Audit 397707

Finding 2025-001: Significant Deficiency in Internal Control Over Compliance and Non-Material Non-Compliance Federal Awarding Agency: U.S. Department of Housing and Urban Development (HUD) Department: Department of Housing and Community Development (DHCD) Program name: Housing Voucher Cluster ALN: 14.879 Compliance Requirement: Special Test-Housing Quality Standards (HQS) Inspection and Enforcement Prior Year Finding Number: N/A Criteria or Specific Requirements: Per 24 CFR 982.404 “The public housing Organization (PHA) must not make any housing assistance payments (HAP) for a dwelling unit that fails to meet the HQS, unless the owner corrects the defect within the period specified by the PHA and the PHA verifies the correction. If a defect is life threatening, the owner must correct the defect within no more than 24 hours. For other defects, the owner must correct the defect within no more than 30 calendar days (or any PHA-approved extension)”. Additionally, per 24 CFR 982.405 “The PHA must inspect the unit at least biennially during assisted occupancy to ensure that the unit continues to meet the HQS”. Per 2 CFR section 200.303, non-Federal entities receiving Federal awards must establish and maintain internal control designed to ensure reasonably compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Condition: During our testing of sixty (60) inspections, we noted the following: - One instance where a unit failed its inspection and re-inspection was not performed or scheduled within the required timeframe. The Organization also failed to abate the housing assist payments (HAP) or terminate the HAP contract for this unit in a timely manner. Additionally, for this unit the inspection was not performed on the required biennial basis. Questioned Costs: We identified $984 in known and $54,962 in likely questioned costs as a result of our sampling and testing procedures. Cause: The Organization did not follow the internal controls, policies and procedures in place to ensure inspections and re-inspections of units are performed on a timely basis. Context: This is a condition based on testing of the Organization’s compliance with specified requirements. The prevalence of the finding is detailed in the Condition section above. The samples were selected using a nonstatistical method. Effect: The Organization’s control environment over HQS enforcements did not ensure that re-inspections were performed timely or documented within the system or that HAP abatements occurred in a timely manner. As a result, the Organization was not in compliance with the HQS enforcement requirements as of September 30, 2025. Non-compliance with these requirements creates a risk that the Organization may provide federal funds to tenants of ineligible units. Recommendation: We recommend the Organization review their system functionality to determine whether an electronic process for scheduling and follow-up or comprehensive reporting can be identified to improve efficiency and eliminate the potential for human error. If an electronic process or comprehensive reporting is not available, or cannot fully cover the deficiency, we recommend the Organization look into measures to streamline their current internal controls, policies and procedures to eliminate non-compliance. Potential examples include adding an inspection checklist, having the inspection supervisor review and schedule upcoming inspections in advance, building room into the schedule for life-threatening re-inspections, having the inspection supervisor ensure that each scheduled inspection is timely documented in the system, etc. Repeat Finding: No Views of responsible officials: Organization management agrees with the finding and recommendations set forth within. Refer to management’s corrective action plan for additional information.