2024-004 The City did not have adequate internal controls for ensuring compliance with earmarking requirements. Assistance Listing Number and Title: 14.231 – Emergency Solutions Grant Program Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: E-23-MC-53-0005 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The City spent $7,864,346 in Emergency Solutions Grant (ESG) Program funds in 2024. The ESG Program provides grants to states, metropolitan cities, urban counties and territories for (1) rehabilitating or converting buildings to use them as emergency homeless shelters, (2) paying certain expenses related to operating emergency shelters, (3) providing essential services related to emergency shelters and street outreach to homeless people, and (4) preventing homeless and providing rapid re-housing assistance. Federal regulations require recipients to establish, document and maintain internal controls that ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition For ESG, the total amount of the City’s fiscal year grant that may be used for street outreach and emergency shelter activities cannot exceed the greater of: (1) 60% of the City's fiscal year grant; or (2) the amount of fiscal year (FY) 2010 ESG program funds committed for homeless assistance activities. For the 2023 ESG award (E-23-MC-53-0005), the greater of the two options was FY 2010 ESG program funds or $502,628. Although the City had a process to review invoices for emergency shelter costs related to the earmark, its internal controls were not adequate to ensure it did not spend more than the allowable amount. We consider this deficiency in internal controls to be a significant deficiency. Cause of Condition Initially, the Human Services Department (HSD) created a budget for emergency shelter costs that was less than the earmark limit. However, HSD staff did not review actual costs charged against the budget. Effect of Condition Our audit found the City exceeded its earmark limitation by $17,524 in emergency shelter costs, which is unallowable. Recommendation We recommend that the City monitor and track all costs related to earmarks to ensure compliance with grant requirements. We further recommend the City consult with the grantor to determine whether it needs to repay the costs charged over the earmarking limit. City’s Response The Department acknowledges this finding. The overage occurred following a period of prolonged vacancy in the contract specialist position and while newly assigned staff were still receiving training. To address this issue, the Department has hired a permanent Federal Grants Management Unit (FGMU) Manager to provide consistent leadership and supervision. The contract specialist receives structured management oversight and ongoing training to strengthen capacity for accurate budget monitoring. In July 2025, the FGMU updated its ESG policies and procedures to incorporate improved controls for earmarking. In addition, the Department has instituted regular training sessions for all staff responsible for federal grant management to reinforce compliance with earmarking and other federal requirements. These corrective actions are designed to strengthen internal controls, provide clearer oversight, and ensure that future expenditures remain within established budget and earmarking limits. Auditor’s Remarks We appreciate the City’s commitment to resolving this finding and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during the next regular 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 576, Emergency Solutions Grants Program, section 100 General provisions and expenditure limits, describes the requirements for auditees on the limits on the amount of the grant that may be used for street outreach and emergency shelter activities.
2024-003 The City did not have adequate internal controls and did not comply with federal Housing Quality Standard requirements. Assistance Listing Number and Title: 14.239 – Home Investment Partnerships Program, 14.239 – COVID-19 Home Investment Partnerships Program Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: COVID-19 M21-MP530200, M20-MC530200, M21-MC530200, M23-MC530200, M24-MC530200 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The Seattle Office of Housing administers the federal HOME Investment Partnerships Program (HOME) and spent $12,309,190 during fiscal year 2024. One of the main objectives of HOME is to expand the supply of decent and affordable housing, particularly for low and very low-income households. The program supports construction, acquisition or rehabilitation of affordable housing units and creates rental and home ownership opportunities. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Description of Condition Federal regulations require the City to perform regular onsite inspections of housing projects funded by the program to ensure compliance with property standards to determine if they meet federal Housing Quality Standards (HQS) requirements, and maintain inspection documentation to demonstrate compliance. For any deficiencies identified during the inspection, the City may accept third-party documentation, such as work orders, or perform re-inspections to verify that deficiencies are corrected. Our audit found the City’s internal controls were ineffective for ensuring compliance with the program’s HQS requirements. Although the City had internal controls for performing inspections and requiring owners to correct HQS deficiencies within 30 calendar days of notification of failed inspections, these procedures did not ensure the City completed annual inspections or perform re-inspections for corrections, as HOME requires. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition City staff responsible for conducting HQS inspections did not understand and follow established policies and procedures for completing inspection forms, and did not know they were required to conduct re-inspections of properties that required repairs, or retain support showing repairs were made. Effect of Condition Using nonstatistical sampling, we tested nine tenant files requiring HQS inspections. Our testing found the City inspected all nine units, but did not have a complete inspection report for one of the inspections and did not perform a re-inspection of repairs for one of the units. Without on-time inspections, the City cannot demonstrate that its housing units met HQS inspection requirements and that they were being consistently maintained in a safe and sanitary manner. Additionally, because the City 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 City strengthen internal controls to ensure it complies with HQS requirements. Specifically, the City should retain documentation to demonstrate it completed inspections and ensure it performs follow-up inspections if repairs or corrections are needed. City’s Response The City acknowledges that it did not close out or document the HQS deficiencies discovered as part of this audit. In recognition of continued growth of the OH housing portfolio, including HOME Program assisted projects, and OH’s capacity to maintain its inspection compliance, OH is in process of contracting with a third-party vendor to complete its annual inspections, including HOME inspections for 2025. The contractor will inspect HUD’s NSPIRE level. With this additional support, OH anticipates it will have the capacity to see that corrections have been completed and documented consistent with the HOME program requirements. Auditor’s Remarks We appreciate the City’s commitment to resolving this finding and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during the next regular 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 92, Home Investment Partnerships Program, section 251 Property standards and inspections, describes the requirements for auditees to conduct on-site progress and final inspections of construction to ensure that work is done in accordance with the applicable codes, the construction contract, and construction documents.
2024-002 The City did not have adequate internal controls and did not comply with federal reporting requirements. Assistance Listing Number and Title: 14.241, Housing Opportunities for Persons With AIDS Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: WA-H200114, WAH21-F001, WAH22-F001, and WAH23-F001 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2023-002 Background The purpose of the Housing Opportunities for Persons with AIDS (HOPWA) program is to provide states and localities with resources and incentives to devise long-term strategies for meeting the housing needs of people living with HIV, including those with AIDS or related diseases, and their families. During fiscal year 2024, the City spent $4,870,191 on program funds for emergency housing, shared housing arrangements, apartments, single room occupancy dwellings, community residences, and essential care services and supplies such as food, medications, medical care, personal protective equipment and information. Of this amount, it passed through $4,784,709 to subrecipients. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The Federal Funding Accountability and Transparency Act (FFATA) requires direct recipients that make first-tier subawards of $30,000 or more to report them in the FFATA Subaward Reporting System. The City must report subawards and subaward amendments by the end of the month following the month in which it made the subawards and subaward amendments. Federal regulations also require recipients to submit a HOPWA Consolidated Annual Performance and Evaluation Report (CAPER) no later than 90 days after the close of their program or operating year. This report provides information on how the recipient and each subrecipient spent the funds. Description of Condition The City’s internal controls were ineffective for ensuring it prepared accurate and complete reports based on supporting documentation and submitted them on time, as federal regulations require. Specifically, the City submitted five FFATA reports in July 2025 that it should have filed in 2024. Also, the CAPER reports were submitted with inaccurate information. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition The City’s human services department is required to submit the required reports and staff were aware of the federal reporting requirements. However, the City did not dedicate adequate resources to ensure it submitted the FFATA reports on time. Also, staff were aware the CAPER reports contained errors; however, the City did not dedicate adequate resources to ensure it corrected the reports before the final submission. Effect of Condition Failing to submit the required reports on time diminishes the federal government’s ability to ensure accountability and transparency of federal spending. The following table summarizes the discrepancies we identified related to FFATA reports. Using a nonstatistical sample, we found three out of four submitted CAPER reports contained errors. In total, the following key line items were misreported: • Total supportive services expenditures were understated by $81,073 • Housing information services expenditures were understated by $51,437 • Resource identification expenditures were understated by $13,122 • Administration expenditures were understated by $43,481 • Other activity expenditures were understated by $152,572 • Total Expenditures for operating year were understated $341,686 • TBRA rental assistance funds expended was understated by $3,891 • Permanent housing placement funds expended was understated by $48,320 • Housing information services funds expended was understated by $23,592 • Supportive services funds expended were understated by $373,766 Recommendation We recommend the City strengthen its internal control to ensure it submits accurate and complete report on time, as federal regulations require. City’s Response The Human Services Department (HSD) acknowledges this finding regarding the late submission of five FFATA reports and inaccuracies in CAPER reporting. These issues arose during a period of prolonged vacancies and while staff were in the process of being trained on reporting requirements, which reduced oversight capacity and contributed to delays and errors. To address this issue, the Department has hired a permanent Federal Grants Management Unit (FGMU) Manager to provide consistent leadership and supervision. HSD updated department-wide FFATA Reporting Policies and Procedures following the federal transition to SAM.gov. Staff completed federal training, and prior reports were reviewed and corrected. The Department implemented controls to close workflow gaps to ensure obligations and data corrections are captured before submission. Additionally, ongoing training is being provided to reinforce compliance. These actions strengthen internal controls and are intended to ensure FFATA and CAPER reports are accurate, complete, and submitted in a timely manner moving forward. Auditor’s Remarks We appreciate the City’s commitment to resolving this finding and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during the next regular 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 2 CFR Part 170, Reporting Subaward and Executive Compensation Information, establishes the Federal Funding Accountability and Transparency Act (FFATA) requirements of reporting the subaward information through the FFATA Subaward Reporting System. Title 24 CFR Part 574, Housing Opportunities For Persons With AIDS, section 520, Performance reports, establishes the performance reporting requirements for grant recipients.
2024-001 The City did not have adequate internal controls for ensuring compliance with federal subrecipient monitoring requirements. Assistance Listing Number and Title: 21.027, COVID 19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) Federal Grantor Name: U.S. Department of Treasury Federal Award/Contract Number: SLFRP1045 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Background The purpose of the Coronavirus State and Local Fiscal Recovery Fund (SLFRF) is to respond to the COVID-19 pandemic’s negative effects on public health and the economy, provide government services to the extent COVID-19 caused a reduction in revenues collected, make necessary investments in water, sewer or broadband infrastructure, and provide emergency relief from natural disasters or their negative economic impacts. It is also intended to fund projects eligible under certain programs administered by the U.S. Department of Transportation through three pathways, and fund projects eligible under the programs established in Title I of the Housing and Community Development Act of 1974. During fiscal year 2024, the City spent $27,916,977 in program funds for responding to the COVID-19 pandemic public health emergency’s negative economic impacts, including public health expenditures. The City passed down $3,596,048 to subrecipient organizations to execute these arrangements. Federal regulations require recipients to establish, document and maintain internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal regulations also require the City to monitor its subrecipients’ activities. This includes verifying subrecipients that spend $750,000 or more in federal awards during a fiscal year receive a federal single audit, following up and ensuring subrecipients take timely and appropriate corrective action on all audit findings, and issuing a management decision as required. Description of Condition The City did not have adequate internal controls and did not comply with federal requirements to ensure its SLFRF program subrecipients received federal single audits when required, and that it followed up on findings and issued management decisions. We tested subrecipients for three City departments and found one department did not have a process to monitor for subrecipient single audits and another department did not retain any documentation showing it monitored for subrecipient single audits. Additionally, two of the three departments we tested did not issue management decisions when the subrecipients’ single audits resulted in SLFRF findings. We consider this deficiency in internal controls to be a significant deficiency Cause of Condition The exact causes varied by department. In general, staff turnover led to either having no controls or not following established controls for monitoring and following up on subrecipients’ federal single audits. Specifically, • The Office of Economic Development had a vacancy in a key role and current department staff could not locate documentation showing previous staff verified subrecipients received single audits when required. • The Office of Housing staff were not aware of the requirement to monitor for subrecipients’ single audits or issue a management decision letter for one subrecipient’s finding. • The Human Services Department experienced staff shortages and did not dedicate time to issuing a management decision for one subrecipient’s finding. Effect of Condition The City could not demonstrate it verified four of five subrecipients received federal single audits when required. Without this verification, the City cannot ensure it is performing the proper level of monitoring and that subrecipients are complying with program requirements. Additionally, the City did not issue a management decision letter as required for two subrecipients that received federal single audit findings for the SLFRF program. Recommendation We recommend the City strengthen internal controls over subrecipient monitoring to ensure it: • Verifies subrecipients receive a federal single audit, if required • Ensures subrecipients take timely and appropriate corrective action on all deficiencies • Issues management decisions to subrecipients within six months of audit reports’ publication for audit findings pertaining to the federal award City’s Response Human Services Department (HSD) HSD acknowledges this finding. While the Department successfully tracked, collected, reviewed, and issued management decision letters to its subrecipients as a standard practice. In this instance a formal management decision was missed for this specific sub-recipient during the review period. The Department has taken corrective measures to strengthen its compliance process, clarify roles and responsibilities to ensure timely completion of this requirement. Office of Economic Development (OED) OED acknowledges this finding. OED intends to take corrective measures through strengthening internal controls over subrecipient single audit monitoring: • Including a step in our internal monitoring processes to document when Program Managers pull and review single audits with federally funded partners • Retaining a monitoring workbook to track and date collection of single audit reports Office of Housing (OH) • OH acknowledges that neither a review of applicable audits nor management decision was sent to subrecipients who had audit findings. OH staff will evaluate its current policies to determine the best way to identify, review and follow-up on any subrecipient audits that may include findings. This review will include appropriate written follow up on actions OH recommends the subrecipient to take to correct the finding(s). Auditor’s Remarks We appreciate the City’s commitment to resolving this finding and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during the next regular 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 2 CFR Part 200, Uniform Guidance, section 332, Requirements for passthrough entities, establishes subrecipient monitoring and management requirements for pass-through entities.