assistance payments, and compliance with HUD reporting requirements. HACLB has established and continues to enhance a system of internal controls to ensure program integrity and compliance. HACLB leverages its MRI housing management software to automate data validation and error detection in alignment with HUD’s PIC requirements, ensuring accurate and compliant submissions. The system flags validation errors for correction before transmission, while additional oversight through the PIC Error Dashboard, SEMAP evaluations, and internal file reviews supports ongoing quality control. Errors identified through these processes are used for staff training and performance improvement, with new Housing Specialists’ work closely monitored to uphold accuracy and program integrity. With the utilization of MRI housing management software and PIC systems, enhanced quality control processes, ongoing staff training, and proactive monitoring, HACLB is confident in its ability to maintain strong internal controls, ensure compliance with HUD requirements, and safeguard program integrity.
Finding Number: 2024-006
Finding Title: Internal controls Over Compliance Participants Reexaminations, Housing Assistance Payments and Related Reporting
Compliance Requirement(s): Special Tests – Housing Assistance Payment, Reporting, Allowed and Unallowed Costs
Classification: Material Weakness
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation
Allowable Costs Principles ; Activities Allowed and Unallowed; Eligibility
§ 982.201 Eligibility and targeting.
(3) The annual income (gross income) of an applicant family is used both for determination of income-eligibility under paragraph (b)(1) of this section and for targeting under paragraph (b)(2)(i) of this section. In determining annual income of an applicant family that includes a person with disabilities, the determination must include the disallowance of increase in annual income as provided in 24 CFR 5.617, if applicable.
(4) The applicable income limit for issuance of a voucher when a family is selected for the program is the highest income limit (for the family size) for areas in the PHA jurisdiction. The applicable income limit for admission to the program is the income limit for the area where the family is initially assisted in the program. At admission, the family may only use the voucher to rent a unit in an area where the family is income eligible.
Housing Assistance Payments
(e) Effective date of reexamination.
(1) The PHA must adopt policies consistent with this section prescribing how to determine the effective date of a change in the housing assistance payment resulting from an interim redetermination.
(2) At the effective date of a regular or interim reexamination, the PHA must make appropriate adjustments in the housing assistance payment in accordance with § 982.505.
(f) Accuracy of family income data. The PHA must establish procedures that are appropriate and necessary to assure that income data provided by applicant or participant families is complete and accurate. The PHA will not be considered out of compliance with the requirements in this section solely due to de minimis errors in calculating family income but is still obligated to correct errors once the PHA becomes aware of the errors. A de minimis error is an error where the PHA determination of family income deviates from the correct income determination by no more than $30 per month in monthly adjusted income ($360 in annual adjusted income).
Reporting
24CFR982.516(d) Family reporting of change. The PHA must adopt policies consistent with this section prescribing when and under what conditions the family must report a change in family income or composition.
HUD collects Tenant data to understand demographic, family profile, income, and housing information for participants in the Public Housing, Section 8 Housing Choice Voucher, Section 8 Project Based Certificate, Section 8 Moderate Rehabilitation, and Moving to Work Demonstration programs. This data also allows HUD to monitor the performance of programs and the performance of public housing agencies that administer the programs.
24 CFR Part 908 and 24 CFR section 982.158 The HUD-50058, Family Report (OMB No. 2577-0083) is required to be submitted by the PHA electronically to HUD each time the PHA completes an issuance, admission, annual reexamination, interim reexamination, portability move-in, expiration, or other change of unit for a family. The PHA must also submit the Family Report when a family ends participation in the program or moves out of the PHA’s jurisdiction under portability.
2 CFR 200 SUBPART D – POST FEDERAL AWARD REQUIREMENTS
2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The Public Housing Authority (PHA) of the City of Long Beach did not have procedures implemented for a secondary review during the process of income tenant income reexamination. Insufficient internal controls around reexaminations of income could lead noncompliance with Eligibility, Reporting, Housing assistance payment, and expenditure allowability requirements.
Cause
The PHA did not have control procedures in place for a secondary review on income reexaminations but is in the process of implementing a control which was not in place for the fiscal year under audit due to understaffing.
Effect or potential effect
Insufficient controls over the reexamination process could lead to ineligible participants in the program, housing assistance payments that are either incorrect or to ineligible participants, and inaccurate reporting to HUD.
Questioned costs
None
Context
We tested 62 reexaminations, none of which included a secondary review.
Identification as a repeat finding if applicable
2023-009
Recommendation
We recommend the PHA establish a secondary review over the reexamination of income of program participants.
Views of responsible officials and planned corrective actions
While HUD does not mandate a secondary review of files or allocate additional funding for such activities, HACLB recognizes the critical importance of accurate participant data, timely housing assistance payments, and compliance with HUD reporting requirements. HACLB has established and continues to enhance a system of internal controls to ensure program integrity and compliance. HACLB leverages its MRI housing management software to automate data validation and error detection in alignment with HUD’s PIC requirements, ensuring accurate and compliant submissions. The system flags validation errors for correction before transmission, while additional oversight through the PIC Error Dashboard, SEMAP evaluations, and internal file reviews supports ongoing quality control. Errors identified through these processes are used for staff training and performance improvement, with new Housing Specialists’ work closely monitored to uphold accuracy and program integrity. With the utilization of MRI housing management software and PIC systems, enhanced quality control processes, ongoing staff training, and proactive monitoring, HACLB is confident in its ability to maintain strong internal controls, ensure compliance with HUD requirements, and safeguard program integrity.
Finding Number: 2024-007
Finding Title: Internal Controls Over the Listing of Housing Quality Control Inspections
Compliance Requirement(s): Special Tests – Housing Quality Control Inspections
Classification: Significant Deficiency
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation
24 CFR 985.2 “PHA's quality control sample” PHA's quality control sample means an annual sample of files or records drawn in an unbiased manner and reviewed by an PHA supervisor (or by another qualified person other than the person who performed the original work) to determine if the work documented in the files or records conforms to program requirements. The minimum size of the PHA's quality control sample is as follows:
Universe Minimum
Minimum number of files or records to be sampled
50 or less 5
51-600 5 plus 1 for each 50 (or part of 50) over 50
601-2000 16 plus 1 for each 100 (or part of 100) over 600
Over 2000 30 plus 1 for each 200 (or part of 200) over 2000
A PHA supervisor or other qualified person must reinspect a sample of units under contract during the last PHA fiscal year. The guidelines included in Table 10-1 determine the required sample size. The universe referred to in table is the number of units under HAP contract at the end of the PHA’s previous fiscal year
Condition
The PHA was unable to provide a complete listing of Housing Quality Control, therefore we were unable to substantiate that the required number of quality control inspections were performed in compliance with program requirements.
Cause
PHA changed IT systems during the fiscal year under audit and it was caused by an IT system issue not being able to export the correct population for our testing
Effect or potential effect
The PHA could be out of compliance with requirements to perform a minimum number of housing quality control inspections.
Questioned costs
None
Context
The PHA provided a listing of 61 inspections which were classified as Quality Control Inspections. 7 were selected for testing, 2 of the selections were found not to be quality control inspections. Upon further inquiry it was identified that the listing was not accurate. Due to IT System changes occurring during the fiscal year under audit the PHA was unable to provide a corrected listing. The PHA had roughly 6700 units at the end of the prior fiscal year receiving housing assistance payments under the program, based on 24 CFR 985.2 the required number of quality control inspections the PHA were required to perform in the fiscal year under audit would be roughly 54 housing quality control inspections. Due to the inability to provide a complete listing we were unable to verify whether the PHA performed the required amount of quality control inspections.
Identification as a repeat finding if applicable
N/A
Recommendation
We recommend the PHA strengthen procedures to ensure the listing of housing quality control inspections is maintained accurately ensuring completeness.
Views of responsible officials and planned corrective actions
The legacy software system had limited functionality, which restricted our ability to generate the requested reports effectively. The HACLB recognizes the importance of maintaining accurate and timely records of Housing Quality Control inspections to ensure compliance with HUD regulations and to support program oversight. HACLB has implemented the MRI housing management software, which enhances functionality and reporting compared to the previous system, particularly benefiting the Inspections Team with advanced tools for organizing, scheduling, and tracking Quality Control inspections. The system’s reporting capabilities enable timely and detailed inspection listings, supporting compliance with HUD requirements for scheduling, documentation, and follow-up. The upgraded system has already begun to improve operational oversight and internal controls related to Housing Quality Control inspections. HACLB expects these enhancements to strengthen compliance efforts and promote better data accuracy and reporting transparency moving forward.
Finding Number: 2024-007
Finding Title: Internal Controls Over the Listing of Housing Quality Control Inspections
Compliance Requirement(s): Special Tests – Housing Quality Control Inspections
Classification: Significant Deficiency
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation
24 CFR 985.2 “PHA's quality control sample” PHA's quality control sample means an annual sample of files or records drawn in an unbiased manner and reviewed by an PHA supervisor (or by another qualified person other than the person who performed the original work) to determine if the work documented in the files or records conforms to program requirements. The minimum size of the PHA's quality control sample is as follows:
Universe Minimum
Minimum number of files or records to be sampled
50 or less 5
51-600 5 plus 1 for each 50 (or part of 50) over 50
601-2000 16 plus 1 for each 100 (or part of 100) over 600
Over 2000 30 plus 1 for each 200 (or part of 200) over 2000
A PHA supervisor or other qualified person must reinspect a sample of units under contract during the last PHA fiscal year. The guidelines included in Table 10-1 determine the required sample size. The universe referred to in table is the number of units under HAP contract at the end of the PHA’s previous fiscal year
Condition
The PHA was unable to provide a complete listing of Housing Quality Control, therefore we were unable to substantiate that the required number of quality control inspections were performed in compliance with program requirements.
Cause
PHA changed IT systems during the fiscal year under audit and it was caused by an IT system issue not being able to export the correct population for our testing
Effect or potential effect
The PHA could be out of compliance with requirements to perform a minimum number of housing quality control inspections.
Questioned costs
None
Context
The PHA provided a listing of 61 inspections which were classified as Quality Control Inspections. 7 were selected for testing, 2 of the selections were found not to be quality control inspections. Upon further inquiry it was identified that the listing was not accurate. Due to IT System changes occurring during the fiscal year under audit the PHA was unable to provide a corrected listing. The PHA had roughly 6700 units at the end of the prior fiscal year receiving housing assistance payments under the program, based on 24 CFR 985.2 the required number of quality control inspections the PHA were required to perform in the fiscal year under audit would be roughly 54 housing quality control inspections. Due to the inability to provide a complete listing we were unable to verify whether the PHA performed the required amount of quality control inspections.
Identification as a repeat finding if applicable
N/A
Recommendation
We recommend the PHA strengthen procedures to ensure the listing of housing quality control inspections is maintained accurately ensuring completeness.
Views of responsible officials and planned corrective actions
The legacy software system had limited functionality, which restricted our ability to generate the requested reports effectively. The HACLB recognizes the importance of maintaining accurate and timely records of Housing Quality Control inspections to ensure compliance with HUD regulations and to support program oversight. HACLB has implemented the MRI housing management software, which enhances functionality and reporting compared to the previous system, particularly benefiting the Inspections Team with advanced tools for organizing, scheduling, and tracking Quality Control inspections. The system’s reporting capabilities enable timely and detailed inspection listings, supporting compliance with HUD requirements for scheduling, documentation, and follow-up. The upgraded system has already begun to improve operational oversight and internal controls related to Housing Quality Control inspections. HACLB expects these enhancements to strengthen compliance efforts and promote better data accuracy and reporting transparency moving forward.
Finding Number: 2024-001
Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion.
(1) The affordability requirements:
(i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership.
(ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and
(iii) Must be recorded in accordance with State recordation laws.
(2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability.
(3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property.
(4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b).
(h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1).
24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations
(1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h):
(i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family.
(ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request.
(iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit.
Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal
entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal
statutes, regulations and the terms and conditions of the federal award.
Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and
program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals.
Cause
The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information.
Effect or potential effect
The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria.
Questioned costs
None
Context
The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances.
Identification as a repeat finding if applicable
2023-002
Recommendation
We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements.
Views of responsible officials and planned corrective actions
The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway.
The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001
Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion.
(1) The affordability requirements:
(i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership.
(ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and
(iii) Must be recorded in accordance with State recordation laws.
(2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability.
(3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property.
(4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b).
(h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1).
24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations
(1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h):
(i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family.
(ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request.
(iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit.
Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal
entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal
statutes, regulations and the terms and conditions of the federal award.
Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and
program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals.
Cause
The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information.
Effect or potential effect
The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria.
Questioned costs
None
Context
The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances.
Identification as a repeat finding if applicable
2023-002
Recommendation
We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements.
Views of responsible officials and planned corrective actions
The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway.
The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001
Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion.
(1) The affordability requirements:
(i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership.
(ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and
(iii) Must be recorded in accordance with State recordation laws.
(2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability.
(3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property.
(4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b).
(h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1).
24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations
(1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h):
(i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family.
(ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request.
(iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit.
Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal
entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal
statutes, regulations and the terms and conditions of the federal award.
Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and
program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals.
Cause
The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information.
Effect or potential effect
The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria.
Questioned costs
None
Context
The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances.
Identification as a repeat finding if applicable
2023-002
Recommendation
We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements.
Views of responsible officials and planned corrective actions
The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway.
The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001
Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion.
(1) The affordability requirements:
(i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership.
(ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and
(iii) Must be recorded in accordance with State recordation laws.
(2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability.
(3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property.
(4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b).
(h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1).
24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations
(1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h):
(i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family.
(ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request.
(iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit.
Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal
entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal
statutes, regulations and the terms and conditions of the federal award.
Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and
program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals.
Cause
The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information.
Effect or potential effect
The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria.
Questioned costs
None
Context
The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances.
Identification as a repeat finding if applicable
2023-002
Recommendation
We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements.
Views of responsible officials and planned corrective actions
The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway.
The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001
Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion.
(1) The affordability requirements:
(i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership.
(ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and
(iii) Must be recorded in accordance with State recordation laws.
(2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability.
(3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property.
(4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b).
(h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1).
24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations
(1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h):
(i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family.
(ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request.
(iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit.
Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal
entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal
statutes, regulations and the terms and conditions of the federal award.
Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and
program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals.
Cause
The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information.
Effect or potential effect
The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria.
Questioned costs
None
Context
The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances.
Identification as a repeat finding if applicable
2023-002
Recommendation
We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements.
Views of responsible officials and planned corrective actions
The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway.
The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-001
Finding Title : Internal Controls and Compliance over Eligibility for Multifamily Housing Projects
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
24 CFR92.252 Qualification as affordable housing: Rental housing - (e) Periods of affordability. The HOME-assisted units must meet the affordability requirements for not less than the applicable period, beginning after project completion.
(1) The affordability requirements:
(i) Apply without regard to the term of any loan or mortgage, repayment of the HOME investment, or the transfer of ownership.
(ii) Must be imposed by a deed restriction, a covenant running with the land, an agreement restricting the use of the property, or other mechanisms approved by HUD and must give the participating jurisdiction the right to require specific performance (except that the participating jurisdiction may provide that the affordability restrictions may terminate upon foreclosure or transfer in lieu of foreclosure); and
(iii) Must be recorded in accordance with State recordation laws.
(2) The participating jurisdiction may use purchase options, rights of first refusal or other preemptive rights to purchase the housing before foreclosure or deed in lieu of foreclosure to preserve affordability.
(3) The affordability restrictions shall be revived according to the original terms if, during the original affordability period, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property.
(4) The termination of the restrictions on the project does not terminate the participating jurisdiction's repayment obligation under § 92.503(b).
(h) Tenant income. The income of each tenant must be determined initially in accordance with §92.203(a)(1)(i). In addition, each year during the period of affordability the project owner must re-examine each tenant's annual income in accordance with one of the options in § 92.203 selected by the participating jurisdiction. An owner of a multifamily project with an affordability period of ten years or more who re-examines tenant's annual income through a statement and certification in accordance with § 92.203(b)(1)(ii), must examine the income of each tenant, in accordance with § 92.203(b)(1)(i), every sixth year of the affordability period, except that, for units that receive Federal or State project-based rental subsidy, the owner must accept the income determination pursuant to § 92.203(a)(1).
24 CFR 92.203 Income determinations - (b) Required Documentation for Annual Income Calculations
(1) For families who are tenants in HOME-assisted housing and not receiving HOME tenant-based rental assistance, the participating jurisdiction must initially determine annual income using the method in paragraph (b)(1)(i) of this section. For subsequent income determinations during the period of affordability, the participating jurisdiction may use any one of the following methods in accordance with §92.252(h):
(i) Examine at least two months of source documents evidencing annual income (e.g., wage statement, interest statement, and unemployment compensation statement) for the family.
(ii) Obtain from the family a written statement of the amount of the family's annual income and family size, along with a certification that the information is complete and accurate. The certification must state that the family will provide source documents upon request.
(iii) Obtain a written statement from the administrator of a government program under which the family receives benefits, and which examines each year the annual income of the family. The statement must indicate the tenant's family size and state the amount of the family's annual income; or alternatively, the statement must indicate the current dollar limit for very low- or low-income families for the family size of the tenant and state that the tenant's annual income does not exceed this limit.
Title 45 US Code of Federal Regulations Part 75 (45 CFR part 75), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, section 75.303 also states that nonfederal
entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal
statutes, regulations and the terms and conditions of the federal award.
Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations and
program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The City was unable to collect documents from the property manager to ensure that individuals who occupied HOME assisted units were eligible tenants for four of the eight properties selected for testing from a population of seventy-four properties. The four properties for which documents could not be collected included a total of forty-two units, all related to the same development group. The City was unable to obtain the necessary documentation from the development groups property manager to verify household income for each tenant. As a result, it could not determine compliance with income eligibility, maximum rent limits, or minimum set-aside requirements for units designated for eligible individuals.
Cause
The City’s attempts to contact the development group for these properties have been unsuccessful, the city was therefore unable to obtain the required documents to assess each family's income which is needed for determining income eligibility, compliance with maximum rent requirements or minimum set-aside requirements for units designated for eligible individuals. The City has made continued attempts to contact the development group, though they have not yet been successful in obtaining the information.
Effect or potential effect
The lack of information available from the development group has meant the City is without the information needed to evaluate the properties and their related tenants for compliance with HUD eligibility criteria.
Questioned costs
None
Context
The City had eighteen outstanding loans with this development group for Multi Family Construction projects as of the fiscal year end, carrying a balance of $9.5m. This represents 12% of the 154 HOME Loans and their related $79.3m outstanding balances.
Identification as a repeat finding if applicable
2023-002
Recommendation
We recommend the City continue its attempts to obtain the necessary documents from the developer and exercising its rights to enforce compliance through the terms of its contractual arrangement when necessary. Additionally, we recommend the City enhance policies and/or procedure for addressing unresponsiveness among developers to establish a structure for clear communication, expectations, an escalation process, and consistent documentation requirements.
Views of responsible officials and planned corrective actions
The City continues to monitor HOME-assisted units to ensure eligibility with income requirements. Since the last audit period, the developer has not yet complied with multiple requests from the City to provide missing documentation; however, City staff continues outreach and has communicated shortcomings with said developer on the dates mentioned in FY 23 corrective action plan and also July 2, 2024, July 16, 2024, July 18, 2024, September 3, 2024, September 10, 2024, September 11, 2024, September 18, 2024, October 30, 2024, November 4, 2024, and December 2, 2024. The City informed the developer that continued non-compliance will result in escalation to the City Attorney, and escalation is currently underway.
The City has updated procedures to add layers of review and increase frequency of communication with developers to ensure timely submission and efforts to obtain necessary documents. The City is confident that these measures will demonstrate compliance with eligibility requirements and resolve the auditor’s concerns.
Finding Number: 2024-002
Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections
Compliance Requirement(s): Special Tests – Housing Quality Standards
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
§ 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements:
…
(iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units.
HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected?
A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows:
Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually.
Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule.
Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards.
The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209.
2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented.
Condition
The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late.
In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251.
Cause
The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year.
Effect or potential effect
Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process.
Questioned costs
None
Context
The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log.
Identification as a repeat finding if applicable
2023-003
Recommendation
We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections.
Views of responsible officials and planned corrective actions
Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections.
The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays.
The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002
Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections
Compliance Requirement(s): Special Tests – Housing Quality Standards
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
§ 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements:
…
(iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units.
HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected?
A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows:
Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually.
Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule.
Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards.
The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209.
2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented.
Condition
The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late.
In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251.
Cause
The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year.
Effect or potential effect
Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process.
Questioned costs
None
Context
The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log.
Identification as a repeat finding if applicable
2023-003
Recommendation
We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections.
Views of responsible officials and planned corrective actions
Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections.
The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays.
The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002
Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections
Compliance Requirement(s): Special Tests – Housing Quality Standards
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
§ 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements:
…
(iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units.
HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected?
A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows:
Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually.
Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule.
Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards.
The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209.
2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented.
Condition
The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late.
In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251.
Cause
The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year.
Effect or potential effect
Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process.
Questioned costs
None
Context
The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log.
Identification as a repeat finding if applicable
2023-003
Recommendation
We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections.
Views of responsible officials and planned corrective actions
Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections.
The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays.
The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002
Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections
Compliance Requirement(s): Special Tests – Housing Quality Standards
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
§ 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements:
…
(iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units.
HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected?
A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows:
Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually.
Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule.
Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards.
The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209.
2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented.
Condition
The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late.
In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251.
Cause
The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year.
Effect or potential effect
Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process.
Questioned costs
None
Context
The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log.
Identification as a repeat finding if applicable
2023-003
Recommendation
We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections.
Views of responsible officials and planned corrective actions
Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections.
The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays.
The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002
Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections
Compliance Requirement(s): Special Tests – Housing Quality Standards
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
§ 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements:
…
(iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units.
HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected?
A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows:
Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually.
Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule.
Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards.
The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209.
2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented.
Condition
The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late.
In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251.
Cause
The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year.
Effect or potential effect
Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process.
Questioned costs
None
Context
The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log.
Identification as a repeat finding if applicable
2023-003
Recommendation
We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections.
Views of responsible officials and planned corrective actions
Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections.
The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays.
The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-002
Finding Title: Internal Controls and Compliance regarding the timeliness of Housing Quality Standards Inspections
Compliance Requirement(s): Special Tests – Housing Quality Standards
Classification: Material Weakness
Programs: Home Investment Partnerships Program
ALN #: 14.239
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development
Federal Award Numbers: M20-MC060518, M21-MP060518, M21-MC060518, M22-MC060518, M23-MC060518
Federal Award Year: 2020, 2021, 2022, 2023
Criteria or specific requirement (including statutory, regulatory, or other citation)
§ 92.251 Property standards and inspections - (3) Ongoing inspections of HOME-assisted rental housing. During the period of affordability, the participating jurisdiction must perform on-site inspections of HOME-assisted rental housing to determine compliance with the property standards in paragraph (f)(1) of this section and to verify the information submitted by owners in accordance with the requirements of § 92.252. The participating jurisdiction must perform inspections in accordance with its established inspection procedures. These procedures, at minimum, must include the following requirements:
…
(iii) Units inspected. Inspections must be based on a random sample of the HOME-assisted units in the project with a mix of unit sizes (e.g., a mix of one-bedroom, two-bedroom, and three-bedroom units) in accordance with the chart contained in this paragraph. All inspections must include the inspectable areas for each building containing HOME-assisted units. For projects with one-to-four HOME-assisted units, the participating jurisdiction must inspect 100 percent of the HOME-assisted units and the inspectable areas for each building with HOME-assisted units.
HOMEfires - Vol. 3 No. 2, February 2001 - Q: The HOME Final Rule states that each Participating Jurisdiction must perform on-site inspections of HOME-assisted rental housing. How frequently should these inspections be performed? How should each PJ determine the number of units that must be inspected?
A: During the affordability period, HOME-assisted rental projects must be inspected regularly to ensure that they continue to meet or exceed the property standards outlined in 24 CFR 92.251. Section 92.504 (d)(1) of the HOME final rule establishes a schedule for on-site inspections based on the total number of units in the project. The schedule is as follows:
Projects containing one to four units must be inspected every three years Five-to-twenty-five-unit projects must be inspected every two years; and Projects with twenty-six or more units must be inspected annually.
Please note that it is the total number of units in the project rather than the number of HOME-assisted units that determines the monitoring schedule.
Section 92.504 (d)(1) also states that the inspections must be based on "a sufficient sample" of units. The Office of Affordable Housing has recommended that each PJ adopt the standard practice of inspecting fifteen to twenty percent of the HOME-assisted units in a project, and a minimum of one unit in every building. For identified in sample units, the PJ should inspect the remaining units to ensure that all HOME-assisted units comply with established property standards.
The participating jurisdiction must establish written inspection procedures. The procedures must include detailed inspection checklists, a description of how and by whom inspections will be carried out, and procedures for training and certifying qualified inspectors. For ongoing property inspections, the procedures must also describe how frequently the property will be inspected, consistent with this section and § 92.209.
2 CFR 200.303 - Additionally, non-Federal entities receiving Federal awards are required to establish and maintain internal controls designated to ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure housing quality standards are appropriately performed and documented.
Condition
The City maintains a log to track housing quality standards inspections. The log lists all the projects, properties, total units, HOME units, required frequency of inspections, upcoming inspection due dates, and details on inspections including the unit number, date, and other details. Our testing included eight of a total seventy-four properties, none of which were inspected late.
In reviewing the log, forty-two properties with 455 associated HOME units had either completed inspections late based on their required inspection date or were not yet completed and past their required inspection due date. Additionally 10 properties did not comply with HUDs 20% requirements for sampling with incorrect inspection frequency requirements listed in the log, and another 9 items did not meet the required sampling sizes as noted in Table 1 Paragraph (f)(3)(iii)—minimum Inspection Sample Size for Home Rental Housing Project in 24 CFR 92.251.
Cause
The City is working through a backlog of inspections due to staffing constraints which occurred in the prior year that caused a knock-on effect to inspections in the current year.
Effect or potential effect
Late or delayed inspections could lead to unidentified issues with housing leading to increased costs and non-compliance with HUD requirements related to the inspection process.
Questioned costs
None
Context
The City is currently responsible for seventy-four properties which include 1948 units, 1054 of which are HOME units. The City completed 227 inspections during the year per the log.
Identification as a repeat finding if applicable
2023-003
Recommendation
We recommend the City continue with its steps towards addressing resource constraints and implement a periodic review of the inspection log for accuracy, completeness and earlier identification of late inspections.
Views of responsible officials and planned corrective actions
Ensuring compliance with HUD requirements continues to be a central priority, and the City is actively enhancing our procedures to strengthen the Housing Quality Standards (HQS) process. The City is working to reduce the backlog of inspections by September 30, 2025, which requires additional effort in order to complete both the prior year inspections in addition to completing the current year inspections in a timely manner. To this end, the City has increased the number of properties inspected each fiscal year. For example, during the FY23 audit period, 204 inspections occurred. In the FY24 period, the number of inspections increased to 227. As of May 2025, the City has inspected 187 units and anticipates a total of 250 inspections will be completed by the end of FY25, thereby eliminating the current backlog and any late inspections.
The Community Development Department implemented more proactive measures, including hiring an in-house inspector and an active master inspection log to track and target upcoming inspections. These efforts have resulted in a more streamlined, data-informed approach to HQS compliance, as evidenced by a significant reduction in the inspection backlog. The master inspection log is also being leveraged to optimize inspection scheduling and ensure that the required HOME units per property are inspected as required. To reinforce this approach, the City instituted a structured, monthly review of the log to improve data accuracy, completeness, and early identification of potential delays.
The City is confident that these measures will demonstrate compliance with the HQS standards and resolve the auditor’s concerns.
Finding Number: 2024-003
Finding Title: Internal Controls and Compliance over the Timeliness of Housing Choice Voucher Participant Re-examination and Recertification
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation)
The PHA must examine family income and composition at least once every 12 months and adjust the tenant rent and housing assistance payment as necessary using the documentation. The Department of Housing and Urban Development (HUD) has provided a grace period of 2 months before they are reported as late.
§ 5.657 Section 8 project-based assistance programs: Reexamination of family income and composition.
(a) Applicability. This section states requirements for reexamination of family income and composition in the Section 8 project-based assistance programs, except for the moderate rehabilitation and the project-based voucher programs.
(b) Regular reexamination. The owner must conduct a reexamination and redetermination of family income and composition at least annually.
(c) Interim reexaminations.
(1) Generally. A family may request an interim reexamination of family income because of any changes since the last examination. The owner must conduct any interim reexamination within a reasonable time after the family request or when the owner becomes aware of an increase in family adjusted income under paragraph (c)(3) of this section. What qualifies as a “reasonable time” may vary based on the amount of time it takes to verify information, but such time generally should not exceed 30 days from the date a family reports changes in income to an owner.
(2) Decreases in the family's annual adjusted income. The owner may decline to conduct an interim reexamination of family income if the owner estimates that the family's adjusted income will decrease by an amount that is less than ten percent of the family's annual adjusted income (or a lower amount established by HUD through notice), or such lower threshold established by the owner.
(3) Increases in the family's annual adjusted income. The owner must conduct an interim reexamination of family income when the owner becomes aware that the family's adjusted income (as defined in § 5.611) has changed by an amount that the owner estimates will result in an increase of ten percent or more in annual adjusted income or such other amount established by HUD through notice, except.
(i) The owner may not consider any increase in the earned income of the family when estimating or calculating whether the family's adjusted income has increased, unless the family has previously received an interim reduction under paragraph (c)(1) of this section during the certification period; and (ii) The owner may choose not to conduct an interim reexamination in the last three months of a certification period.
(4) Policies on reporting changes in family income or composition. The owner must adopt policies consistent with this paragraph (c), prescribing when and under what conditions the family must report a change in family income or composition.
(5) Effective date of rent changes.
(i) If the family has reported a change in family income or composition in a timely manner according to the owner's policies, the owner must provide the family with 30 days advance notice of any rent increase, and such rent increase will be effective the first day of the month beginning after the end of that 30-day notice period. Rent decreases will be effective on the first day of the first month after the date of the actual change leading to the interim reexamination of family income.
(ii) If the family has failed to report a change in family income or composition in a timely manner according to the owner's policies, owners must implement any resulting rent increases retroactively to the first of the month following the date of the change leading to the interim reexamination of family income. Any resulting rent decrease must be implemented no later than the first rent period following completion of the reexamination. However, rent decreases may be applied retroactively at the discretion of the owner, in accordance with the owner's conditions as established in written policy, and subject to paragraph (c)(5)(iii) of this section.
(iii) A retroactive rent decrease may not be applied by the owner prior to the later of the first of the month following:
(A) The date of the change leading to the interim reexamination of family income; or
(B) The effective date of the family's most recent previous interim or annual reexamination (or initial examination if that was the family's last examination).
Condition
For 31 of 60 samples, the Authority did not re-examine eligible participants or redetermine family income on an annual basis (12 months). Of these 31, there were 12 samples completed within the 2-month grace period, before HUD considers the re-examination late for its purposes. The remaining 19 samples were not completed until after 14 months.
Cause
For the participants whose income was not re-examined during the fiscal year, it is due to the volume of participants within the HCV program in relation to the resources available to the Housing Authority of the City to administer the program.
Effect or potential effect
Delays in reviewing participant's eligibility status each 12-month period could lead to noncompliance with HUD regulations. Additionally, it could cause program resources to go to ineligible participants, which would result in unallowable cost to the program.
Questioned costs
None
Context
The Housing Authority of the City of Long Beach’s has 75 employees who are responsible for the administration of the programs over 7,800 participants, or over 100 Re-examinations per employee.
Identification as a repeat finding if applicable
2023-007
Recommendation
We recommend the City continue with its plan to address delays in the recertification processes through steps that are being taken to address resource constraints.
Views of responsible officials and planned corrective actions
The City of Long Beach Housing Authority (HACLB) acknowledges the audit finding and has implemented a comprehensive corrective action plan to address the timeliness of participant re-examinations and recertifications under the Housing Choice Vouchers Program (HCV). To improve program efficiency and compliance, HACLB has expanded staffing through the recruitment and training of new Housing Specialists and the hiring of key administrative officers, however the prolonged timeline for recruitment has resulted in operational challenges that impact overall efficiency, and there are still several supervisory positions that remain vacant after 10 months. HACLB also renewed a contract for support services to address the backlog of reexaminations and implemented a new housing software platform to enhance workflow management and productivity tracking. These combined efforts are expected to significantly reduce delays, enhance operational oversight, and support sustained compliance with HUD requirements. HACLB remains committed to continuously evaluating and improving its internal controls and procedures to ensure the timely completion of all HCV participant reexaminations and recertifications.
Finding Number: 2024-003
Finding Title: Internal Controls and Compliance over the Timeliness of Housing Choice Voucher Participant Re-examination and Recertification
Compliance Requirement(s): Eligibility
Classification: Material Weakness
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation)
The PHA must examine family income and composition at least once every 12 months and adjust the tenant rent and housing assistance payment as necessary using the documentation. The Department of Housing and Urban Development (HUD) has provided a grace period of 2 months before they are reported as late.
§ 5.657 Section 8 project-based assistance programs: Reexamination of family income and composition.
(a) Applicability. This section states requirements for reexamination of family income and composition in the Section 8 project-based assistance programs, except for the moderate rehabilitation and the project-based voucher programs.
(b) Regular reexamination. The owner must conduct a reexamination and redetermination of family income and composition at least annually.
(c) Interim reexaminations.
(1) Generally. A family may request an interim reexamination of family income because of any changes since the last examination. The owner must conduct any interim reexamination within a reasonable time after the family request or when the owner becomes aware of an increase in family adjusted income under paragraph (c)(3) of this section. What qualifies as a “reasonable time” may vary based on the amount of time it takes to verify information, but such time generally should not exceed 30 days from the date a family reports changes in income to an owner.
(2) Decreases in the family's annual adjusted income. The owner may decline to conduct an interim reexamination of family income if the owner estimates that the family's adjusted income will decrease by an amount that is less than ten percent of the family's annual adjusted income (or a lower amount established by HUD through notice), or such lower threshold established by the owner.
(3) Increases in the family's annual adjusted income. The owner must conduct an interim reexamination of family income when the owner becomes aware that the family's adjusted income (as defined in § 5.611) has changed by an amount that the owner estimates will result in an increase of ten percent or more in annual adjusted income or such other amount established by HUD through notice, except.
(i) The owner may not consider any increase in the earned income of the family when estimating or calculating whether the family's adjusted income has increased, unless the family has previously received an interim reduction under paragraph (c)(1) of this section during the certification period; and (ii) The owner may choose not to conduct an interim reexamination in the last three months of a certification period.
(4) Policies on reporting changes in family income or composition. The owner must adopt policies consistent with this paragraph (c), prescribing when and under what conditions the family must report a change in family income or composition.
(5) Effective date of rent changes.
(i) If the family has reported a change in family income or composition in a timely manner according to the owner's policies, the owner must provide the family with 30 days advance notice of any rent increase, and such rent increase will be effective the first day of the month beginning after the end of that 30-day notice period. Rent decreases will be effective on the first day of the first month after the date of the actual change leading to the interim reexamination of family income.
(ii) If the family has failed to report a change in family income or composition in a timely manner according to the owner's policies, owners must implement any resulting rent increases retroactively to the first of the month following the date of the change leading to the interim reexamination of family income. Any resulting rent decrease must be implemented no later than the first rent period following completion of the reexamination. However, rent decreases may be applied retroactively at the discretion of the owner, in accordance with the owner's conditions as established in written policy, and subject to paragraph (c)(5)(iii) of this section.
(iii) A retroactive rent decrease may not be applied by the owner prior to the later of the first of the month following:
(A) The date of the change leading to the interim reexamination of family income; or
(B) The effective date of the family's most recent previous interim or annual reexamination (or initial examination if that was the family's last examination).
Condition
For 31 of 60 samples, the Authority did not re-examine eligible participants or redetermine family income on an annual basis (12 months). Of these 31, there were 12 samples completed within the 2-month grace period, before HUD considers the re-examination late for its purposes. The remaining 19 samples were not completed until after 14 months.
Cause
For the participants whose income was not re-examined during the fiscal year, it is due to the volume of participants within the HCV program in relation to the resources available to the Housing Authority of the City to administer the program.
Effect or potential effect
Delays in reviewing participant's eligibility status each 12-month period could lead to noncompliance with HUD regulations. Additionally, it could cause program resources to go to ineligible participants, which would result in unallowable cost to the program.
Questioned costs
None
Context
The Housing Authority of the City of Long Beach’s has 75 employees who are responsible for the administration of the programs over 7,800 participants, or over 100 Re-examinations per employee.
Identification as a repeat finding if applicable
2023-007
Recommendation
We recommend the City continue with its plan to address delays in the recertification processes through steps that are being taken to address resource constraints.
Views of responsible officials and planned corrective actions
The City of Long Beach Housing Authority (HACLB) acknowledges the audit finding and has implemented a comprehensive corrective action plan to address the timeliness of participant re-examinations and recertifications under the Housing Choice Vouchers Program (HCV). To improve program efficiency and compliance, HACLB has expanded staffing through the recruitment and training of new Housing Specialists and the hiring of key administrative officers, however the prolonged timeline for recruitment has resulted in operational challenges that impact overall efficiency, and there are still several supervisory positions that remain vacant after 10 months. HACLB also renewed a contract for support services to address the backlog of reexaminations and implemented a new housing software platform to enhance workflow management and productivity tracking. These combined efforts are expected to significantly reduce delays, enhance operational oversight, and support sustained compliance with HUD requirements. HACLB remains committed to continuously evaluating and improving its internal controls and procedures to ensure the timely completion of all HCV participant reexaminations and recertifications.
Finding Number: 2024-004
Finding Title: Internal Controls and Compliance Over Federally Funded Equipment
Compliance Requirement(s): Equipment and Real Property Management
Classification: Significant Deficiency
Programs: Port Security Grant Program
ALN #: 97.056
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Homeland Security
Federal Award Numbers: EMW-2021-PU-00463-S01
Federal Award Year: 2021
Criteria or specific requirement (including statutory, regulatory, or other citation
§ 200.313 Equipment. See also § 200.439.
(a) Title. Title to equipment acquired under the Federal award will vest upon acquisition in the recipient or subrecipient subject to the conditions of this section. This title must be a conditional title unless a Federal statute specifically authorizes the Federal agency to vest title in the recipient or subrecipient without further responsibility to the Federal Government (and the Federal agency elects to do so). A conditional title means a clear title is withheld by the Federal agency until conditions and requirements specified in the terms and conditions of a Federal award have been fulfilled. Title for equipment vested in a recipient or subrecipient is subject to the following conditions:
(1) Use the equipment for the authorized purposes of the project during the period of performance or until the property is no longer needed for the purposes of the project.
(2) While the equipment is being used for the originally authorized purpose, the recipient or subrecipient must not dispose of or encumber its title or other interests without the approval of the Federal agency or pass-through entity.
(3) Use and dispose of the property in accordance with paragraphs (b), (c), and (e) of this section.
(b) General. A State must use, manage and dispose of equipment acquired under a Federal award in accordance with State laws and procedures. Indian Tribes must use, manage, and dispose of equipment acquired under a Federal award in accordance with tribal laws and procedures. If such laws and procedures do not exist, Indian Tribes must follow the guidance in this section. Other recipients and subrecipients, including subrecipients of a State or Indian Tribe, must follow paragraphs (c) through (e) of this section.
(c) Use.
(1) The recipient or subrecipient must use equipment for the project or program for which it was acquired and for as long as needed, whether or not the project or program continues to be supported by the Federal award. The recipient or subrecipient must not encumber the equipment without prior approval of the Federal agency or pass-through entity. The Federal agency may require the submission of the applicable common forms for reporting on equipment. When no longer needed for the original project or program, the equipment may be used in other activities in the following order of priority:
(i) Activities under other Federal awards from the Federal agency that funded the original program or project; then
(ii) Activities under Federal awards from other Federal agencies. These activities include consolidated equipment for information technology systems.
(2) During the time that equipment is used on the project or program for which it was acquired, the recipient or subrecipient must also make the equipment available for use on other programs or projects supported by the Federal Government, provided that such use will not interfere with the purpose for which it was originally acquired. First preference for other use of the equipment must be given to other programs or projects supported by the Federal agency that financed the equipment. Second preference must be given to programs or projects under Federal awards from other Federal agencies. Use for non-federally funded projects is also permissible, provided such use will not interfere with the purpose for which it was originally acquired. The recipient or subrecipient should consider charging user fees as appropriate.
(3) Notwithstanding the encouragement in § 200.307 to earn program income, the recipient or subrecipient must not use equipment acquired with the Federal award to provide services for a fee that is less than a private company would charge for similar services unless specifically authorized by Federal statute. This restriction is effective as long as the Federal Government retains an interest in the equipment.
(4) When acquiring replacement equipment, the recipient or subrecipient may either trade-in or sell the equipment and use the proceeds to offset the cost of the replacement equipment.
(d) Management requirements. Regardless of whether equipment is acquired in part or its entirety under the Federal award, the recipient or subrecipient must manage equipment (including replacement equipment) utilizing procedures that meet the following requirements:
(1) Property records must include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date, the cost of the property, the percentage of the Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property. The recipient and subrecipient are responsible for maintaining and updating property records when there is a change in the status of the property.
(2) A physical inventory of the property must be conducted, and the results must be reconciled with the property records at least once every two years.
(3) A control system must be in place to ensure safeguards for preventing property loss, damage, or theft. Any loss, damage, or theft of equipment must be investigated. The recipient or subrecipient must notify the Federal agency or pass-through entity of any loss, damage, or theft of equipment that will have an impact on the program.
(4) Regular maintenance procedures must be in place to ensure the property is in proper working condition.
(5) If the recipient or subrecipient is authorized or required to sell the property, proper sales procedures must be in place to ensure the highest possible return.
(e) Disposition. When equipment acquired under a Federal award is no longer needed for the original project, program, or for other activities currently or previously supported by a Federal agency, the recipient or subrecipient must request disposition instructions from the Federal agency or pass-through entity if required by the terms and conditions of the Federal award. Disposition of the equipment will be made as follows, in accordance with Federal agency or pass-through entity disposition instructions:
(1) Equipment with a current fair market value of $10,000 or less (per unit) may be retained, sold, or otherwise disposed of with no further responsibility to the Federal agency or pass-through entity.
(2) Except as provided in § 200.312(b), or if the Federal agency or pass-through entity fails to provide requested disposition instructions within 120 days, items of equipment with a current fair market value in excess of $10,000 (per-unit) may be retained or sold by the recipient or subrecipient. However, the Federal agency is entitled to an amount calculated by multiplying the percentage of the Federal agency's contribution towards the original purchase by the current market value or proceeds from the sale. If the equipment is sold, the Federal agency or pass-through entity may permit the recipient or subrecipient to retain, from the Federal share, $1,000 of the proceeds to cover expenses associated with the selling and handling of the equipment.
(3) The recipient or subrecipient may transfer title to the property to the Federal Government or to an eligible third party provided that the recipient or subrecipient must be entitled to compensation for its attributable percentage of the current fair market value of the property.
(4) In cases where a recipient or subrecipient fails to take appropriate disposition actions, the Federal agency or pass-through entity may direct the recipient or subrecipient to take disposition actions.
Condition
As part of our audit procedures, we reviewed internal controls over inventory and asset management, including physical inspection and disposition tracking of equipment. For the Fire Department, we determined that no physical inventory of federally funded equipment had been conducted during the required biennial period, and no reconciliation of equipment records to actual assets had been performed. While informal tracking logs and asset purchase records existed, they were incomplete and lacked standardized documentation of asset tag numbers, inspection dates, asset condition, and verification signatures. Moreover, there was no evidence of centralized or departmental oversight to ensure routine physical inventory and compliance with Federal property standards.
In addition, we identified the Harbor department failed to properly record the disposition of a federally funded asset. The asset was still marked as “in service” within the equipment listing provided to us during the audit; however the item had in fact been disposed of during the audit period.
Cause
The Fire Department’s grants team oversees the compliance with required federal equipment procedures, the grants team indicated capacity issues were the main contributor towards the lack of a reconciliation or inventorying of the equipment.
The Harbor Departments property related to a vehicle which was disposed of after an accident. This occurred between the departments inventory processes leading to the listing not being updated by mistake.
Effect or potential effect
The Departments were out of compliance with federal requirements surrounding equipment management, maintenance, and disposal.
Questioned costs
None
Context
The Harbor Department special vehicle which had an estimated book value of $0 that was involved in a collision before being disposed of. There were $0 in proceeds received related to the disposal.
Identification as a repeat finding if applicable
N/A
Recommendation
We recommend the departments enhance internal controls to ensure its property records include all the requirements under the Uniform Guidance and properly identify all property and equipment purchased with federal funds.
We recommend the Fire Department implement a plan to address staffing needs and formalize procedures regarding the reconciliation, tracking, and maintenance of federally funded equipment. We recommend the Harbor Department enhance their procedures on equipment disposals.
Views of responsible officials and planned corrective actions
The Fire Department will ensure that all grant funds are expended in compliance with grant guidelines, including the completion of a biennial Equipment Inventory and the submission of a certification letter verifying its accuracy to the grantor every other year.
Effective June 16, 2025, the Fire Department will conduct an Equipment Inventory and submit a verification letter to the grantor confirming its completion on a biennial basis. The current Equipment Inventory will be completed by the Support Services Bureau by September 30, 2025. The Fire Department will ensure the accompanying verification letter is sent to the grantor along with the updated inventory list. This biennial requirement will be integrated into the Department’s annual calendar. Following the FY2025 inventory, the next cycle will occur in FY2027 and continue in every odd-numbered fiscal year thereafter.
The Harbor Department will enhance its written procedures on equipment disposals and provide training to appropriate Finance, Security, and Maintenance Division staff in FY 2025 to ensure compliance and timeliness in following equipment disposal procedures.
Finding Number: 2024-004
Finding Title: Internal Controls and Compliance Over Federally Funded Equipment
Compliance Requirement(s): Equipment and Real Property Management
Classification: Significant Deficiency
Programs: Port Security Grant Program
ALN #: 97.056
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Homeland Security
Federal Award Numbers: EMW-2021-PU-00463-S01
Federal Award Year: 2021
Criteria or specific requirement (including statutory, regulatory, or other citation
§ 200.313 Equipment. See also § 200.439.
(a) Title. Title to equipment acquired under the Federal award will vest upon acquisition in the recipient or subrecipient subject to the conditions of this section. This title must be a conditional title unless a Federal statute specifically authorizes the Federal agency to vest title in the recipient or subrecipient without further responsibility to the Federal Government (and the Federal agency elects to do so). A conditional title means a clear title is withheld by the Federal agency until conditions and requirements specified in the terms and conditions of a Federal award have been fulfilled. Title for equipment vested in a recipient or subrecipient is subject to the following conditions:
(1) Use the equipment for the authorized purposes of the project during the period of performance or until the property is no longer needed for the purposes of the project.
(2) While the equipment is being used for the originally authorized purpose, the recipient or subrecipient must not dispose of or encumber its title or other interests without the approval of the Federal agency or pass-through entity.
(3) Use and dispose of the property in accordance with paragraphs (b), (c), and (e) of this section.
(b) General. A State must use, manage and dispose of equipment acquired under a Federal award in accordance with State laws and procedures. Indian Tribes must use, manage, and dispose of equipment acquired under a Federal award in accordance with tribal laws and procedures. If such laws and procedures do not exist, Indian Tribes must follow the guidance in this section. Other recipients and subrecipients, including subrecipients of a State or Indian Tribe, must follow paragraphs (c) through (e) of this section.
(c) Use.
(1) The recipient or subrecipient must use equipment for the project or program for which it was acquired and for as long as needed, whether or not the project or program continues to be supported by the Federal award. The recipient or subrecipient must not encumber the equipment without prior approval of the Federal agency or pass-through entity. The Federal agency may require the submission of the applicable common forms for reporting on equipment. When no longer needed for the original project or program, the equipment may be used in other activities in the following order of priority:
(i) Activities under other Federal awards from the Federal agency that funded the original program or project; then
(ii) Activities under Federal awards from other Federal agencies. These activities include consolidated equipment for information technology systems.
(2) During the time that equipment is used on the project or program for which it was acquired, the recipient or subrecipient must also make the equipment available for use on other programs or projects supported by the Federal Government, provided that such use will not interfere with the purpose for which it was originally acquired. First preference for other use of the equipment must be given to other programs or projects supported by the Federal agency that financed the equipment. Second preference must be given to programs or projects under Federal awards from other Federal agencies. Use for non-federally funded projects is also permissible, provided such use will not interfere with the purpose for which it was originally acquired. The recipient or subrecipient should consider charging user fees as appropriate.
(3) Notwithstanding the encouragement in § 200.307 to earn program income, the recipient or subrecipient must not use equipment acquired with the Federal award to provide services for a fee that is less than a private company would charge for similar services unless specifically authorized by Federal statute. This restriction is effective as long as the Federal Government retains an interest in the equipment.
(4) When acquiring replacement equipment, the recipient or subrecipient may either trade-in or sell the equipment and use the proceeds to offset the cost of the replacement equipment.
(d) Management requirements. Regardless of whether equipment is acquired in part or its entirety under the Federal award, the recipient or subrecipient must manage equipment (including replacement equipment) utilizing procedures that meet the following requirements:
(1) Property records must include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date, the cost of the property, the percentage of the Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property. The recipient and subrecipient are responsible for maintaining and updating property records when there is a change in the status of the property.
(2) A physical inventory of the property must be conducted, and the results must be reconciled with the property records at least once every two years.
(3) A control system must be in place to ensure safeguards for preventing property loss, damage, or theft. Any loss, damage, or theft of equipment must be investigated. The recipient or subrecipient must notify the Federal agency or pass-through entity of any loss, damage, or theft of equipment that will have an impact on the program.
(4) Regular maintenance procedures must be in place to ensure the property is in proper working condition.
(5) If the recipient or subrecipient is authorized or required to sell the property, proper sales procedures must be in place to ensure the highest possible return.
(e) Disposition. When equipment acquired under a Federal award is no longer needed for the original project, program, or for other activities currently or previously supported by a Federal agency, the recipient or subrecipient must request disposition instructions from the Federal agency or pass-through entity if required by the terms and conditions of the Federal award. Disposition of the equipment will be made as follows, in accordance with Federal agency or pass-through entity disposition instructions:
(1) Equipment with a current fair market value of $10,000 or less (per unit) may be retained, sold, or otherwise disposed of with no further responsibility to the Federal agency or pass-through entity.
(2) Except as provided in § 200.312(b), or if the Federal agency or pass-through entity fails to provide requested disposition instructions within 120 days, items of equipment with a current fair market value in excess of $10,000 (per-unit) may be retained or sold by the recipient or subrecipient. However, the Federal agency is entitled to an amount calculated by multiplying the percentage of the Federal agency's contribution towards the original purchase by the current market value or proceeds from the sale. If the equipment is sold, the Federal agency or pass-through entity may permit the recipient or subrecipient to retain, from the Federal share, $1,000 of the proceeds to cover expenses associated with the selling and handling of the equipment.
(3) The recipient or subrecipient may transfer title to the property to the Federal Government or to an eligible third party provided that the recipient or subrecipient must be entitled to compensation for its attributable percentage of the current fair market value of the property.
(4) In cases where a recipient or subrecipient fails to take appropriate disposition actions, the Federal agency or pass-through entity may direct the recipient or subrecipient to take disposition actions.
Condition
As part of our audit procedures, we reviewed internal controls over inventory and asset management, including physical inspection and disposition tracking of equipment. For the Fire Department, we determined that no physical inventory of federally funded equipment had been conducted during the required biennial period, and no reconciliation of equipment records to actual assets had been performed. While informal tracking logs and asset purchase records existed, they were incomplete and lacked standardized documentation of asset tag numbers, inspection dates, asset condition, and verification signatures. Moreover, there was no evidence of centralized or departmental oversight to ensure routine physical inventory and compliance with Federal property standards.
In addition, we identified the Harbor department failed to properly record the disposition of a federally funded asset. The asset was still marked as “in service” within the equipment listing provided to us during the audit; however the item had in fact been disposed of during the audit period.
Cause
The Fire Department’s grants team oversees the compliance with required federal equipment procedures, the grants team indicated capacity issues were the main contributor towards the lack of a reconciliation or inventorying of the equipment.
The Harbor Departments property related to a vehicle which was disposed of after an accident. This occurred between the departments inventory processes leading to the listing not being updated by mistake.
Effect or potential effect
The Departments were out of compliance with federal requirements surrounding equipment management, maintenance, and disposal.
Questioned costs
None
Context
The Harbor Department special vehicle which had an estimated book value of $0 that was involved in a collision before being disposed of. There were $0 in proceeds received related to the disposal.
Identification as a repeat finding if applicable
N/A
Recommendation
We recommend the departments enhance internal controls to ensure its property records include all the requirements under the Uniform Guidance and properly identify all property and equipment purchased with federal funds.
We recommend the Fire Department implement a plan to address staffing needs and formalize procedures regarding the reconciliation, tracking, and maintenance of federally funded equipment. We recommend the Harbor Department enhance their procedures on equipment disposals.
Views of responsible officials and planned corrective actions
The Fire Department will ensure that all grant funds are expended in compliance with grant guidelines, including the completion of a biennial Equipment Inventory and the submission of a certification letter verifying its accuracy to the grantor every other year.
Effective June 16, 2025, the Fire Department will conduct an Equipment Inventory and submit a verification letter to the grantor confirming its completion on a biennial basis. The current Equipment Inventory will be completed by the Support Services Bureau by September 30, 2025. The Fire Department will ensure the accompanying verification letter is sent to the grantor along with the updated inventory list. This biennial requirement will be integrated into the Department’s annual calendar. Following the FY2025 inventory, the next cycle will occur in FY2027 and continue in every odd-numbered fiscal year thereafter.
The Harbor Department will enhance its written procedures on equipment disposals and provide training to appropriate Finance, Security, and Maintenance Division staff in FY 2025 to ensure compliance and timeliness in following equipment disposal procedures.
Finding Number: 2024-005
Finding Title: Internal Controls over Compliance of Reinspection’s to Enforce Housing Quality Standards
Compliance Requirement(s): Special Tests – Housing Quality Standards Enforcement
Classification: Material Weakness
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation
PART 982—SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM
24 CFR 982.54(d)(21) Procedural guidelines and performance standards for conducting required HQS inspections, including:
(i) Any deficiency that the Public Housing Authority (PHA) has adopted as a life-threatening deficiency that is not a HUD-required life-threatening deficiency
(ii) For PHAs that adopt the initial inspection non-life-threatening deficiency option:
a. The PHA's policy on whether the provision will apply to all initial inspections or a portion of initial inspections.
b. The PHA's policy on whether the provision will be applied to only some inspections and how the units will be selected.
c. The PHA's policy on using withheld HAP funds to repay an owner once the unit is in compliance with HQS.
(iii) For PHAs that adopt the alternative inspection provision:
a. The PHA's policy on how it will apply the provision to initial and periodic inspections.
b. he specific alternative inspection method used by the PHA.
c. The specific properties or types of properties where the alternative inspection method will be employed.
d. For initial inspections, the maximum amount of time the PHA will withhold HAP if the owner does not correct the HQS deficiencies within the cure period, and the period of time after which the PHA will terminate the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract.
(iv) The PHA's policy on charging a reinspection fee to owners.
24 CFR 982.54(d)(22) The PHA's policy on withholding HAP for units that do not meet HQS (see § 982.404(d)(1))
24 CFR 982.406(e)(5) The PHA may commence housing assistance payments to the owner and make housing assistance payments retroactive to the effective date of the HAP contract only after the unit passes the PHA's HQS inspection. If the unit does not pass the HQS inspection, the PHA may not make housing assistance payments to the owner until all the deficiencies have been corrected. If a deficiency is life-threatening, the owner must correct the deficiency within 24 hours of notification from the PHA. For other deficiencies, the owner must correct the deficiency within no more than 30 calendar days (or any PHA-approved extension) of notification from the PHA. If the owner corrects the deficiencies within the required cure period, the PHA makes the housing assistance payments retroactive to the effective date of the HAP contract.
PHA POLICY 8-II.F. INSPECTION RESULTS AND REINSPECTIONS FOR UNITS UNDER HAP CONTRACT
The city of Long Beach PHA Admin Plan requires that each deficiency is identified in the NPSIRE standards as either life-threatening, severe, moderate, or low. Further indicating that units under HAP contract, must correct for life-threatening deficiencies within 24 hours after notice has been provided and all others must be corrected within 30 days (or a PHA-approved extension) after notice has been provided.
Life-threatening deficiencies require notifying both parties by telephone or email immediately while Severe or moderate deficiencies will be provided through a written notification within five business days of the inspection. Both will include specifying who is responsible for correcting the violation and the time frame within which the failure must be corrected. If low deficiencies are identified, these deficiencies will only be noted for informational purposes.
The notice will inform the party which caused the deficiencies, whether owner or family, that if life-threatening conditions are not corrected within 24 hours, and non-life-threatening conditions are not corrected within the specified time frame (or any PHA-approved extension), the owner’s HAP will be abated in accordance with PHA policy (Section 8-II.G.) or the family’s assistance will be terminated in accordance with PHA policy (Chapter 12).
2 CFR 200 SUBPART D – POST FEDERAL AWARD REQUIREMENTS
2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The PHA did not have sufficient internal controls in place to ensure timely reinspection of initial inspections for housing quality standard enforcement leading to eighteen re-inspections which were not completed within the required time frames set by PHA policy, created in accordance with federal requirements. The inspections selected were categorized as severe or moderate deficiencies, allowing for a 30 day period starting after providing notification of inspection results which must occur within 5 days of the inspection completion (or effectively 35 days), the eighteen samples mentioned were completed after this window causing the PHA to be noncompliant with PHA policy 8-II.F and 24 CFR 982.406(e)(5).
Additionally, one tenant failed inspection in October 2023 before failing a subsequent reinspection in December 2023. No further action was taken by the PHA, and the case was closed without resolving the deficiencies that caused the inspections to fail leading to noncompliance with 24 CFR 982.406(e)(5) and PHA policy 8-II.F.
Cause
The delayed reinspection’s and mistakenly closed inspection were due to constraints on resources and a change in the system utilized by the authority to administer the program during the year.
Effect or potential effect
The PHA did not perform necessary procedures to enforce owner and/or family obligations to correct deficiencies, which if unresolved, could lead to housing assistance payments to either party which should have been abated.
Questioned costs
None
Context
Sixty inspections requiring reinspection were selected for testing, eighteen were found to be completed after the required reinspection date. Late reinspection’s ranged from 1 day late to over a year late. One of the failed re-inspections cases was closed by management prior to resolution of identified deficiencies. None of the 60 samples selected were categorized as “life threatening”.
Identification as a repeat finding if applicable
2023-008
Recommendation
We recommend the Authority enhance internal controls over the timeliness and completeness of its the housing quality standard enforcement procedures.
Views of responsible officials and planned corrective actions
The HACLB acknowledges the importance of timely reinspections to ensure compliance with Housing Quality Standards (HQS) and has taken concrete steps to strengthen its internal controls and enforcement mechanisms. To strengthen compliance and reduce delays, HACLB implemented an enhanced reinspection scheduling process in December 2024, using its MRI housing software to automatically schedule reinspections within the 30-day remediation period. The system also tracks extension requests and approvals, while staff regularly monitor system-generated reports to ensure timely follow-up and adherence to HUD standards. These improvements are designed to ensure that repairs are verified within the required timeframe, increase program compliance, and improve the overall quality of housing for HCV participants. HACLB is committed to ongoing monitoring and refinement of this process to ensure continuous improvement.
Finding Number: 2024-005
Finding Title: Internal Controls over Compliance of Reinspection’s to Enforce Housing Quality Standards
Compliance Requirement(s): Special Tests – Housing Quality Standards Enforcement
Classification: Material Weakness
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation
PART 982—SECTION 8 TENANT-BASED ASSISTANCE: HOUSING CHOICE VOUCHER PROGRAM
24 CFR 982.54(d)(21) Procedural guidelines and performance standards for conducting required HQS inspections, including:
(i) Any deficiency that the Public Housing Authority (PHA) has adopted as a life-threatening deficiency that is not a HUD-required life-threatening deficiency
(ii) For PHAs that adopt the initial inspection non-life-threatening deficiency option:
a. The PHA's policy on whether the provision will apply to all initial inspections or a portion of initial inspections.
b. The PHA's policy on whether the provision will be applied to only some inspections and how the units will be selected.
c. The PHA's policy on using withheld HAP funds to repay an owner once the unit is in compliance with HQS.
(iii) For PHAs that adopt the alternative inspection provision:
a. The PHA's policy on how it will apply the provision to initial and periodic inspections.
b. he specific alternative inspection method used by the PHA.
c. The specific properties or types of properties where the alternative inspection method will be employed.
d. For initial inspections, the maximum amount of time the PHA will withhold HAP if the owner does not correct the HQS deficiencies within the cure period, and the period of time after which the PHA will terminate the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract.
(iv) The PHA's policy on charging a reinspection fee to owners.
24 CFR 982.54(d)(22) The PHA's policy on withholding HAP for units that do not meet HQS (see § 982.404(d)(1))
24 CFR 982.406(e)(5) The PHA may commence housing assistance payments to the owner and make housing assistance payments retroactive to the effective date of the HAP contract only after the unit passes the PHA's HQS inspection. If the unit does not pass the HQS inspection, the PHA may not make housing assistance payments to the owner until all the deficiencies have been corrected. If a deficiency is life-threatening, the owner must correct the deficiency within 24 hours of notification from the PHA. For other deficiencies, the owner must correct the deficiency within no more than 30 calendar days (or any PHA-approved extension) of notification from the PHA. If the owner corrects the deficiencies within the required cure period, the PHA makes the housing assistance payments retroactive to the effective date of the HAP contract.
PHA POLICY 8-II.F. INSPECTION RESULTS AND REINSPECTIONS FOR UNITS UNDER HAP CONTRACT
The city of Long Beach PHA Admin Plan requires that each deficiency is identified in the NPSIRE standards as either life-threatening, severe, moderate, or low. Further indicating that units under HAP contract, must correct for life-threatening deficiencies within 24 hours after notice has been provided and all others must be corrected within 30 days (or a PHA-approved extension) after notice has been provided.
Life-threatening deficiencies require notifying both parties by telephone or email immediately while Severe or moderate deficiencies will be provided through a written notification within five business days of the inspection. Both will include specifying who is responsible for correcting the violation and the time frame within which the failure must be corrected. If low deficiencies are identified, these deficiencies will only be noted for informational purposes.
The notice will inform the party which caused the deficiencies, whether owner or family, that if life-threatening conditions are not corrected within 24 hours, and non-life-threatening conditions are not corrected within the specified time frame (or any PHA-approved extension), the owner’s HAP will be abated in accordance with PHA policy (Section 8-II.G.) or the family’s assistance will be terminated in accordance with PHA policy (Chapter 12).
2 CFR 200 SUBPART D – POST FEDERAL AWARD REQUIREMENTS
2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The PHA did not have sufficient internal controls in place to ensure timely reinspection of initial inspections for housing quality standard enforcement leading to eighteen re-inspections which were not completed within the required time frames set by PHA policy, created in accordance with federal requirements. The inspections selected were categorized as severe or moderate deficiencies, allowing for a 30 day period starting after providing notification of inspection results which must occur within 5 days of the inspection completion (or effectively 35 days), the eighteen samples mentioned were completed after this window causing the PHA to be noncompliant with PHA policy 8-II.F and 24 CFR 982.406(e)(5).
Additionally, one tenant failed inspection in October 2023 before failing a subsequent reinspection in December 2023. No further action was taken by the PHA, and the case was closed without resolving the deficiencies that caused the inspections to fail leading to noncompliance with 24 CFR 982.406(e)(5) and PHA policy 8-II.F.
Cause
The delayed reinspection’s and mistakenly closed inspection were due to constraints on resources and a change in the system utilized by the authority to administer the program during the year.
Effect or potential effect
The PHA did not perform necessary procedures to enforce owner and/or family obligations to correct deficiencies, which if unresolved, could lead to housing assistance payments to either party which should have been abated.
Questioned costs
None
Context
Sixty inspections requiring reinspection were selected for testing, eighteen were found to be completed after the required reinspection date. Late reinspection’s ranged from 1 day late to over a year late. One of the failed re-inspections cases was closed by management prior to resolution of identified deficiencies. None of the 60 samples selected were categorized as “life threatening”.
Identification as a repeat finding if applicable
2023-008
Recommendation
We recommend the Authority enhance internal controls over the timeliness and completeness of its the housing quality standard enforcement procedures.
Views of responsible officials and planned corrective actions
The HACLB acknowledges the importance of timely reinspections to ensure compliance with Housing Quality Standards (HQS) and has taken concrete steps to strengthen its internal controls and enforcement mechanisms. To strengthen compliance and reduce delays, HACLB implemented an enhanced reinspection scheduling process in December 2024, using its MRI housing software to automatically schedule reinspections within the 30-day remediation period. The system also tracks extension requests and approvals, while staff regularly monitor system-generated reports to ensure timely follow-up and adherence to HUD standards. These improvements are designed to ensure that repairs are verified within the required timeframe, increase program compliance, and improve the overall quality of housing for HCV participants. HACLB is committed to ongoing monitoring and refinement of this process to ensure continuous improvement.
Finding Number: 2024-006
Finding Title: Internal controls Over Compliance Participants Reexaminations, Housing Assistance Payments and Related Reporting
Compliance Requirement(s): Special Tests – Housing Assistance Payment, Reporting, Allowed and Unallowed Costs
Classification: Material Weakness
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation
Allowable Costs Principles ; Activities Allowed and Unallowed; Eligibility
§ 982.201 Eligibility and targeting.
(3) The annual income (gross income) of an applicant family is used both for determination of income-eligibility under paragraph (b)(1) of this section and for targeting under paragraph (b)(2)(i) of this section. In determining annual income of an applicant family that includes a person with disabilities, the determination must include the disallowance of increase in annual income as provided in 24 CFR 5.617, if applicable.
(4) The applicable income limit for issuance of a voucher when a family is selected for the program is the highest income limit (for the family size) for areas in the PHA jurisdiction. The applicable income limit for admission to the program is the income limit for the area where the family is initially assisted in the program. At admission, the family may only use the voucher to rent a unit in an area where the family is income eligible.
Housing Assistance Payments
(e) Effective date of reexamination.
(1) The PHA must adopt policies consistent with this section prescribing how to determine the effective date of a change in the housing assistance payment resulting from an interim redetermination.
(2) At the effective date of a regular or interim reexamination, the PHA must make appropriate adjustments in the housing assistance payment in accordance with § 982.505.
(f) Accuracy of family income data. The PHA must establish procedures that are appropriate and necessary to assure that income data provided by applicant or participant families is complete and accurate. The PHA will not be considered out of compliance with the requirements in this section solely due to de minimis errors in calculating family income but is still obligated to correct errors once the PHA becomes aware of the errors. A de minimis error is an error where the PHA determination of family income deviates from the correct income determination by no more than $30 per month in monthly adjusted income ($360 in annual adjusted income).
Reporting
24CFR982.516(d) Family reporting of change. The PHA must adopt policies consistent with this section prescribing when and under what conditions the family must report a change in family income or composition.
HUD collects Tenant data to understand demographic, family profile, income, and housing information for participants in the Public Housing, Section 8 Housing Choice Voucher, Section 8 Project Based Certificate, Section 8 Moderate Rehabilitation, and Moving to Work Demonstration programs. This data also allows HUD to monitor the performance of programs and the performance of public housing agencies that administer the programs.
24 CFR Part 908 and 24 CFR section 982.158 The HUD-50058, Family Report (OMB No. 2577-0083) is required to be submitted by the PHA electronically to HUD each time the PHA completes an issuance, admission, annual reexamination, interim reexamination, portability move-in, expiration, or other change of unit for a family. The PHA must also submit the Family Report when a family ends participation in the program or moves out of the PHA’s jurisdiction under portability.
2 CFR 200 SUBPART D – POST FEDERAL AWARD REQUIREMENTS
2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The Public Housing Authority (PHA) of the City of Long Beach did not have procedures implemented for a secondary review during the process of income tenant income reexamination. Insufficient internal controls around reexaminations of income could lead noncompliance with Eligibility, Reporting, Housing assistance payment, and expenditure allowability requirements.
Cause
The PHA did not have control procedures in place for a secondary review on income reexaminations but is in the process of implementing a control which was not in place for the fiscal year under audit due to understaffing.
Effect or potential effect
Insufficient controls over the reexamination process could lead to ineligible participants in the program, housing assistance payments that are either incorrect or to ineligible participants, and inaccurate reporting to HUD.
Questioned costs
None
Context
We tested 62 reexaminations, none of which included a secondary review.
Identification as a repeat finding if applicable
2023-009
Recommendation
We recommend the PHA establish a secondary review over the reexamination of income of program participants.
Views of responsible officials and planned corrective actions
While HUD does not mandate a secondary review of files or allocate additional funding for such activities, HACLB recognizes the critical importance of accurate participant data, timely housing assistance payments, and compliance with HUD reporting requirements. HACLB has established and continues to enhance a system of internal controls to ensure program integrity and compliance. HACLB leverages its MRI housing management software to automate data validation and error detection in alignment with HUD’s PIC requirements, ensuring accurate and compliant submissions. The system flags validation errors for correction before transmission, while additional oversight through the PIC Error Dashboard, SEMAP evaluations, and internal file reviews supports ongoing quality control. Errors identified through these processes are used for staff training and performance improvement, with new Housing Specialists’ work closely monitored to uphold accuracy and program integrity. With the utilization of MRI housing management software and PIC systems, enhanced quality control processes, ongoing staff training, and proactive monitoring, HACLB is confident in its ability to maintain strong internal controls, ensure compliance with HUD requirements, and safeguard program integrity.
Finding Number: 2024-006
Finding Title: Internal controls Over Compliance Participants Reexaminations, Housing Assistance Payments and Related Reporting
Compliance Requirement(s): Special Tests – Housing Assistance Payment, Reporting, Allowed and Unallowed Costs
Classification: Material Weakness
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation
Allowable Costs Principles ; Activities Allowed and Unallowed; Eligibility
§ 982.201 Eligibility and targeting.
(3) The annual income (gross income) of an applicant family is used both for determination of income-eligibility under paragraph (b)(1) of this section and for targeting under paragraph (b)(2)(i) of this section. In determining annual income of an applicant family that includes a person with disabilities, the determination must include the disallowance of increase in annual income as provided in 24 CFR 5.617, if applicable.
(4) The applicable income limit for issuance of a voucher when a family is selected for the program is the highest income limit (for the family size) for areas in the PHA jurisdiction. The applicable income limit for admission to the program is the income limit for the area where the family is initially assisted in the program. At admission, the family may only use the voucher to rent a unit in an area where the family is income eligible.
Housing Assistance Payments
(e) Effective date of reexamination.
(1) The PHA must adopt policies consistent with this section prescribing how to determine the effective date of a change in the housing assistance payment resulting from an interim redetermination.
(2) At the effective date of a regular or interim reexamination, the PHA must make appropriate adjustments in the housing assistance payment in accordance with § 982.505.
(f) Accuracy of family income data. The PHA must establish procedures that are appropriate and necessary to assure that income data provided by applicant or participant families is complete and accurate. The PHA will not be considered out of compliance with the requirements in this section solely due to de minimis errors in calculating family income but is still obligated to correct errors once the PHA becomes aware of the errors. A de minimis error is an error where the PHA determination of family income deviates from the correct income determination by no more than $30 per month in monthly adjusted income ($360 in annual adjusted income).
Reporting
24CFR982.516(d) Family reporting of change. The PHA must adopt policies consistent with this section prescribing when and under what conditions the family must report a change in family income or composition.
HUD collects Tenant data to understand demographic, family profile, income, and housing information for participants in the Public Housing, Section 8 Housing Choice Voucher, Section 8 Project Based Certificate, Section 8 Moderate Rehabilitation, and Moving to Work Demonstration programs. This data also allows HUD to monitor the performance of programs and the performance of public housing agencies that administer the programs.
24 CFR Part 908 and 24 CFR section 982.158 The HUD-50058, Family Report (OMB No. 2577-0083) is required to be submitted by the PHA electronically to HUD each time the PHA completes an issuance, admission, annual reexamination, interim reexamination, portability move-in, expiration, or other change of unit for a family. The PHA must also submit the Family Report when a family ends participation in the program or moves out of the PHA’s jurisdiction under portability.
2 CFR 200 SUBPART D – POST FEDERAL AWARD REQUIREMENTS
2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented.
Condition
The Public Housing Authority (PHA) of the City of Long Beach did not have procedures implemented for a secondary review during the process of income tenant income reexamination. Insufficient internal controls around reexaminations of income could lead noncompliance with Eligibility, Reporting, Housing assistance payment, and expenditure allowability requirements.
Cause
The PHA did not have control procedures in place for a secondary review on income reexaminations but is in the process of implementing a control which was not in place for the fiscal year under audit due to understaffing.
Effect or potential effect
Insufficient controls over the reexamination process could lead to ineligible participants in the program, housing assistance payments that are either incorrect or to ineligible participants, and inaccurate reporting to HUD.
Questioned costs
None
Context
We tested 62 reexaminations, none of which included a secondary review.
Identification as a repeat finding if applicable
2023-009
Recommendation
We recommend the PHA establish a secondary review over the reexamination of income of program participants.
Views of responsible officials and planned corrective actions
While HUD does not mandate a secondary review of files or allocate additional funding for such activities, HACLB recognizes the critical importance of accurate participant data, timely housing assistance payments, and compliance with HUD reporting requirements. HACLB has established and continues to enhance a system of internal controls to ensure program integrity and compliance. HACLB leverages its MRI housing management software to automate data validation and error detection in alignment with HUD’s PIC requirements, ensuring accurate and compliant submissions. The system flags validation errors for correction before transmission, while additional oversight through the PIC Error Dashboard, SEMAP evaluations, and internal file reviews supports ongoing quality control. Errors identified through these processes are used for staff training and performance improvement, with new Housing Specialists’ work closely monitored to uphold accuracy and program integrity. With the utilization of MRI housing management software and PIC systems, enhanced quality control processes, ongoing staff training, and proactive monitoring, HACLB is confident in its ability to maintain strong internal controls, ensure compliance with HUD requirements, and safeguard program integrity.
Finding Number: 2024-007
Finding Title: Internal Controls Over the Listing of Housing Quality Control Inspections
Compliance Requirement(s): Special Tests – Housing Quality Control Inspections
Classification: Significant Deficiency
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation
24 CFR 985.2 “PHA's quality control sample” PHA's quality control sample means an annual sample of files or records drawn in an unbiased manner and reviewed by an PHA supervisor (or by another qualified person other than the person who performed the original work) to determine if the work documented in the files or records conforms to program requirements. The minimum size of the PHA's quality control sample is as follows:
Universe Minimum
Minimum number of files or records to be sampled
50 or less 5
51-600 5 plus 1 for each 50 (or part of 50) over 50
601-2000 16 plus 1 for each 100 (or part of 100) over 600
Over 2000 30 plus 1 for each 200 (or part of 200) over 2000
A PHA supervisor or other qualified person must reinspect a sample of units under contract during the last PHA fiscal year. The guidelines included in Table 10-1 determine the required sample size. The universe referred to in table is the number of units under HAP contract at the end of the PHA’s previous fiscal year
Condition
The PHA was unable to provide a complete listing of Housing Quality Control, therefore we were unable to substantiate that the required number of quality control inspections were performed in compliance with program requirements.
Cause
PHA changed IT systems during the fiscal year under audit and it was caused by an IT system issue not being able to export the correct population for our testing
Effect or potential effect
The PHA could be out of compliance with requirements to perform a minimum number of housing quality control inspections.
Questioned costs
None
Context
The PHA provided a listing of 61 inspections which were classified as Quality Control Inspections. 7 were selected for testing, 2 of the selections were found not to be quality control inspections. Upon further inquiry it was identified that the listing was not accurate. Due to IT System changes occurring during the fiscal year under audit the PHA was unable to provide a corrected listing. The PHA had roughly 6700 units at the end of the prior fiscal year receiving housing assistance payments under the program, based on 24 CFR 985.2 the required number of quality control inspections the PHA were required to perform in the fiscal year under audit would be roughly 54 housing quality control inspections. Due to the inability to provide a complete listing we were unable to verify whether the PHA performed the required amount of quality control inspections.
Identification as a repeat finding if applicable
N/A
Recommendation
We recommend the PHA strengthen procedures to ensure the listing of housing quality control inspections is maintained accurately ensuring completeness.
Views of responsible officials and planned corrective actions
The legacy software system had limited functionality, which restricted our ability to generate the requested reports effectively. The HACLB recognizes the importance of maintaining accurate and timely records of Housing Quality Control inspections to ensure compliance with HUD regulations and to support program oversight. HACLB has implemented the MRI housing management software, which enhances functionality and reporting compared to the previous system, particularly benefiting the Inspections Team with advanced tools for organizing, scheduling, and tracking Quality Control inspections. The system’s reporting capabilities enable timely and detailed inspection listings, supporting compliance with HUD requirements for scheduling, documentation, and follow-up. The upgraded system has already begun to improve operational oversight and internal controls related to Housing Quality Control inspections. HACLB expects these enhancements to strengthen compliance efforts and promote better data accuracy and reporting transparency moving forward.
Finding Number: 2024-007
Finding Title: Internal Controls Over the Listing of Housing Quality Control Inspections
Compliance Requirement(s): Special Tests – Housing Quality Control Inspections
Classification: Significant Deficiency
Programs: Section 8 Housing Choice Vouchers
ALN #: 14.871
Pass-through entity: N/A – Direct Award
Federal Agency: Department of Housing and Urban Development (HUD)
Federal Award Numbers: Multiple – City receives incremental funding throughout the year
Federal Award Year: 2024
Criteria or specific requirement (including statutory, regulatory, or other citation
24 CFR 985.2 “PHA's quality control sample” PHA's quality control sample means an annual sample of files or records drawn in an unbiased manner and reviewed by an PHA supervisor (or by another qualified person other than the person who performed the original work) to determine if the work documented in the files or records conforms to program requirements. The minimum size of the PHA's quality control sample is as follows:
Universe Minimum
Minimum number of files or records to be sampled
50 or less 5
51-600 5 plus 1 for each 50 (or part of 50) over 50
601-2000 16 plus 1 for each 100 (or part of 100) over 600
Over 2000 30 plus 1 for each 200 (or part of 200) over 2000
A PHA supervisor or other qualified person must reinspect a sample of units under contract during the last PHA fiscal year. The guidelines included in Table 10-1 determine the required sample size. The universe referred to in table is the number of units under HAP contract at the end of the PHA’s previous fiscal year
Condition
The PHA was unable to provide a complete listing of Housing Quality Control, therefore we were unable to substantiate that the required number of quality control inspections were performed in compliance with program requirements.
Cause
PHA changed IT systems during the fiscal year under audit and it was caused by an IT system issue not being able to export the correct population for our testing
Effect or potential effect
The PHA could be out of compliance with requirements to perform a minimum number of housing quality control inspections.
Questioned costs
None
Context
The PHA provided a listing of 61 inspections which were classified as Quality Control Inspections. 7 were selected for testing, 2 of the selections were found not to be quality control inspections. Upon further inquiry it was identified that the listing was not accurate. Due to IT System changes occurring during the fiscal year under audit the PHA was unable to provide a corrected listing. The PHA had roughly 6700 units at the end of the prior fiscal year receiving housing assistance payments under the program, based on 24 CFR 985.2 the required number of quality control inspections the PHA were required to perform in the fiscal year under audit would be roughly 54 housing quality control inspections. Due to the inability to provide a complete listing we were unable to verify whether the PHA performed the required amount of quality control inspections.
Identification as a repeat finding if applicable
N/A
Recommendation
We recommend the PHA strengthen procedures to ensure the listing of housing quality control inspections is maintained accurately ensuring completeness.
Views of responsible officials and planned corrective actions
The legacy software system had limited functionality, which restricted our ability to generate the requested reports effectively. The HACLB recognizes the importance of maintaining accurate and timely records of Housing Quality Control inspections to ensure compliance with HUD regulations and to support program oversight. HACLB has implemented the MRI housing management software, which enhances functionality and reporting compared to the previous system, particularly benefiting the Inspections Team with advanced tools for organizing, scheduling, and tracking Quality Control inspections. The system’s reporting capabilities enable timely and detailed inspection listings, supporting compliance with HUD requirements for scheduling, documentation, and follow-up. The upgraded system has already begun to improve operational oversight and internal controls related to Housing Quality Control inspections. HACLB expects these enhancements to strengthen compliance efforts and promote better data accuracy and reporting transparency moving forward.