The Housing Authority did not have adequate controls in
place to ensure compliance with federal program
requirements.
Assistance Listing Number and Title: 14.871 – Section 8 Housing Choice
Vouchers
14.871 – COVID-19 Section 8 Housing
Choice Vouchers
14.879 – Mainstream Vouchers
Federal Grantor Name: U.S. Department of Housing and Urban
Development
Federal Award/Contract Number: S-0088V
Pass-through Entity Name: N/A
Pass-through Award/Contract
Number:
N/A
Known Questioned Cost Amount: $58,569
Background
During 2020, the Housing Authority spent $8,052,481 under the Housing Voucher
Cluster program, which includes the Section 8 Housing Choice Vouchers program
(HCVP) and the Mainstream Vouchers (MV) program. The HCVP provides rental
assistance to help families with very low incomes afford decent, safe, and sanitary
rental housing. The HCVP is administered by local public housing agencies (PHAs)
authorized under state law to operate housing programs within an area or
jurisdiction. The MV program enables families, for whom the head, spouse, or
co-head is a person with disabilities, to lease affordable private housing of their
choice.
The Department of Housing and Urban Development (HUD) enters into Annual
Contributions Contracts (ACCs) with the Housing Authority, allowing HUD to
provide funds so the Authority can administer the program locally.
Federal regulations require recipients of federal funds to establish and maintain
internal controls that ensure compliance with program requirements. These controls
include understanding program requirements and monitoring the effectiveness of
established controls.
Reasonable rent
The Housing Authority must maintain records to document the basis for its
determination that the rental amount set by the property owner is reasonable. The
Housing Authority must determine if the rent is reasonable at the time of initial
leasing, and at the contract anniversary if there is a five percent decrease in the
published Fair Market Rent in effect 60 days before the contract anniversary.
Housing quality standards enforcement
In Notice PIH 2020–05, published on April 10, 2020, HUD exercised its authority
under the Coronavirus Aid, Relief, and Economic Security (CARES) Act to
establish waivers and administrative flexibilities to provide relief to PHAs in
response to the COVID-19 pandemic. Subsequent revision PIH 2020-33 (issued in
November 2020) allowed PHAs to delay biennial inspections for both tenant-based
and project-based voucher units and instead rely on owners’ certifications that they
have no reasonable basis to have knowledge that life-threatening conditions exist
in their unit or any units in question. These waivers apply to Housing Quality
Standards (HQS) inspection requirements but do not waive the HQS enforcement
requirements.
For housing units that fail to meet quality standards, the Housing Authority must
require owners to correct any cited life-threatening deficiencies within 24 hours of
inspections and all other deficiencies within 30 calendar days of inspections or
within a specified Housing Authority-approved extension. If owners do not correct
the cited deficiencies within the specified correction period, the Housing Authority
must stop assistance payments beginning no later than the first of the month
following the specified correction period, or it must terminate the HAP contract.
Activities allowed / allowable costs / operating transfers and administrative fees
HAP may not be used to cover administrative expenses, nor may HAP be loaned,
advanced, or transferred to other component units or other programs.
Description of Condition
Reasonable rent
The Housing Authority did not have controls in place to ensure it determined rental
amounts were reasonable at the time of initial leasing.
Housing quality standards enforcement
The Housing Authority did not have effective internal controls in place for ensuring
compliance with the program’s HQS enforcement requirements. Specifically, the
Housing Authority did not ensure owners corrected cited life-threatening
deficiencies within 24 hours of inspections.
Activities allowed / allowable costs / operating transfers and administrative fees
The Housing Authority did not have controls in place for ensuring it only
transferred funds out of the program for allowable uses.
We consider these deficiencies in internal controls to be material weaknesses that
led to material noncompliance.
These issues were not reported as a finding in the prior audit.
Cause of Condition
Reasonable rent
The Housing Authority moved the tenants out of one of their PHA-owned units for
an extended period to rehabilitate the properties. Upon moving the tenants back into
the units, the Housing Authority established new leases with the tenants and did not
perform rent reasonableness checks as required.
Housing quality standards enforcement
Program staff believed they were not required to follow-up on failed inspections
because they thought the inspection waivers issued from HUD also allowed them
to waive following up on failed inspections.
Activities allowed / allowable costs / operating transfers and administrative fees
The Housing Authority experienced turnover in several key positions responsible
for managing operating transfers. Current employees said they did not know why
the operating transfers were made. Housing Authority staff and management relied
on the former staff to perform grant-related activities and comply with all program
requirements without adequate oversight.
Effect of Condition and Questioned Costs
Reasonable rent
We used statistical sampling to test 29 tenant files and found that nine lacked
documentation of rent reasonableness determinations. Additionally, we determined
reasonable rent determinations were not performed for all 134 Housing
Authority-owned units before tenants were housed and received their first
assistance payment.
Without rent reasonableness determinations, the Housing Authority cannot assure
granting agencies that it has effective processes in place to ensure compliance with
program requirements.
Housing quality standards enforcement
The Housing Authority did not have documentation showing it followed-up on two
of the six failed inspections in 2020 with cited life-threatening deficiencies and
required the owners to correct the deficiencies within 24 hours of inspections.
Additionally, the Housing Authority did not stop assistance payments beginning no
later than the first of the month following the specified correction period or
terminate the HAP contract. Because the Housing Authority did not follow up on
HQS deficiencies within the required time frame, it cannot demonstrate that the
housing units met enforcement requirements.
Activities allowed / allowable costs / operating transfers and administrative fees
The audit identified an operating transfer of $58,569 out of the HCVP into the
Mainstream Vouchers program that was an unallowable use of the funds. As a
result, we are questioning these costs.
Recommendations
Reasonable rent
We recommend the Housing Authority strengthen internal controls to ensure it
performs reasonable rent determinations at the time of initial leasing in compliance
with program requirements.
Housing quality standards enforcement
We recommend the Housing Authority strengthen internal controls to follow-up on
failed inspections with cited life-threatening HQS deficiencies and require owners
to correct them timely, as the program requires.
Activities allowed / allowable costs / operating transfers and administrative fees
We recommend the Housing Authority improve internal controls to ensure it only
charges valid and allowable costs to the program. We further recommend the
Housing Authority ensure operating transfers out of the HCVP are used only for
activities allowed under the program.
Housing Authority’s Response
The Housing Authority of the City of Renton (RHA) agrees with this finding and
has taken and will continue to take steps to create Internal Controls to ensure
compliance for program compliance, especially on the HCV or Housing Choice
Voucher program. SEMAP spreadsheets and guidance have been created to
monitor and audit the 14 Program Indicators. Internal Controls will also be
created to ensure that Independent Audits for the Housing Authority as a
whole are completed Annually and submitted to HUD FASS and Federal Audit
Clearinghouse by the 9th month after its FYE date of December 31st.
Auditor’s Remarks
We appreciate the Housing Authority’s commitment to resolve this finding and
thank the Housing Authority 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 982, Section 8 Tenant-Based Assistance: Housing Choice
Voucher Program, Section 152, Administrative fee, outlines the purpose and use of
administrative fees.
Title 24 CFR Part 982, Section 8 Tenant-Based Assistance: Housing Choice
Voucher Program, Section 158, Program accounts and records, establishes
requirements over program accounts and records.
Title 24 CFR Part 982, Section 8 Tenant-Based Assistance: Housing Choice
Voucher Program, section 404, Maintenance: Owner and family responsibility;
PHA remedies, establishes enforcement requirements for housing quality
standards.
Title 24 CFR Part 982, Section 8 Tenant-based assistance: Housing Choice
Voucher Program, Section 507, establishes the requirements over rent
reasonableness.