Finding 1229975 (2025-002)

Material Weakness Repeat Finding
Requirement
N
Questioned Costs
-
Year
2025
Accepted
2026-09-16

AI Summary

  • Core Issue: The Commission failed to conduct timely Housing Quality Standards (HQS) inspections, leading to a material weakness in internal controls and noncompliance with HUD requirements.
  • Impacted Requirements: Biennial inspections and quality control re-inspections were not completed as mandated, affecting compliance and potentially HAP payment calculations.
  • Recommended Follow-Up: The Commission should review and improve its HQS inspection policies and collaborate closely with the third-party inspection company to ensure timely inspections and proper documentation.

Finding Text

HQS Inspections - N Federal Agency: U.S. Department of Housing and Urban Development Federal Program: Housing Voucher Cluster FALN: 14.871/14.879 Federal Award Identification Number and Year: MD023, 2025 Award Period: 1/1/2025-12/31/2025 Type of Finding: Material Weakness in Internal Control over Compliance and Material Noncompliance (Modified Opinion) Criteria or specific requirement: 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)). Condition: The Commission did not follow its policies and procedures designed to ensure HQS inspections were performed timely. Questioned costs: None identified. The Authority did not complete the annual HQS inspection within the required timeframe for the unit tested. While this represents noncompliance with program requirements, we did not perform procedures to determine whether the delay was attributable to the Authority, the landlord, or the participant. As a result, we did not determine whether HAP payments made during the period of noncompliance were unallowable. Accordingly, questioned costs could not be determined. Context: During testing of 60 tenant files, exceptions were noted in the following: - 10 units sampled were not inspected on a biennial basis - 3 units were not inspected at least 2 years prior to the HUD-50058’s effective date that was selected for testing Cause: The Commission did not work closely with the third party inspection company to ensure inspections were being performed timely. Effect: The Commission is not in compliance with HUD requirements. This could have an impact on HAP calculations. Repeat finding: Yes, 2024-002 Recommendation: We recommend the Commission review its HQS inspection policies and procedures and discuss these standards with the third-party inspection company that it utilizes for these inspections to ensure all inspections are performed timely and that all necessary documentation is maintained for each inspection. Views of responsible officials: There is no disagreement with the audit finding.

Corrective Action Plan

Housing Voucher Cluster – FALN No. 14.871 & 14.879 – HQS Inspections - N Recommendation: We recommend the Commission review its HQS inspection policies and procedures and discuss these standards with the third-party inspection company that it utilizes for these inspections to ensure all inspections are performed timely and that all necessary documentation is maintained for each inspection. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: HCHC’s third-part inspection company was not able to meet the terms of its contract or the HCVP requirements, partly due to staff turnover. As a result, HCHC terminated the contract as of the end of June, 2026, and hired two new contractors. HCHC has a third inspection company under contract to fill in when needed. Staff is providing the new contractors with a detailed SOP to ensure a mutual understanding of all necessary inspection actions. HCHC staff will meet with the inspection companies weekly to discuss progress, results and issues that arise during inspections. Name(s) of the contact person(s) responsible for corrective action: Crystal Gorham, Director of Rental Assistance Planned completion date for corrective action plan: in progress all correction should be reflected by December 2026.

Categories

HUD Housing Programs Allowable Costs / Cost Principles Material Weakness

Other Findings in this Audit

  • 1229972 2025-001
    Material Weakness Repeat
  • 1229973 2025-001
    Material Weakness Repeat
  • 1229974 2025-002
    Material Weakness Repeat
  • 1229976 2025-003
    Material Weakness Repeat
  • 1229977 2025-003
    Material Weakness Repeat
  • 1229978 2025-004
    Material Weakness Repeat
  • 1229979 2025-004
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
14.871 SECTION 8 HOUSING CHOICE VOUCHERS $31.12M
21.027 CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS $3.28M
14.879 MAINSTREAM VOUCHERS $1.92M
14.241 HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS $315,087
14.218 COMMUNITY DEVELOPMENT BLOCK GRANTS/ENTITLEMENT GRANTS $220,985
14.896 FAMILY SELF-SUFFICIENCY PROGRAM $103,264
14.U01 FSS ESCROW FORFEITURE ACCOUNT $1,459