Housing Authority of Grays Harbor County January 1, 2025 through December 31, 2025 2025-001 The Housing Authority did not have adequate internal controls and did not comply with Housing Quality Standards inspection and 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: WA018-VO Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A Description of Condition The Housing Authority received $4,648,690 in 2025 under the Housing Voucher Cluster program, which includes the Section 8 Housing Choice Vouchers program. The Housing Choice Vouchers program provides rental assistance to help low-income families afford decent, safe, and sanitary rental housing through Housing Authority Payment (HAP) contracts. Federal regulations require recipients to establish, 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 Housing Authority must inspect all units leased to families at least every two years to determine if they meet federal Housing Quality Standards (HQS) requirements. For units housed within a Rental Assistance Demonstration (RAD) development, the Housing Authority may adopt an alternative inspection model as provided by program guidelines. This model allows the Housing Authority to maintain compliance by randomly inspecting only 20% of units within a RAD development; however, if 20% of units inspected within a building do not pass inspection, 100% of the units within the building must be inspected. The Housing Authority must keep documentation demonstrating compliance with this alternative inspection methodology. For units under HAP contracts that fail to meet HQS requirements, the Housing Authority must require owners to correct any cited life-threatening HQS deficiencies within 24 hours of notification of the failed inspection. Owners must correct cited non-life-threatening HQS deficiencies within 30 calendar days of notification or within a specified Housing Authority-approved extension. If owners do not correct cited deficiencies within the specified correction period, the Housing Authority must stop assistance payments by the first of the month following the end of the correction period or must terminate the HAP contract. The Housing Authority must keep documentation demonstrating compliance with HQS enforcement requirements. HQS inspections Our audit found the Housing Authority’s internal controls were ineffective for ensuring compliance with the alternative methodology’s HQS inspection requirements. Although the Housing Authority had internal controls for inspecting 20% of RAD development units, it did not establish effective controls for testing 100% of units within a building upon exceeding the inspection failure rate threshold. HQS enforcement Although the Housing Authority had internal controls requiring owners to correct HQS deficiencies within 30 calendar days of notification of failed inspections, the Housing Authority did not maintain documentation when it approved extensions to landlords to correct HQS deficiencies. We consider these internal control deficiencies to be material weaknesses that led to material noncompliance. Cause of Condition HQS inspections Although the Housing Authority provides housing inspection training to staff, those responsible for conducting the HQS inspections were not aware of the additional requirements in the Housing Authority’s administrative plan for RAD developments related to the percentage of units failing inspections. HQS enforcement Housing Authority staff said they provided HQS inspection deficiency resolution extensions to landlords when deemed appropriate via phone calls or emails that were not formally documented. The Housing Authority’s process for extensions did not require staff to maintain formalized documentation of these extensions. Effect of Condition HQS inspections We tested inspection reports for RAD development buildings maintained by the Housing Authority and found that two developments had inspection failure rates more than 20%. These developments house 76 units in total. Under the requirements of the alternative methodology, we determined that there were 57 uninspected units in total. As a result, we determined that 75% of RAD development units were not inspected as required. Because the Housing Authority did not perform additional HQS inspections as required, it cannot demonstrate that all housing units met HQS requirements. HQS enforcement Using statistical sampling, we tested 25 tenants with failed HQS inspections and found seven tenants whose non-life-threatening deficiencies were not corrected within 30 days as required. The Housing Authority was unable to provide written documentation of extensions made to owners as federal regulations require. Without this documentation, the Housing Authority cannot demonstrate that owners corrected deficiencies within the required timeframe and that the housing units met HQS requirements. Recommendation We recommend the Housing Authority strengthen internal controls to ensure it complies with HQS requirements. Specifically, it should follow the established administrative plan and comply with its adopted alternative inspection methodology to ensure RAD developments meet HQS, and retain required documentation to support extensions made to owners for correcting non-life-threatening HQS deficiencies. Housing Authority’s Response Management agrees with the finding. The Housing Authority of Grays Harbor County (HAGHC) acknowledges that it did not have adequate internal controls and understanding regarding the RAD inspection regulations which require all units to be inspected if 20% of the sampled units failed to meet Housing Quality Standards. Two out of seven developments failed more than 20% of the sampled inspections and all units should have been inspected. In addition, the HAGHC did not have adequate controls to document extension requests for failed inspections that took longer than 30 days to repair. HAGHC takes its responsibility to provide decent, safe, and sanitary housing through the Housing Choice Voucher program seriously and has implemented staff training along with procedure updates to ensure compliance with all federal regulations for inspections. Auditor’s Remarks We thank the Housing Authority for its cooperation throughout the audit and the steps it is taking to address these concerns. We will review the status of the Housing Authority’s corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Title 24, CFR, Part 983, Project-Based Voucher (PBV) Program, Subpart C, 103, Inspecting units, describes the requirements for housing authorities to perform periodic inspections. 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.