SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS City of Spokane January 1, 2025 through December 31, 2025 2025-002 The City did not have adequate internal controls and did not comply with federal reporting requirements. Assistance Listing Number and Title: 14.218 Community Development Block Grants/Entitlement Grants Federal Grantor Name: Housing and Urban Development Federal Award/Contract Number: B-24-MC-53-0006, B-23-MC-53-0006, B-22-MC-53-0006, B-21-MC-53-0006, B-25-MC-53-0006 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 primary objective of the Community Development Block Grants/Entitlement Grants (CDBG) program is to help provide decent and affordable housing, particularly for people with moderate, low and very low incomes. Funds also help recipients implement strategies for achieving an adequate supply of decent housing and providing suitable living environments and expanded economic opportunities for people with low incomes. In 2025, the City spent $5,739,184 for its CDBG program. Of this amount, it passed $5,059,168 through 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 U.S. General Services Administration’s System for Award Management at SAM.gov. 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. Description of Condition The City’s internal controls were ineffective for ensuring it submitted on time FFATA reports for two new subawards and two subaward amendments as federal regulations require. We consider this deficiency in internal controls to be a material weakness that led to material noncompliance. Cause of Condition The employee responsible for submitting FFATA reports was aware of the reporting requirements but overlooked submitting them on time. Effect of Condition Failing to submit the required reports diminishes the federal government's ability to ensure accountability and transparency of federal spending. Using a nonstatistical sample, we found four of five FFATA reports (80%) tested were not submitted on time. The table below summarizes the discrepancies we identified. During the audit period, the City submitted one FFATA report seven months late and subsequently submitted the other three FFATA reports applicable to the audit period at the time of audit, ranging from nine to 12 months late. Recommendation We recommend the City strengthen its internal controls to ensure it submits FFATA reports for all applicable subawards by the due date, as federal regulations require. City’s Response The City understands the importance of complying with federal reporting requirements and is committed to timely and accurate reporting. The City agrees with the finding regarding the untimeliness of FFATA reporting. To prevent a recurrence, the City has implemented a weekly supervisory review of FFATA reporting activities to monitor compliance with reporting requirements and ensure reports are submitted within the required timeframes. Auditor’s Remarks We appreciate the City’s commitment to resolve this finding and thank the City 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 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 U.S. General Services Administration’s System for Award Management at SAM.gov.
SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS City of Spokane January 1, 2025 through December 31, 2025 2025-003 The City did not have adequate internal controls and did not comply with Housing Quality Standards requirements of its HOME Investment Partnerships Program. Assistance Listing Number and Title: 14.239 – COVID 19 – HOME Investment Partnerships Program 14.239 – HOME Investment Partnerships Program Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: M21-MP530201, M17-MC5320201, M18-MC5320201, M19-MC5320201, M20-MC5320201, M23-MC5320201, M24-MC5320201, M25-MC5320201, 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 During 2025, the City spent $2,400,313 in HOME Investment Partnerships Program (HOME) funds. The HOME program expands the supply of decent and affordable housing, particularly for low- and very low-income people; strengthens the abilities of state and local governments to design and implement strategies for achieving adequate supplies of decent, affordable housing; provides financial and technical assistance to participating jurisdictions, including the development of model programs for affordable low-income housing; and extends and strengthens partnerships among all levels of government and the private sector, including for-profit and nonprofit organizations, in the production and operation of affordable housing. 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. Federal regulations require the City to perform on-site inspections of HOME-assisted units at least every three years to determine compliance with housing quality standards (HQS) and verify information that owners submit. For any deficiencies identified during inspections, federal regulations require the City to follow its own written procedures to ensure project owners take timely corrective and remedial actions to address deficiencies. The City’s HOME Program Monitoring Plan requires owners to repair and schedule reinspection for any life-threatening HQS deficiencies within 24 hours of the failed inspection and to repair and schedule reinspection for moderate and severe HQS deficiencies within 30 days of the failed inspection. During the COVID-19 pandemic, the U.S. Department of Housing and Urban Development (HUD) waived requirements to perform on-site inspections to protect staff and limit the spread of COVID-19. The waiver period began April 10, 2020, and applied to ongoing periodic inspections but did not apply to initial inspections upon completion of construction and rehabilitation. Within 180 days of the waiver period end date of December 31, 2021, the City was required to physically inspect units that would have been subject to ongoing inspections. Description of Condition Our audit found the City’s internal controls were ineffective for ensuring compliance with the program’s HQS requirements. Specifically, although the City maintained a list identifying all HOME-assisted units due for inspection in 2025, it did not inspect all units when due as HUD requires. Additionally, it did not verify that any needed repairs for inspected units were completed on time in accordance with the City’s HOME Program Monitoring Plan as required. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition Beginning in 2020, the City experienced turnover in positions responsible for managing the HOME program. Current staff and management said inspection documentation was incomplete, and they could not locate documentation to confirm whether former employees had inspected units after the waiver period ended as required or contacted HUD to establish an inspection plan. As a result, they implemented a plan to inspect one-third of the HOME program project portfolio each year beginning with 2025 but did not contact HUD to confirm whether this plan would comply with program requirements. Further, current staff did not have experience with inspection requirements and experienced delays with property and project owners completing repairs on time. Effect of Condition Our audit found the City did not inspect 193 out of 258 (75%) HOME-assisted units due for inspection in 2025 as required. Additionally, using a nonstatistical sample, we found two out of 12 (16.7%) HOME-assisted units inspected in 2025 had deficiencies that were not repaired and scheduled for reinspection on time. One unit had a life-threatening deficiency and was not repaired and scheduled for reinspection within 24 hours and the other unit had a moderate deficiency that was not repaired and scheduled for reinspection within 30 days, as required. Because the City did not inspect all units due in 2025 and did not repair HQS deficiencies and schedule reinspection within the required period, it cannot demonstrate that HOME-assisted units complied with HQS requirements. Recommendation We recommend the City strengthen and follow internal controls to ensure it complies with HUD housing quality standards requirements and its established HOME Program Monitoring Plan. Specifically, the City should: • Inspect all HOME-assisted units at least every three years in accordance with HUD requirements • Follow up on HQS deficiencies and ensure they are repaired and scheduled for reinspection on time as HUD and the City’s HOME Program Monitoring Plan require City’s Response The City agrees with Washington State Auditor’s finding and appreciates their review. Immediately, the Housing and Human Services (HHS) division plans to hire a temporary position dedicated to Housing Quality Standards (HQS) inspections and monitoring. This position will focus on completing the outstanding HQS/NSPIRE inspections and bringing the City’s Affordable Housing portfolio into compliance. To establish sustainable internal controls and prevent the issue from recurring, the HHS division will also hire an additional Program Professional to increase staff capacity and ensure that required monitoring activities are completed on an ongoing basis. Once the outstanding inspections are completed, staff will maintain a regular monitoring schedule to ensure each property is monitored at least once every three years. In addition, HHS staff have engaged the U.S. Department of Housing and Urban Development (HUD) to review the City’s monitoring and inspection model and establish an agreed-upon monitoring plan for the HOME program. This plan will provide the City with a clear framework for HQS/NSPIRE inspections, property monitoring, documentation, and ongoing compliance. Auditor’s Remarks We appreciate the City’s commitment to resolve this finding and thank the City 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 92, Section 251, Property standards and inspections, establishes requirements for performing inspections no less than every three years and for participating jurisdictions to establish procedures that ensure timely corrective and remedial actions taken by the project owner to address identified deficiencies.