Audit 3968

The Housing Authority did not have adequate controls in place to ensure compliance with federal program requirements. Assistance Listing Number and Title: 14.871 – Section 8 Housing Choice Vouchers 14.871 – COVID-19 Section 8 Housing Choice Vouchers 14.879 – Mainstream Vouchers Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: S-0088V Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $58,569 Background During 2020, the Housing Authority spent $8,052,481 under the Housing Voucher Cluster program, which includes the Section 8 Housing Choice Vouchers program (HCVP) and the Mainstream Vouchers (MV) program. The HCVP provides rental assistance to help families with very low incomes afford decent, safe, and sanitary rental housing. The HCVP is administered by local public housing agencies (PHAs) authorized under state law to operate housing programs within an area or jurisdiction. The MV program enables families, for whom the head, spouse, or co-head is a person with disabilities, to lease affordable private housing of their choice. The Department of Housing and Urban Development (HUD) enters into Annual Contributions Contracts (ACCs) with the Housing Authority, allowing HUD to provide funds so the Authority can administer the program locally. Federal regulations require recipients of federal funds 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. Reasonable rent The Housing Authority must maintain records to document the basis for its determination that the rental amount set by the property owner is reasonable. The Housing Authority must determine if the rent is reasonable at the time of initial leasing, and at the contract anniversary if there is a five percent decrease in the published Fair Market Rent in effect 60 days before the contract anniversary. Housing quality standards enforcement In Notice PIH 2020–05, published on April 10, 2020, HUD exercised its authority under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to establish waivers and administrative flexibilities to provide relief to PHAs in response to the COVID-19 pandemic. Subsequent revision PIH 2020-33 (issued in November 2020) allowed PHAs to delay biennial inspections for both tenant-based and project-based voucher units and instead rely on owners’ certifications that they have no reasonable basis to have knowledge that life-threatening conditions exist in their unit or any units in question. These waivers apply to Housing Quality Standards (HQS) inspection requirements but do not waive the HQS enforcement requirements. For housing units that fail to meet quality standards, the Housing Authority must require owners to correct any cited life-threatening deficiencies within 24 hours of inspections and all other deficiencies within 30 calendar days of inspections or within a specified Housing Authority-approved extension. If owners do not correct the cited deficiencies within the specified correction period, the Housing Authority must stop assistance payments beginning no later than the first of the month following the specified correction period, or it must terminate the HAP contract. Activities allowed / allowable costs / operating transfers and administrative fees HAP may not be used to cover administrative expenses, nor may HAP be loaned, advanced, or transferred to other component units or other programs. Description of Condition Reasonable rent The Housing Authority did not have controls in place to ensure it determined rental amounts were reasonable at the time of initial leasing. Housing quality standards enforcement The Housing Authority did not have effective internal controls in place for ensuring compliance with the program’s HQS enforcement requirements. Specifically, the Housing Authority did not ensure owners corrected cited life-threatening deficiencies within 24 hours of inspections. Activities allowed / allowable costs / operating transfers and administrative fees The Housing Authority did not have controls in place for ensuring it only transferred funds out of the program for allowable uses. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. These issues were not reported as a finding in the prior audit. Cause of Condition Reasonable rent The Housing Authority moved the tenants out of one of their PHA-owned units for an extended period to rehabilitate the properties. Upon moving the tenants back into the units, the Housing Authority established new leases with the tenants and did not perform rent reasonableness checks as required. Housing quality standards enforcement Program staff believed they were not required to follow-up on failed inspections because they thought the inspection waivers issued from HUD also allowed them to waive following up on failed inspections. Activities allowed / allowable costs / operating transfers and administrative fees The Housing Authority experienced turnover in several key positions responsible for managing operating transfers. Current employees said they did not know why the operating transfers were made. Housing Authority staff and management relied on the former staff to perform grant-related activities and comply with all program requirements without adequate oversight. Effect of Condition and Questioned Costs Reasonable rent We used statistical sampling to test 29 tenant files and found that nine lacked documentation of rent reasonableness determinations. Additionally, we determined reasonable rent determinations were not performed for all 134 Housing Authority-owned units before tenants were housed and received their first assistance payment. Without rent reasonableness determinations, the Housing Authority cannot assure granting agencies that it has effective processes in place to ensure compliance with program requirements. Housing quality standards enforcement The Housing Authority did not have documentation showing it followed-up on two of the six failed inspections in 2020 with cited life-threatening deficiencies and required the owners to correct the deficiencies within 24 hours of inspections. Additionally, the Housing Authority did not stop assistance payments beginning no later than the first of the month following the specified correction period or terminate the HAP contract. Because the Housing Authority did not follow up on HQS deficiencies within the required time frame, it cannot demonstrate that the housing units met enforcement requirements. Activities allowed / allowable costs / operating transfers and administrative fees The audit identified an operating transfer of $58,569 out of the HCVP into the Mainstream Vouchers program that was an unallowable use of the funds. As a result, we are questioning these costs. Recommendations Reasonable rent We recommend the Housing Authority strengthen internal controls to ensure it performs reasonable rent determinations at the time of initial leasing in compliance with program requirements. Housing quality standards enforcement We recommend the Housing Authority strengthen internal controls to follow-up on failed inspections with cited life-threatening HQS deficiencies and require owners to correct them timely, as the program requires. Activities allowed / allowable costs / operating transfers and administrative fees We recommend the Housing Authority improve internal controls to ensure it only charges valid and allowable costs to the program. We further recommend the Housing Authority ensure operating transfers out of the HCVP are used only for activities allowed under the program. Housing Authority’s Response The Housing Authority of the City of Renton (RHA) agrees with this finding and has taken and will continue to take steps to create Internal Controls to ensure compliance for program compliance, especially on the HCV or Housing Choice Voucher program. SEMAP spreadsheets and guidance have been created to monitor and audit the 14 Program Indicators. Internal Controls will also be created to ensure that Independent Audits for the Housing Authority as a whole are completed Annually and submitted to HUD FASS and Federal Audit Clearinghouse by the 9th month after its FYE date of December 31st. 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 corrective action taken 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 152, Administrative fee, outlines the purpose and use of administrative fees. Title 24 CFR Part 982, Section 8 Tenant-Based Assistance: Housing Choice Voucher Program, Section 158, Program accounts and records, establishes requirements over program accounts and records. 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. Title 24 CFR Part 982, Section 8 Tenant-based assistance: Housing Choice Voucher Program, Section 507, establishes the requirements over rent reasonableness.

The Housing Authority did not have adequate controls in place to ensure compliance with federal program requirements. Assistance Listing Number and Title: 14.871 – Section 8 Housing Choice Vouchers 14.871 – COVID-19 Section 8 Housing Choice Vouchers 14.879 – Mainstream Vouchers Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: S-0088V Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $58,569 Background During 2020, the Housing Authority spent $8,052,481 under the Housing Voucher Cluster program, which includes the Section 8 Housing Choice Vouchers program (HCVP) and the Mainstream Vouchers (MV) program. The HCVP provides rental assistance to help families with very low incomes afford decent, safe, and sanitary rental housing. The HCVP is administered by local public housing agencies (PHAs) authorized under state law to operate housing programs within an area or jurisdiction. The MV program enables families, for whom the head, spouse, or co-head is a person with disabilities, to lease affordable private housing of their choice. The Department of Housing and Urban Development (HUD) enters into Annual Contributions Contracts (ACCs) with the Housing Authority, allowing HUD to provide funds so the Authority can administer the program locally. Federal regulations require recipients of federal funds 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. Reasonable rent The Housing Authority must maintain records to document the basis for its determination that the rental amount set by the property owner is reasonable. The Housing Authority must determine if the rent is reasonable at the time of initial leasing, and at the contract anniversary if there is a five percent decrease in the published Fair Market Rent in effect 60 days before the contract anniversary. Housing quality standards enforcement In Notice PIH 2020–05, published on April 10, 2020, HUD exercised its authority under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to establish waivers and administrative flexibilities to provide relief to PHAs in response to the COVID-19 pandemic. Subsequent revision PIH 2020-33 (issued in November 2020) allowed PHAs to delay biennial inspections for both tenant-based and project-based voucher units and instead rely on owners’ certifications that they have no reasonable basis to have knowledge that life-threatening conditions exist in their unit or any units in question. These waivers apply to Housing Quality Standards (HQS) inspection requirements but do not waive the HQS enforcement requirements. For housing units that fail to meet quality standards, the Housing Authority must require owners to correct any cited life-threatening deficiencies within 24 hours of inspections and all other deficiencies within 30 calendar days of inspections or within a specified Housing Authority-approved extension. If owners do not correct the cited deficiencies within the specified correction period, the Housing Authority must stop assistance payments beginning no later than the first of the month following the specified correction period, or it must terminate the HAP contract. Activities allowed / allowable costs / operating transfers and administrative fees HAP may not be used to cover administrative expenses, nor may HAP be loaned, advanced, or transferred to other component units or other programs. Description of Condition Reasonable rent The Housing Authority did not have controls in place to ensure it determined rental amounts were reasonable at the time of initial leasing. Housing quality standards enforcement The Housing Authority did not have effective internal controls in place for ensuring compliance with the program’s HQS enforcement requirements. Specifically, the Housing Authority did not ensure owners corrected cited life-threatening deficiencies within 24 hours of inspections. Activities allowed / allowable costs / operating transfers and administrative fees The Housing Authority did not have controls in place for ensuring it only transferred funds out of the program for allowable uses. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. These issues were not reported as a finding in the prior audit. Cause of Condition Reasonable rent The Housing Authority moved the tenants out of one of their PHA-owned units for an extended period to rehabilitate the properties. Upon moving the tenants back into the units, the Housing Authority established new leases with the tenants and did not perform rent reasonableness checks as required. Housing quality standards enforcement Program staff believed they were not required to follow-up on failed inspections because they thought the inspection waivers issued from HUD also allowed them to waive following up on failed inspections. Activities allowed / allowable costs / operating transfers and administrative fees The Housing Authority experienced turnover in several key positions responsible for managing operating transfers. Current employees said they did not know why the operating transfers were made. Housing Authority staff and management relied on the former staff to perform grant-related activities and comply with all program requirements without adequate oversight. Effect of Condition and Questioned Costs Reasonable rent We used statistical sampling to test 29 tenant files and found that nine lacked documentation of rent reasonableness determinations. Additionally, we determined reasonable rent determinations were not performed for all 134 Housing Authority-owned units before tenants were housed and received their first assistance payment. Without rent reasonableness determinations, the Housing Authority cannot assure granting agencies that it has effective processes in place to ensure compliance with program requirements. Housing quality standards enforcement The Housing Authority did not have documentation showing it followed-up on two of the six failed inspections in 2020 with cited life-threatening deficiencies and required the owners to correct the deficiencies within 24 hours of inspections. Additionally, the Housing Authority did not stop assistance payments beginning no later than the first of the month following the specified correction period or terminate the HAP contract. Because the Housing Authority did not follow up on HQS deficiencies within the required time frame, it cannot demonstrate that the housing units met enforcement requirements. Activities allowed / allowable costs / operating transfers and administrative fees The audit identified an operating transfer of $58,569 out of the HCVP into the Mainstream Vouchers program that was an unallowable use of the funds. As a result, we are questioning these costs. Recommendations Reasonable rent We recommend the Housing Authority strengthen internal controls to ensure it performs reasonable rent determinations at the time of initial leasing in compliance with program requirements. Housing quality standards enforcement We recommend the Housing Authority strengthen internal controls to follow-up on failed inspections with cited life-threatening HQS deficiencies and require owners to correct them timely, as the program requires. Activities allowed / allowable costs / operating transfers and administrative fees We recommend the Housing Authority improve internal controls to ensure it only charges valid and allowable costs to the program. We further recommend the Housing Authority ensure operating transfers out of the HCVP are used only for activities allowed under the program. Housing Authority’s Response The Housing Authority of the City of Renton (RHA) agrees with this finding and has taken and will continue to take steps to create Internal Controls to ensure compliance for program compliance, especially on the HCV or Housing Choice Voucher program. SEMAP spreadsheets and guidance have been created to monitor and audit the 14 Program Indicators. Internal Controls will also be created to ensure that Independent Audits for the Housing Authority as a whole are completed Annually and submitted to HUD FASS and Federal Audit Clearinghouse by the 9th month after its FYE date of December 31st. 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 corrective action taken 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 152, Administrative fee, outlines the purpose and use of administrative fees. Title 24 CFR Part 982, Section 8 Tenant-Based Assistance: Housing Choice Voucher Program, Section 158, Program accounts and records, establishes requirements over program accounts and records. 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. Title 24 CFR Part 982, Section 8 Tenant-based assistance: Housing Choice Voucher Program, Section 507, establishes the requirements over rent reasonableness.

The Housing Authority did not have adequate controls in place to ensure compliance with federal program requirements. Assistance Listing Number and Title: 14.871 – Section 8 Housing Choice Vouchers 14.871 – COVID-19 Section 8 Housing Choice Vouchers 14.879 – Mainstream Vouchers Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: S-0088V Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $58,569 Background During 2020, the Housing Authority spent $8,052,481 under the Housing Voucher Cluster program, which includes the Section 8 Housing Choice Vouchers program (HCVP) and the Mainstream Vouchers (MV) program. The HCVP provides rental assistance to help families with very low incomes afford decent, safe, and sanitary rental housing. The HCVP is administered by local public housing agencies (PHAs) authorized under state law to operate housing programs within an area or jurisdiction. The MV program enables families, for whom the head, spouse, or co-head is a person with disabilities, to lease affordable private housing of their choice. The Department of Housing and Urban Development (HUD) enters into Annual Contributions Contracts (ACCs) with the Housing Authority, allowing HUD to provide funds so the Authority can administer the program locally. Federal regulations require recipients of federal funds 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. Reasonable rent The Housing Authority must maintain records to document the basis for its determination that the rental amount set by the property owner is reasonable. The Housing Authority must determine if the rent is reasonable at the time of initial leasing, and at the contract anniversary if there is a five percent decrease in the published Fair Market Rent in effect 60 days before the contract anniversary. Housing quality standards enforcement In Notice PIH 2020–05, published on April 10, 2020, HUD exercised its authority under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to establish waivers and administrative flexibilities to provide relief to PHAs in response to the COVID-19 pandemic. Subsequent revision PIH 2020-33 (issued in November 2020) allowed PHAs to delay biennial inspections for both tenant-based and project-based voucher units and instead rely on owners’ certifications that they have no reasonable basis to have knowledge that life-threatening conditions exist in their unit or any units in question. These waivers apply to Housing Quality Standards (HQS) inspection requirements but do not waive the HQS enforcement requirements. For housing units that fail to meet quality standards, the Housing Authority must require owners to correct any cited life-threatening deficiencies within 24 hours of inspections and all other deficiencies within 30 calendar days of inspections or within a specified Housing Authority-approved extension. If owners do not correct the cited deficiencies within the specified correction period, the Housing Authority must stop assistance payments beginning no later than the first of the month following the specified correction period, or it must terminate the HAP contract. Activities allowed / allowable costs / operating transfers and administrative fees HAP may not be used to cover administrative expenses, nor may HAP be loaned, advanced, or transferred to other component units or other programs. Description of Condition Reasonable rent The Housing Authority did not have controls in place to ensure it determined rental amounts were reasonable at the time of initial leasing. Housing quality standards enforcement The Housing Authority did not have effective internal controls in place for ensuring compliance with the program’s HQS enforcement requirements. Specifically, the Housing Authority did not ensure owners corrected cited life-threatening deficiencies within 24 hours of inspections. Activities allowed / allowable costs / operating transfers and administrative fees The Housing Authority did not have controls in place for ensuring it only transferred funds out of the program for allowable uses. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. These issues were not reported as a finding in the prior audit. Cause of Condition Reasonable rent The Housing Authority moved the tenants out of one of their PHA-owned units for an extended period to rehabilitate the properties. Upon moving the tenants back into the units, the Housing Authority established new leases with the tenants and did not perform rent reasonableness checks as required. Housing quality standards enforcement Program staff believed they were not required to follow-up on failed inspections because they thought the inspection waivers issued from HUD also allowed them to waive following up on failed inspections. Activities allowed / allowable costs / operating transfers and administrative fees The Housing Authority experienced turnover in several key positions responsible for managing operating transfers. Current employees said they did not know why the operating transfers were made. Housing Authority staff and management relied on the former staff to perform grant-related activities and comply with all program requirements without adequate oversight. Effect of Condition and Questioned Costs Reasonable rent We used statistical sampling to test 29 tenant files and found that nine lacked documentation of rent reasonableness determinations. Additionally, we determined reasonable rent determinations were not performed for all 134 Housing Authority-owned units before tenants were housed and received their first assistance payment. Without rent reasonableness determinations, the Housing Authority cannot assure granting agencies that it has effective processes in place to ensure compliance with program requirements. Housing quality standards enforcement The Housing Authority did not have documentation showing it followed-up on two of the six failed inspections in 2020 with cited life-threatening deficiencies and required the owners to correct the deficiencies within 24 hours of inspections. Additionally, the Housing Authority did not stop assistance payments beginning no later than the first of the month following the specified correction period or terminate the HAP contract. Because the Housing Authority did not follow up on HQS deficiencies within the required time frame, it cannot demonstrate that the housing units met enforcement requirements. Activities allowed / allowable costs / operating transfers and administrative fees The audit identified an operating transfer of $58,569 out of the HCVP into the Mainstream Vouchers program that was an unallowable use of the funds. As a result, we are questioning these costs. Recommendations Reasonable rent We recommend the Housing Authority strengthen internal controls to ensure it performs reasonable rent determinations at the time of initial leasing in compliance with program requirements. Housing quality standards enforcement We recommend the Housing Authority strengthen internal controls to follow-up on failed inspections with cited life-threatening HQS deficiencies and require owners to correct them timely, as the program requires. Activities allowed / allowable costs / operating transfers and administrative fees We recommend the Housing Authority improve internal controls to ensure it only charges valid and allowable costs to the program. We further recommend the Housing Authority ensure operating transfers out of the HCVP are used only for activities allowed under the program. Housing Authority’s Response The Housing Authority of the City of Renton (RHA) agrees with this finding and has taken and will continue to take steps to create Internal Controls to ensure compliance for program compliance, especially on the HCV or Housing Choice Voucher program. SEMAP spreadsheets and guidance have been created to monitor and audit the 14 Program Indicators. Internal Controls will also be created to ensure that Independent Audits for the Housing Authority as a whole are completed Annually and submitted to HUD FASS and Federal Audit Clearinghouse by the 9th month after its FYE date of December 31st. 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 corrective action taken 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 152, Administrative fee, outlines the purpose and use of administrative fees. Title 24 CFR Part 982, Section 8 Tenant-Based Assistance: Housing Choice Voucher Program, Section 158, Program accounts and records, establishes requirements over program accounts and records. 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. Title 24 CFR Part 982, Section 8 Tenant-based assistance: Housing Choice Voucher Program, Section 507, establishes the requirements over rent reasonableness.

The Housing Authority did not have adequate controls in place to ensure compliance with federal program requirements. Assistance Listing Number and Title: 14.871 – Section 8 Housing Choice Vouchers 14.871 – COVID-19 Section 8 Housing Choice Vouchers 14.879 – Mainstream Vouchers Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: S-0088V Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $58,569 Background During 2020, the Housing Authority spent $8,052,481 under the Housing Voucher Cluster program, which includes the Section 8 Housing Choice Vouchers program (HCVP) and the Mainstream Vouchers (MV) program. The HCVP provides rental assistance to help families with very low incomes afford decent, safe, and sanitary rental housing. The HCVP is administered by local public housing agencies (PHAs) authorized under state law to operate housing programs within an area or jurisdiction. The MV program enables families, for whom the head, spouse, or co-head is a person with disabilities, to lease affordable private housing of their choice. The Department of Housing and Urban Development (HUD) enters into Annual Contributions Contracts (ACCs) with the Housing Authority, allowing HUD to provide funds so the Authority can administer the program locally. Federal regulations require recipients of federal funds 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. Reasonable rent The Housing Authority must maintain records to document the basis for its determination that the rental amount set by the property owner is reasonable. The Housing Authority must determine if the rent is reasonable at the time of initial leasing, and at the contract anniversary if there is a five percent decrease in the published Fair Market Rent in effect 60 days before the contract anniversary. Housing quality standards enforcement In Notice PIH 2020–05, published on April 10, 2020, HUD exercised its authority under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to establish waivers and administrative flexibilities to provide relief to PHAs in response to the COVID-19 pandemic. Subsequent revision PIH 2020-33 (issued in November 2020) allowed PHAs to delay biennial inspections for both tenant-based and project-based voucher units and instead rely on owners’ certifications that they have no reasonable basis to have knowledge that life-threatening conditions exist in their unit or any units in question. These waivers apply to Housing Quality Standards (HQS) inspection requirements but do not waive the HQS enforcement requirements. For housing units that fail to meet quality standards, the Housing Authority must require owners to correct any cited life-threatening deficiencies within 24 hours of inspections and all other deficiencies within 30 calendar days of inspections or within a specified Housing Authority-approved extension. If owners do not correct the cited deficiencies within the specified correction period, the Housing Authority must stop assistance payments beginning no later than the first of the month following the specified correction period, or it must terminate the HAP contract. Activities allowed / allowable costs / operating transfers and administrative fees HAP may not be used to cover administrative expenses, nor may HAP be loaned, advanced, or transferred to other component units or other programs. Description of Condition Reasonable rent The Housing Authority did not have controls in place to ensure it determined rental amounts were reasonable at the time of initial leasing. Housing quality standards enforcement The Housing Authority did not have effective internal controls in place for ensuring compliance with the program’s HQS enforcement requirements. Specifically, the Housing Authority did not ensure owners corrected cited life-threatening deficiencies within 24 hours of inspections. Activities allowed / allowable costs / operating transfers and administrative fees The Housing Authority did not have controls in place for ensuring it only transferred funds out of the program for allowable uses. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. These issues were not reported as a finding in the prior audit. Cause of Condition Reasonable rent The Housing Authority moved the tenants out of one of their PHA-owned units for an extended period to rehabilitate the properties. Upon moving the tenants back into the units, the Housing Authority established new leases with the tenants and did not perform rent reasonableness checks as required. Housing quality standards enforcement Program staff believed they were not required to follow-up on failed inspections because they thought the inspection waivers issued from HUD also allowed them to waive following up on failed inspections. Activities allowed / allowable costs / operating transfers and administrative fees The Housing Authority experienced turnover in several key positions responsible for managing operating transfers. Current employees said they did not know why the operating transfers were made. Housing Authority staff and management relied on the former staff to perform grant-related activities and comply with all program requirements without adequate oversight. Effect of Condition and Questioned Costs Reasonable rent We used statistical sampling to test 29 tenant files and found that nine lacked documentation of rent reasonableness determinations. Additionally, we determined reasonable rent determinations were not performed for all 134 Housing Authority-owned units before tenants were housed and received their first assistance payment. Without rent reasonableness determinations, the Housing Authority cannot assure granting agencies that it has effective processes in place to ensure compliance with program requirements. Housing quality standards enforcement The Housing Authority did not have documentation showing it followed-up on two of the six failed inspections in 2020 with cited life-threatening deficiencies and required the owners to correct the deficiencies within 24 hours of inspections. Additionally, the Housing Authority did not stop assistance payments beginning no later than the first of the month following the specified correction period or terminate the HAP contract. Because the Housing Authority did not follow up on HQS deficiencies within the required time frame, it cannot demonstrate that the housing units met enforcement requirements. Activities allowed / allowable costs / operating transfers and administrative fees The audit identified an operating transfer of $58,569 out of the HCVP into the Mainstream Vouchers program that was an unallowable use of the funds. As a result, we are questioning these costs. Recommendations Reasonable rent We recommend the Housing Authority strengthen internal controls to ensure it performs reasonable rent determinations at the time of initial leasing in compliance with program requirements. Housing quality standards enforcement We recommend the Housing Authority strengthen internal controls to follow-up on failed inspections with cited life-threatening HQS deficiencies and require owners to correct them timely, as the program requires. Activities allowed / allowable costs / operating transfers and administrative fees We recommend the Housing Authority improve internal controls to ensure it only charges valid and allowable costs to the program. We further recommend the Housing Authority ensure operating transfers out of the HCVP are used only for activities allowed under the program. Housing Authority’s Response The Housing Authority of the City of Renton (RHA) agrees with this finding and has taken and will continue to take steps to create Internal Controls to ensure compliance for program compliance, especially on the HCV or Housing Choice Voucher program. SEMAP spreadsheets and guidance have been created to monitor and audit the 14 Program Indicators. Internal Controls will also be created to ensure that Independent Audits for the Housing Authority as a whole are completed Annually and submitted to HUD FASS and Federal Audit Clearinghouse by the 9th month after its FYE date of December 31st. 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 corrective action taken 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 152, Administrative fee, outlines the purpose and use of administrative fees. Title 24 CFR Part 982, Section 8 Tenant-Based Assistance: Housing Choice Voucher Program, Section 158, Program accounts and records, establishes requirements over program accounts and records. 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. Title 24 CFR Part 982, Section 8 Tenant-based assistance: Housing Choice Voucher Program, Section 507, establishes the requirements over rent reasonableness.

The Housing Authority did not have adequate controls in place to ensure compliance with federal program requirements. Assistance Listing Number and Title: 14.871 – Section 8 Housing Choice Vouchers 14.871 – COVID-19 Section 8 Housing Choice Vouchers 14.879 – Mainstream Vouchers Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: S-0088V Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $58,569 Background During 2020, the Housing Authority spent $8,052,481 under the Housing Voucher Cluster program, which includes the Section 8 Housing Choice Vouchers program (HCVP) and the Mainstream Vouchers (MV) program. The HCVP provides rental assistance to help families with very low incomes afford decent, safe, and sanitary rental housing. The HCVP is administered by local public housing agencies (PHAs) authorized under state law to operate housing programs within an area or jurisdiction. The MV program enables families, for whom the head, spouse, or co-head is a person with disabilities, to lease affordable private housing of their choice. The Department of Housing and Urban Development (HUD) enters into Annual Contributions Contracts (ACCs) with the Housing Authority, allowing HUD to provide funds so the Authority can administer the program locally. Federal regulations require recipients of federal funds 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. Reasonable rent The Housing Authority must maintain records to document the basis for its determination that the rental amount set by the property owner is reasonable. The Housing Authority must determine if the rent is reasonable at the time of initial leasing, and at the contract anniversary if there is a five percent decrease in the published Fair Market Rent in effect 60 days before the contract anniversary. Housing quality standards enforcement In Notice PIH 2020–05, published on April 10, 2020, HUD exercised its authority under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to establish waivers and administrative flexibilities to provide relief to PHAs in response to the COVID-19 pandemic. Subsequent revision PIH 2020-33 (issued in November 2020) allowed PHAs to delay biennial inspections for both tenant-based and project-based voucher units and instead rely on owners’ certifications that they have no reasonable basis to have knowledge that life-threatening conditions exist in their unit or any units in question. These waivers apply to Housing Quality Standards (HQS) inspection requirements but do not waive the HQS enforcement requirements. For housing units that fail to meet quality standards, the Housing Authority must require owners to correct any cited life-threatening deficiencies within 24 hours of inspections and all other deficiencies within 30 calendar days of inspections or within a specified Housing Authority-approved extension. If owners do not correct the cited deficiencies within the specified correction period, the Housing Authority must stop assistance payments beginning no later than the first of the month following the specified correction period, or it must terminate the HAP contract. Activities allowed / allowable costs / operating transfers and administrative fees HAP may not be used to cover administrative expenses, nor may HAP be loaned, advanced, or transferred to other component units or other programs. Description of Condition Reasonable rent The Housing Authority did not have controls in place to ensure it determined rental amounts were reasonable at the time of initial leasing. Housing quality standards enforcement The Housing Authority did not have effective internal controls in place for ensuring compliance with the program’s HQS enforcement requirements. Specifically, the Housing Authority did not ensure owners corrected cited life-threatening deficiencies within 24 hours of inspections. Activities allowed / allowable costs / operating transfers and administrative fees The Housing Authority did not have controls in place for ensuring it only transferred funds out of the program for allowable uses. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. These issues were not reported as a finding in the prior audit. Cause of Condition Reasonable rent The Housing Authority moved the tenants out of one of their PHA-owned units for an extended period to rehabilitate the properties. Upon moving the tenants back into the units, the Housing Authority established new leases with the tenants and did not perform rent reasonableness checks as required. Housing quality standards enforcement Program staff believed they were not required to follow-up on failed inspections because they thought the inspection waivers issued from HUD also allowed them to waive following up on failed inspections. Activities allowed / allowable costs / operating transfers and administrative fees The Housing Authority experienced turnover in several key positions responsible for managing operating transfers. Current employees said they did not know why the operating transfers were made. Housing Authority staff and management relied on the former staff to perform grant-related activities and comply with all program requirements without adequate oversight. Effect of Condition and Questioned Costs Reasonable rent We used statistical sampling to test 29 tenant files and found that nine lacked documentation of rent reasonableness determinations. Additionally, we determined reasonable rent determinations were not performed for all 134 Housing Authority-owned units before tenants were housed and received their first assistance payment. Without rent reasonableness determinations, the Housing Authority cannot assure granting agencies that it has effective processes in place to ensure compliance with program requirements. Housing quality standards enforcement The Housing Authority did not have documentation showing it followed-up on two of the six failed inspections in 2020 with cited life-threatening deficiencies and required the owners to correct the deficiencies within 24 hours of inspections. Additionally, the Housing Authority did not stop assistance payments beginning no later than the first of the month following the specified correction period or terminate the HAP contract. Because the Housing Authority did not follow up on HQS deficiencies within the required time frame, it cannot demonstrate that the housing units met enforcement requirements. Activities allowed / allowable costs / operating transfers and administrative fees The audit identified an operating transfer of $58,569 out of the HCVP into the Mainstream Vouchers program that was an unallowable use of the funds. As a result, we are questioning these costs. Recommendations Reasonable rent We recommend the Housing Authority strengthen internal controls to ensure it performs reasonable rent determinations at the time of initial leasing in compliance with program requirements. Housing quality standards enforcement We recommend the Housing Authority strengthen internal controls to follow-up on failed inspections with cited life-threatening HQS deficiencies and require owners to correct them timely, as the program requires. Activities allowed / allowable costs / operating transfers and administrative fees We recommend the Housing Authority improve internal controls to ensure it only charges valid and allowable costs to the program. We further recommend the Housing Authority ensure operating transfers out of the HCVP are used only for activities allowed under the program. Housing Authority’s Response The Housing Authority of the City of Renton (RHA) agrees with this finding and has taken and will continue to take steps to create Internal Controls to ensure compliance for program compliance, especially on the HCV or Housing Choice Voucher program. SEMAP spreadsheets and guidance have been created to monitor and audit the 14 Program Indicators. Internal Controls will also be created to ensure that Independent Audits for the Housing Authority as a whole are completed Annually and submitted to HUD FASS and Federal Audit Clearinghouse by the 9th month after its FYE date of December 31st. 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 corrective action taken 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 152, Administrative fee, outlines the purpose and use of administrative fees. Title 24 CFR Part 982, Section 8 Tenant-Based Assistance: Housing Choice Voucher Program, Section 158, Program accounts and records, establishes requirements over program accounts and records. 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. Title 24 CFR Part 982, Section 8 Tenant-based assistance: Housing Choice Voucher Program, Section 507, establishes the requirements over rent reasonableness.

The Housing Authority did not have adequate controls in place to ensure compliance with federal program requirements. Assistance Listing Number and Title: 14.871 – Section 8 Housing Choice Vouchers 14.871 – COVID-19 Section 8 Housing Choice Vouchers 14.879 – Mainstream Vouchers Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: S-0088V Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $58,569 Background During 2020, the Housing Authority spent $8,052,481 under the Housing Voucher Cluster program, which includes the Section 8 Housing Choice Vouchers program (HCVP) and the Mainstream Vouchers (MV) program. The HCVP provides rental assistance to help families with very low incomes afford decent, safe, and sanitary rental housing. The HCVP is administered by local public housing agencies (PHAs) authorized under state law to operate housing programs within an area or jurisdiction. The MV program enables families, for whom the head, spouse, or co-head is a person with disabilities, to lease affordable private housing of their choice. The Department of Housing and Urban Development (HUD) enters into Annual Contributions Contracts (ACCs) with the Housing Authority, allowing HUD to provide funds so the Authority can administer the program locally. Federal regulations require recipients of federal funds 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. Reasonable rent The Housing Authority must maintain records to document the basis for its determination that the rental amount set by the property owner is reasonable. The Housing Authority must determine if the rent is reasonable at the time of initial leasing, and at the contract anniversary if there is a five percent decrease in the published Fair Market Rent in effect 60 days before the contract anniversary. Housing quality standards enforcement In Notice PIH 2020–05, published on April 10, 2020, HUD exercised its authority under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to establish waivers and administrative flexibilities to provide relief to PHAs in response to the COVID-19 pandemic. Subsequent revision PIH 2020-33 (issued in November 2020) allowed PHAs to delay biennial inspections for both tenant-based and project-based voucher units and instead rely on owners’ certifications that they have no reasonable basis to have knowledge that life-threatening conditions exist in their unit or any units in question. These waivers apply to Housing Quality Standards (HQS) inspection requirements but do not waive the HQS enforcement requirements. For housing units that fail to meet quality standards, the Housing Authority must require owners to correct any cited life-threatening deficiencies within 24 hours of inspections and all other deficiencies within 30 calendar days of inspections or within a specified Housing Authority-approved extension. If owners do not correct the cited deficiencies within the specified correction period, the Housing Authority must stop assistance payments beginning no later than the first of the month following the specified correction period, or it must terminate the HAP contract. Activities allowed / allowable costs / operating transfers and administrative fees HAP may not be used to cover administrative expenses, nor may HAP be loaned, advanced, or transferred to other component units or other programs. Description of Condition Reasonable rent The Housing Authority did not have controls in place to ensure it determined rental amounts were reasonable at the time of initial leasing. Housing quality standards enforcement The Housing Authority did not have effective internal controls in place for ensuring compliance with the program’s HQS enforcement requirements. Specifically, the Housing Authority did not ensure owners corrected cited life-threatening deficiencies within 24 hours of inspections. Activities allowed / allowable costs / operating transfers and administrative fees The Housing Authority did not have controls in place for ensuring it only transferred funds out of the program for allowable uses. We consider these deficiencies in internal controls to be material weaknesses that led to material noncompliance. These issues were not reported as a finding in the prior audit. Cause of Condition Reasonable rent The Housing Authority moved the tenants out of one of their PHA-owned units for an extended period to rehabilitate the properties. Upon moving the tenants back into the units, the Housing Authority established new leases with the tenants and did not perform rent reasonableness checks as required. Housing quality standards enforcement Program staff believed they were not required to follow-up on failed inspections because they thought the inspection waivers issued from HUD also allowed them to waive following up on failed inspections. Activities allowed / allowable costs / operating transfers and administrative fees The Housing Authority experienced turnover in several key positions responsible for managing operating transfers. Current employees said they did not know why the operating transfers were made. Housing Authority staff and management relied on the former staff to perform grant-related activities and comply with all program requirements without adequate oversight. Effect of Condition and Questioned Costs Reasonable rent We used statistical sampling to test 29 tenant files and found that nine lacked documentation of rent reasonableness determinations. Additionally, we determined reasonable rent determinations were not performed for all 134 Housing Authority-owned units before tenants were housed and received their first assistance payment. Without rent reasonableness determinations, the Housing Authority cannot assure granting agencies that it has effective processes in place to ensure compliance with program requirements. Housing quality standards enforcement The Housing Authority did not have documentation showing it followed-up on two of the six failed inspections in 2020 with cited life-threatening deficiencies and required the owners to correct the deficiencies within 24 hours of inspections. Additionally, the Housing Authority did not stop assistance payments beginning no later than the first of the month following the specified correction period or terminate the HAP contract. Because the Housing Authority did not follow up on HQS deficiencies within the required time frame, it cannot demonstrate that the housing units met enforcement requirements. Activities allowed / allowable costs / operating transfers and administrative fees The audit identified an operating transfer of $58,569 out of the HCVP into the Mainstream Vouchers program that was an unallowable use of the funds. As a result, we are questioning these costs. Recommendations Reasonable rent We recommend the Housing Authority strengthen internal controls to ensure it performs reasonable rent determinations at the time of initial leasing in compliance with program requirements. Housing quality standards enforcement We recommend the Housing Authority strengthen internal controls to follow-up on failed inspections with cited life-threatening HQS deficiencies and require owners to correct them timely, as the program requires. Activities allowed / allowable costs / operating transfers and administrative fees We recommend the Housing Authority improve internal controls to ensure it only charges valid and allowable costs to the program. We further recommend the Housing Authority ensure operating transfers out of the HCVP are used only for activities allowed under the program. Housing Authority’s Response The Housing Authority of the City of Renton (RHA) agrees with this finding and has taken and will continue to take steps to create Internal Controls to ensure compliance for program compliance, especially on the HCV or Housing Choice Voucher program. SEMAP spreadsheets and guidance have been created to monitor and audit the 14 Program Indicators. Internal Controls will also be created to ensure that Independent Audits for the Housing Authority as a whole are completed Annually and submitted to HUD FASS and Federal Audit Clearinghouse by the 9th month after its FYE date of December 31st. 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 corrective action taken 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 152, Administrative fee, outlines the purpose and use of administrative fees. Title 24 CFR Part 982, Section 8 Tenant-Based Assistance: Housing Choice Voucher Program, Section 158, Program accounts and records, establishes requirements over program accounts and records. 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. Title 24 CFR Part 982, Section 8 Tenant-based assistance: Housing Choice Voucher Program, Section 507, establishes the requirements over rent reasonableness.