2022-001 The Housing Authority had inadequate internal controls to ensure compliance with Housing Quality Standards inspection 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: WA054VO/ WA054AF /WA054EH 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 During fiscal year 2022, the Housing Authority spent $34,532,939 under the Housing Voucher Cluster program, which includes the Section 8 Housing Choice Vouchers program (HCVP). Of this amount, $64,069 was spent on the Emergency Housing Vouchers award that is not subject to Housing Quality Standards (HQS) inspection requirements for 2022, and it is not included in this finding. The HCVP provides rental assistance to help families with very low incomes afford decent, safe and sanitary rental housing. Federal regulations require recipients to establish and follow 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 HQS. The Coronavirus Aid, Relief, and Economic Security (CARES) Act (Public Law 116-136) provides the U.S. Department of Housing and Urban Development (HUD) with broad authority to waive or establish alternative requirements for numerous statutory and regulatory requirements for the Housing Voucher Cluster. In Notice PIH 2020-05, published on April 10, 2020, HUD exercised its authority under the CARES Act to establish waivers and administrative flexibilities to provide relief to Public Housing Agencies (PHAs) in response to the COVID-19 pandemic. Subsequent revisions PIH 2020-33 (issued in November 2020) and PIH 2021-14 (issued in May 2021) allowed PHAs to delay biennial inspections for both tenant-based and project-based voucher units. PIH 2021-14 also requires PHAs to conduct all delayed biennial inspections from calendar years 2020 and 2021 as soon as possible, but no later than June 30, 2022, and December 31, 2022, respectively. Our audit found the Housing Authority?s established internal controls were ineffective for ensuring compliance with the program?s HQS inspection requirements. Specifically, the Housing Authority did not perform the delayed biennial inspections by the required dates. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition The Housing Authority was not able to conduct HQS inspections during 2020 and part of 2021 due to COVID-19. This resulted in a backlog of inspections, as well as an increase in failed inspections from 17 percent annually to about 50 percent, which required reinspections. When the Housing Authority resumed inspections in accordance with HUD?s notice, the number of inspections due went from 1,200 annually to 2,500, and it only had one inspector available to complete them. The Housing Authority also experienced turnover in this inspector position, as well as a software conversion, which included the HQS inspection tracking system during 2022. The Housing Authority also experienced an increased workload due to landlords' staffing and supply issues, tenants' unreported HQS violations, and deferred repairs, which further delayed the inspections. Effect of Condition The Housing Authority did not perform 901 delayed inspections by December 31, 2022, as required by HUD?s PIH 2021-14. Because the Housing Authority did not perform inspections timely, it could not demonstrate that the housing units met HQS inspection requirements. The Housing Authority completed all these delayed inspections as of August 2023. Recommendation We recommend the Housing Authority strengthen internal controls to ensure it complies with HQS inspection requirements. Housing Authority?s Response We concur with the findings. The waiver of inspections by HUD during COVID, together with the reinstatement with an unrealistic deadline, created an impossible challenge to overcome given staffing, past experience with outside contractors for the service, the condition of the units, and the lifting of waivers required five years of inspections to be completed in 12 months. We had internal controls and knew when HQS inspections were due. We didn?t have the resources to complete inspections within the unrealistic timeline. HUD was continually informed of the situation and our efforts and progress to comply. We instituted increased staffing and better quality control early on. Auditor?s Remarks We thank the Housing Authority for its cooperation throughout the audit and the steps it has taken 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. Notice PIH 2020-33(HA), REV-2, COVID-19 Statutory and Regulatory Waivers and Alternative Requirements for the Public Housing, Housing Choice Voucher (including Mainstream and Mod Rehab), Indian Housing Block Grant and Indian Community Development Block Grant programs, Suspension of Public Housing Assessment System and Section Eight Management Assessment Program, Revision 2. Notice PIH2021-14(HA), COVID-19 Statutory and Regulatory Waivers and Alternative Requirements for the Public Housing, Housing Choice Voucher (including Mainstream and Mod Rehab), Indian Housing Block Grant and Indian Community Development Block Grant programs, Suspension of Public Housing Assessment System and Section Eight Management Assessment Program, Revision 3. Title 24 CFR Part 982, Section 8 Tenant-Based Assistance: Housing Choice Voucher Program, section 405, PHA initial and periodic unit inspection, establishes inspection requirements for housing quality standards.
2022-001 The Housing Authority had inadequate internal controls to ensure compliance with Housing Quality Standards inspection 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: WA054VO/ WA054AF /WA054EH 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 During fiscal year 2022, the Housing Authority spent $34,532,939 under the Housing Voucher Cluster program, which includes the Section 8 Housing Choice Vouchers program (HCVP). Of this amount, $64,069 was spent on the Emergency Housing Vouchers award that is not subject to Housing Quality Standards (HQS) inspection requirements for 2022, and it is not included in this finding. The HCVP provides rental assistance to help families with very low incomes afford decent, safe and sanitary rental housing. Federal regulations require recipients to establish and follow 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 HQS. The Coronavirus Aid, Relief, and Economic Security (CARES) Act (Public Law 116-136) provides the U.S. Department of Housing and Urban Development (HUD) with broad authority to waive or establish alternative requirements for numerous statutory and regulatory requirements for the Housing Voucher Cluster. In Notice PIH 2020-05, published on April 10, 2020, HUD exercised its authority under the CARES Act to establish waivers and administrative flexibilities to provide relief to Public Housing Agencies (PHAs) in response to the COVID-19 pandemic. Subsequent revisions PIH 2020-33 (issued in November 2020) and PIH 2021-14 (issued in May 2021) allowed PHAs to delay biennial inspections for both tenant-based and project-based voucher units. PIH 2021-14 also requires PHAs to conduct all delayed biennial inspections from calendar years 2020 and 2021 as soon as possible, but no later than June 30, 2022, and December 31, 2022, respectively. Our audit found the Housing Authority?s established internal controls were ineffective for ensuring compliance with the program?s HQS inspection requirements. Specifically, the Housing Authority did not perform the delayed biennial inspections by the required dates. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition The Housing Authority was not able to conduct HQS inspections during 2020 and part of 2021 due to COVID-19. This resulted in a backlog of inspections, as well as an increase in failed inspections from 17 percent annually to about 50 percent, which required reinspections. When the Housing Authority resumed inspections in accordance with HUD?s notice, the number of inspections due went from 1,200 annually to 2,500, and it only had one inspector available to complete them. The Housing Authority also experienced turnover in this inspector position, as well as a software conversion, which included the HQS inspection tracking system during 2022. The Housing Authority also experienced an increased workload due to landlords' staffing and supply issues, tenants' unreported HQS violations, and deferred repairs, which further delayed the inspections. Effect of Condition The Housing Authority did not perform 901 delayed inspections by December 31, 2022, as required by HUD?s PIH 2021-14. Because the Housing Authority did not perform inspections timely, it could not demonstrate that the housing units met HQS inspection requirements. The Housing Authority completed all these delayed inspections as of August 2023. Recommendation We recommend the Housing Authority strengthen internal controls to ensure it complies with HQS inspection requirements. Housing Authority?s Response We concur with the findings. The waiver of inspections by HUD during COVID, together with the reinstatement with an unrealistic deadline, created an impossible challenge to overcome given staffing, past experience with outside contractors for the service, the condition of the units, and the lifting of waivers required five years of inspections to be completed in 12 months. We had internal controls and knew when HQS inspections were due. We didn?t have the resources to complete inspections within the unrealistic timeline. HUD was continually informed of the situation and our efforts and progress to comply. We instituted increased staffing and better quality control early on. Auditor?s Remarks We thank the Housing Authority for its cooperation throughout the audit and the steps it has taken 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. Notice PIH 2020-33(HA), REV-2, COVID-19 Statutory and Regulatory Waivers and Alternative Requirements for the Public Housing, Housing Choice Voucher (including Mainstream and Mod Rehab), Indian Housing Block Grant and Indian Community Development Block Grant programs, Suspension of Public Housing Assessment System and Section Eight Management Assessment Program, Revision 2. Notice PIH2021-14(HA), COVID-19 Statutory and Regulatory Waivers and Alternative Requirements for the Public Housing, Housing Choice Voucher (including Mainstream and Mod Rehab), Indian Housing Block Grant and Indian Community Development Block Grant programs, Suspension of Public Housing Assessment System and Section Eight Management Assessment Program, Revision 3. Title 24 CFR Part 982, Section 8 Tenant-Based Assistance: Housing Choice Voucher Program, section 405, PHA initial and periodic unit inspection, establishes inspection requirements for housing quality standards.