SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Housing Authority of Asotin County January 1, 2024 through December 31, 2024 2024-002 The Housing Authority did not have adequate internal controls and did not comply with Housing Quality Standards enforcement requirements of its Housing Voucher Cluster program. Assistance Listing Number and Title: 14.871 – Section 8 Housing Choice Vouchers Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: WA017AFR124 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2023-001 Description of Condition The Housing Authority received $1,524,133 in 2024 under the Housing Voucher Cluster program, which includes the Section 8 Housing Choice Vouchers program (HCVP). The HCVP provides rental assistance to help low-income families afford decent, safe and sanitary rental housing through Housing Authority Payment (HAP) contracts. Federal regulations require recipients to establish and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The Housing Authority must inspect units leased to families at least every two years to determine if they meet federal Housing Quality Standards (HQS) requirements. For units under HAP contracts that fail to meet HQS requirements, the Housing Authority must require owners to correct any cited life-threatening HQS deficiencies within 24 hours of notification of the failed inspection. Owners must correct cited non-life-threatening HQS deficiencies within 30 calendar days of notification or within a specified Housing Authority-approved extension. If owners do not correct cited deficiencies within the specified correction period, the Housing Authority must stop assistance payments by the first of the month following the end of the correction period or must terminate the HAP contract. The Housing Authority must keep documentation demonstrating compliance with HQS enforcement requirements. Our audit found the Housing Authority’s internal controls were ineffective for ensuring compliance with the program’s HQS enforcement requirements. Although the Housing Authority had internal controls requiring owners to correct HQS deficiencies within 30 calendar days of notification of failed inspections, it did not establish effective controls requiring owners to correct cited life-threatening HQS deficiencies within 24 hours of notification, as the program requires. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition Although the Housing Authority provides housing inspection training to staff, those responsible for conducting the HQS inspections did not understand and follow established policies and procedures for identifying certain inspection failures as life-threatening and ensuring owners corrected them within 24 hours of notification. Additionally, while monitoring the program, Housing Authority staff did not identify that inspectors did not separately cite life-threatening deficiencies and follow up with owners as required to ensure owners corrected deficiencies within the correction period. The Housing Authority implemented corrective action after receiving the prior audit finding in September 2024, but was not complying before this date. Effect of Condition Using statistical sampling, we tested six failed inspections and found three with HQS deficiencies defined as life-threatening in the Housing Authority’s policy. The Housing Authority did not have documentation demonstrating it followed up and required the owners to correct the deficiencies within 24 hours of notification. Additionally, it did not comply with the requirement to terminate the HAP contract or stop the HAP for three owners who did not correct deficiencies within the correction period. The Housing Authority reinspected the units and verified the owners corrected the deficiencies within 30 days or the approved 30-day extension period. Because the Housing Authority did not follow up on HQS deficiencies within the required correction period, it cannot demonstrate that the housing units met HQS requirements. Recommendation We recommend the Housing Authority strengthen internal controls to ensure it follows the established policy and complies with HQS enforcement requirements. Specifically, the Housing Authority should follow up on cited life-threatening HQS deficiencies and require owners to correct them within 24 hours of notification, as HCVP requires. Housing Authority’s Response The Housing Authority does concur with the State Auditor’s Office finding that the Housing Quality Standards (HQS) requirements are to follow up with the landlord if any life-threatening deficiencies are identified during an inspection. The requirement states that “If a deficiency is life-threatening, the owner (landlord) must correct the deficiency within 24 hours of notification” (24 CFR 982.404(a)(3)). Although this finding was also included in the prior year’s audit, the Housing Authority acknowledges that the corrective action did not start until September 2024. When the Housing Authority was notified of this finding, a corrective action plan was immediately prepared and implemented. Additionally, the U.S. Department of Housing and Urban Development (HUD) followed up on this finding in June 2025 and the Housing Authority provided the corrective action plan along with supporting documentation to HUD. On June 23, 2025, the Housing Authority received a letter from the HUD Seattle Field Office acknowledging that the Housing Authority had taken the appropriate actions to resolve the finding and avoid the same error in the future. Below is the Housing Authority’s corrective action plan that was implemented in September 2024: • Review HQS/NSPIRE standards with current staff assigned to performing and processing Section 8 inspections during a monthly meeting • Implemented internal controls that ensure life-threatening deficiencies are identified and all required notifications are made • Review of all parts of the Code of Federal Regulations (CFR) and PIH Notices distributed by HUD monthly that pertain to HQS/NSPIRE inspection standards • All pertinent staff have taken the NSPIRE Inspection Standards training (all inspectors and Section 8 Occupancy Specialist) • Updated our process to include the use of a new inspection checklist that separately identifies life-threatening deficiencies, as well as using a new form to document attempts to contact the landlord and track the date that the deficiency was resolved The Housing Authority acknowledges that we lacked the appropriate internal controls prior to September 2024 to identify and notify the landlords of any life-threatening deficiencies that must be corrected within 24 hours. This corrective action plan has been in place since September 2024, and the Housing Authority feels that it is now fully in compliance with the applicable inspection requirements set forth by HUD and any relevant CFRs. Auditor’s Remarks We appreciate the Housing Authority’s commitment to resolve this finding and thank the Housing Authority for its cooperation and assistance during the audit. We will review the status of the Housing Authority’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 24 CFR Part 982, Section 8 Tenant-Based Assistance: Housing Choice Voucher Program, section 404, Maintenance: Owner and family responsibility; PHA remedies, establishes enforcement requirements for housing quality standards.