Audit 369309

The Housing Authority did not have adequate internal controls and did not comply with the 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: 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 Description of Condition The Housing Authority spent $5,337,048 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 safe and sanitary rental housing through Housing Authority Payment (HAP) contracts. 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. 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 of the failed inspection 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 after the correction period ends 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 procedures to require owners to correct life-threatening HQS deficiencies within 24 hours and non-life-threatening HQS deficiencies within 30 calendar days of notification of failed inspections, it did not always follow through with this requirement. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition Although the Housing Authority provided housing inspection training to staff, those responsible for conducting the HQS inspections did not follow procedures for ensuring owners corrected life-threatening HQS deficiencies within 24 hours or non-life-threatening deficiencies within 30 days of notification of failed inspections. Effect of Condition Using statistical sampling, we tested 12 failed inspections that occurred during 2024 and found one with cited life-threatening HQS deficiencies and one with cited non-life-threatening HQS deficiencies for which the Housing Authority did not have documentation demonstrating it followed up on the inspections and required the owners to correct the deficiencies within 24 hours and 30 days of notification, respectively. 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 complies with HQS enforcement requirements. Specifically, the Housing Authority should follow up on cited HQS deficiencies and require owners to correct them within 24 hours or 30 days of notification of the failed inspection, depending on the deficiency type, as HCVP requires. Additionally, the Housing Authority should maintain documentation demonstrating compliance with this requirement. Housing Authority’s Response In order to improve internal controls to ensure compliance with HQS and NSPIRE inspection requirements the Housing Authority will improve the established tracking system for inspections to better manage and track follow-up on HQS deficiency. Inspection staff will be more thoroughly trained on increased communication with landlords and tenants, using the tracking system regularly to ensure timely inspections and follow-up, and the updated tracking sheet will be audited on a regular basis and quality control inspections will be conducted by the Compliance Manager. The Housing Authority will also implement a peer-review system for staff to review files on a regular basis. Clients on the Housing Choice Voucher program are split between two staff members by last name, the peer-review system will require staff to audit on a quarterly basis the other person's case load at random to ensure errors are caught and addressed and further training can be conducted as needed. Auditor’s Remarks We appreciate the steps the Housing Authority is taking to address these issues. We will follow up during the 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.