Finding 1219672 (2025-003)

Finding Number: 2025-003 Finding Title: Internal Controls over Compliance of Reinspection’s to Enforce Housing Quality Standards Compliance Requirement(s): Special Tests – Housing Quality Standards Enforcement Classification: Material Weakness Programs: Section 8 Housing Choice Vouchers ALN #: 14.871 Pass-through entity: N/A – Direct Award Federal Agency: Department of Housing and Urban Development (HUD) Federal Award Numbers: Multiple – City receives incremental funding throughout the year Federal Award Year: 2025 Criteria or specific requirement (including statutory, regulatory, or other citation Part 982—Section 8 Tenant-Based Assistance: Housing Choice Voucher Program 24 CFR 982.54(d)(21) Procedural guidelines and performance standards for conducting required HQS inspections, including: (d) The PHA Administrative Plan must cover all the PHA's local policies for administration of the program, including the PHA's policies on the following subjects (see 24 CFR 983.10 for a list of subjects specific to the project-based voucher (PBV) program that also must be included in the Administrative Plan of a PHA that operates a PBV program): (i) Any deficiency that the Public Housing Authority (PHA) has adopted as a life-threatening deficiency that is not a HUD-required life-threatening deficiency (ii) For PHAs that adopt the initial inspection non-life-threatening deficiency option: a. The PHA's policy on whether the provision will apply to all initial inspections or a portion of initial inspections. b. The PHA's policy on whether the provision will be applied to only some inspections and how the units will be selected. c. The PHA's policy on using withheld HAP funds to repay an owner once the unit is in compliance with HQS. (iii) For PHAs that adopt the alternative inspection provision: a. The PHA's policy on how it will apply the provision to initial and periodic inspections. b. The specific alternative inspection method used by the PHA. c. The specific properties or types of properties where the alternative inspection method will be employed. d. For initial inspections, the maximum amount of time the PHA will withhold HAP if the owner does not correct the HQS deficiencies within the cure period, and the period of time after which the PHA will terminate the HAP contract for the owner's failure to correct the deficiencies, which may not exceed 180 days from the effective date of the HAP contract. (iv) The PHA's policy on charging a reinspection fee to owners. 24 CFR 982.54(d)(22) The PHA's policy on withholding HAP for units that do not meet HQS (see § 982.404(d)(1)) 24 CFR 982.406(e)(5) The PHA may commence housing assistance payments to the owner and make housing assistance payments retroactive to the effective date of the HAP contract only after the unit passes the PHA's HQS inspection. If the unit does not pass the HQS inspection, the PHA may not make housing assistance payments to the owner until all the deficiencies have been corrected. If a deficiency is life- threatening, the owner must correct the deficiency within 24 hours of notification from the PHA. For other deficiencies, the owner must correct the deficiency within no more than 30 calendar days (or any PHA- approved extension) of notification from the PHA. If the owner corrects the deficiencies within the required cure period, the PHA makes the housing assistance payments retroactive to the effective date of the HAP contract. PHA Policy 8-Ii.F. Inspection Results And Reinspection’s For Units Under Hap Contract The City of Long Beach PHA Admin Plan requires that each deficiency is identified in the NPSIRE standards as either life-threatening, severe, moderate, or low. Further indicating that units under HAP contract, must correct for life-threatening deficiencies within 24 hours after notice has been provided and all others must be corrected within 30 days (or a PHA-approved extension) after notice has been provided. Life-threatening deficiencies require notifying both parties by telephone or email immediately while Severe or moderate deficiencies will be provided through a written notification within five business days of the inspection. Both will include specifying who is responsible for correcting the violation and the time frame within which the failure must be corrected. If low deficiencies are identified, these deficiencies will only be noted for informational purposes. The notice will inform the party which caused the deficiencies, whether owner or family, that if life-threatening conditions are not corrected within 24 hours, and non-life-threatening conditions are not corrected within the specified time frame (or any PHA-approved extension), the owner’s HAP will be abated in accordance with PHA policy (Section 8-II.G.) or the family’s assistance will be terminated in accordance with PHA policy (Chapter 12). 2 CFR 200 Subpart D – Post Federal Award Requirements 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designated to reasonably ensure compliance with Federal laws, regulations and program compliance requirements. Effective internal controls should include procedures to ensure eligibility criteria are met and documented. Condition The PHA lacked adequate internal controls to ensure the timely reinspection of all initial inspections required for housing quality standards enforcement. Of the 40 sampled cases, 3 re-inspections did not occur as mandated. Consequently, the re-inspections were not conducted within the timeframes established by PHA policy, which aligns with federal requirements. According to policy, a 30-day period for reinspection begins after notification of inspection results, which must be sent within five days of the initial inspection completion, totaling 35 days resulting in noncompliance with PHA policy 8-II.F and 24 CFR 982.406(e)(5). Testing identified that 2 out of 40 units were classified as Life-Threatening conditions under PHA policy, mandating correction within 24 hours. Despite this requirement, the reinspections conducted exceeded the stipulated 24-hour correction and verification period. Additionally, 1 unit which failed inspections November 14, 2024 and November 15, 2024 were subject to attempts from the PHA to reinspect the unit. After 3 attempts in December 2024 and January 2025 the PHA did not issue the Notice of Intended Action Enforcement of Family Obligation timely in March 2025. The unit is still going through the informal hearing process. Cause The delayed reinspection’s and mistakenly closed inspection were due to constraints on resources and a change in the system utilized by HACLB to administer the program during the year. For the inspections classified as life-threatening, the categorization within the system was incorrect due to mistakes during the data entry process. Effect or potential effect The PHA did not perform necessary procedures to enforce owner and/or family obligations to correct deficiencies, which if unresolved, could lead to abated housing assistance payments and impact the quality of housing for tenants. Questioned costs None Context A sample of 40 required re-inspections related to housing quality standards enforcements over failed initial inspections were tested. These failed inspections, which require items to be corrected before being subjected to re-inspection by the PHA until eventually cleared. 1 re-inspection did not occur and remained open as of the time of this audit. This item related to a failed inspection which occurred in January 2025 is over 15 months past its required re-inspection date. The time period for this initial failed inspection occurred shortly after their implementation of enhanced reinspection scheduling process in December 2024, using its MRI housing software to automatically schedule re-inspections within the 30-day remediation period. The new system has lead to reduced instances of late or missed re-inspections in our testing when compared to the prior year. Identification as a repeat finding if applicable 2024-005 Recommendation In alignment with steps already take by HACLB to strengthen compliance and reduce instances of delayed re-inspections, we recommend HACLB continue refining their controls over the timeliness and completeness of its the housing quality standard enforcement scheduling and monitoring. Continuing with its previous corrective actions in this area, HACLB should enhance staff procedures over the monitoring of the system and related scheduling reports to ensure that every required re-inspection is scheduled and has taken place in compliance with program requirements. Views of responsible officials and planned corrective actions HACLB recognizes the importance of conducting timely re-inspections to ensure compliance with HUD National Standards for the Physical Inspections of Real Estate (NSPIRE) enforcement requirements, formerly known as Housing Quality Standards (HQS). HACLB has reviewed the circumstances surrounding the single delayed reinspection, although attempts were made to reinspect the unit, and has evaluated opportunities to strengthen internal controls over reinspection scheduling and monitoring. Beginning in December 2024, HACLB implemented enhancements to its MRI housing management system to strengthen oversight of inspection enforcement activities by scheduling re-inspections in advance of the required 30-day correction period, reducing the risk of missed or delayed re-inspections. To further strengthen internal controls, HACLB centralized the process for non-compliance. Inspection staff will regularly review open enforcement cases and reports to identify and promptly address any overdue or pending re-inspections. HACLB will also continue providing staff guidance and training regarding re-inspection scheduling, case monitoring, and NSPIRE enforcement requirements. These measures are intended to improve accountability, strengthen monitoring controls, and reduce the risk of missed or delayed re-inspections. HACLB remains committed to continuous improvement and maintaining compliance with HUD requirements governing enforcement.