2025-003 – Special Tests – Internal Control and Compliance over National Standards for the Physical Inspection of Real Estate (NSPIRE) / Housing Quality Standards Inspections (Material Weakness) Information on the Federal Program: Assistance Listing Number: 14.871 Federal Program Name: Housing Voucher Cluster Federal Agency: Department of Housing and Urban Development Pass-Through Entity: N/A Federal Award Number and Award Year: CA120 Criteria or Specific Requirement (Including Statutory, Regulatory, or Other Citation): Pursuant to 24 CFR 982.405(b), the Public PHA (PHA) must inspect the unit leased to a family prior to the initial term of the lease, at least biennially during assisted occupancy, and at other times as needed, to determine if the unit meets Housing Quality Standards (HQS). Pursuant to 2025 Compliance Supplement: The PHA must inspect the unit leased to a family at least biennially to determine if the unit meets Housing Quality Standards (HQS) and the PHA must conduct quality control re-inspections. The PHA must prepare a unit inspection report (24 CFR sections 982.158(d) and 982.405(b)). However, NSPIRE for HCV and Project Based Vouchers (PBV) programs, referred to as NSPIRE-V during HUD’s demonstration, was effective October 1, 2023, and replaced HQS, as previously defined in 24 CFR 982.401, as the inspection standards for these programs. As announced in the Federal Register, “Economic Growth Regulatory Relief and Consumer Protection Act: Implementation of National Standards for the Physical Inspection of Real Estate (NSPIRE); Extension of NSPIRE Compliance Date for HCV Programs,” HUD extended the compliance date for HCV and PBV programs until October 1, 2024. This applies to all Public Housing Agencies (PHAs), including MTW PHAs, administering Section 8 Housing Choice Voucher programs. For units under HAP contract that fail to meet HQS, if the reported deficiency is life-threatening, the PHA must, within 24 hours of notification, both inspect the housing unit and notify the owner if the life-threatening deficiency is confirmed. The owner must then make the repairs within 24 hours of PHA notification. If the reported deficiency is non-life-threatening, the PHA must, within 15 days of notification, both inspect the unit and notify the owner if the deficiency is confirmed. The owner must then make the repairs within 30 days of notification from the PHA or within any PHA-approved extension. (24 CFR section 982.405(d)). If the owner does not correct the cited HQS deficiencies within the specified correction period, the PHA must stop (abate) HAPs beginning no later than the first of the month following the specified correction period or must terminate the HAP contract. The owner is not responsible for a breach of HQS as a result of the family’s failure to pay for utilities for which the family is responsible under the lease or for tenant damage. For family-caused defects, if the family does not correct the cited HQS deficiencies within the specified correction period, the PHA must take prompt and vigorous action to enforce the family obligations (24 CFR sections 982.158(d) and 982.404). Condition: During the Housing Quality Standards (HQS) inspection testing, we tested twenty-three (23) samples and identified several instances in which the City did not comply with HUD inspection requirements. Specifically: For seven (7) of twenty-three (23) inspections tested, required re-inspections were not completed within 30 days of the failed inspections, and the City was unable to provide documentation evidencing that an extension had been granted, as required by HUD program regulations. For three (3) of twenty-three (23) inspections tested, re-inspections were either not performed or were performed without adequate supporting documentation to demonstrate compliance with HUD’s re inspection requirements. For ten (10) samples out of twenty-three (23) samples, inspections were performed more than 24 months apart, exceeding HUD’s required inspection frequency. For one (1) of twenty-three (23) inspections tested, the City was unable to locate prior inspection records to verify whether inspections were completed within the required 24-month inspection cycle. For one (1) of twenty-three (23) inspections tested, the City was unable to locate documentation supporting issuance of the initial inspection notice letter to the participant. For five (5) of twenty-three (23) inspections tested, the City was unable to locate documentation supporting issuance of failed inspection notice letters, as required to notify participants of deficiencies and required corrective actions. Additionally, in the forty (40) samples we tested for eligibility, ten (10) samples had failed inspection documented and out of which six (6) re-inspections were not performed within 30 days of the failed inspections. These instances indicate that the City did not consistently perform and document HQS inspections and reinspections in accordance with HUD program requirements. Cause: The deficiencies occurred due to weaknesses in the City’s internal control procedures over the monitoring and documentation of Housing Quality Standards inspections. Specifically, the City did not maintain adequate tracking procedures to ensure inspections and re-inspections were completed within required timeframes, and supporting documentation for certain inspection activities was not consistently retained. Effect or Potential Effect: The City has not complied with the requirements of 24 CFR 982.405(b) – Housing Quality Standards Inspections. Questioned Costs: None. Context: See condition above for the context of the finding. Repeat Finding from Prior Year, If Applicable: Yes. See prior year finding 2024-004. Recommendation: We recommend that the City strengthen its internal control procedures over HQS inspections by implementing a formal tracking and monitoring process to ensure inspections and re-inspections are completed within HUDrequired timeframes. In addition, the City should maintain complete documentation of inspection activities, including inspection dates and supporting records, to demonstrate compliance with program requirements. Views of Responsible Officials: Management concurs.