Finding 25816 (2022-001)

Significant Deficiency Repeat Finding
Requirement
N
Questioned Costs
-
Year
2022
Accepted
2022-11-02

AI Summary

  • Core Issue: Project management failed to complete necessary repairs and conduct annual housing quality inspections, resulting in units not meeting safety standards.
  • Impacted Requirements: Violations of 24 CFR 886.323(a) and 24 CFR 882.516(b) regarding maintenance and inspection obligations could lead to material defaults.
  • Recommended Follow-Up: Implement internal controls to ensure timely completion of repairs and adherence to inspection schedules for all units.

Finding Text

Condition: Project management did not complete repairs needed to ensure that units meet housing quality standards, nor performed housing quality inspections at least annually. Context: As part of our audit procedure, we selected 9 units to evaluate housing quality standards. Six selections resulted in HQS Unit Inspections. For two of the six HQS unit inspections, management indicated on the inspection report that the unit was not in decent, safe and sanitary condition. Work orders related to the six HQS unit inspections were still opened and required repairs as documented on the work orders were not completed as of June 30, 2022. For two of the six units, housing quality inspections were not performed at least annually. Criteria: 24 CRF 886.323(a) states that the owner shall maintain and operate the project so as to provide decent, safe, and sanitary housing and the owner shall provide all the services, maintenance, and utilities which he or she agrees to provide under the contract and the lease. Failure to do so shall be considered a material default under the contract and Regulatory Agreement, if any. 24 CRF 882.516 (b) states that in addition to the inspections required prior to execution of the Contract, the PHA must inspect or cause to be inspected each dwelling unit under Contract at least annually and at such other times as may be necessary to assure that the Owner is meeting the obligations to maintain the unit in decent, safe and sanitary condition and to provide the agreed upon utilities and other services. Cause: As a consequence of the Covid-19 pandemic, most of prior year unit inspections were completed in August 2021. Current year unit inspections were completed during the months of February and March of 2022. Employees targeted their efforts on completing emergency repairs on those inspections. Major repairs to units with prolonged vacancy periods were performed during the current year. Effect: 24 CRF 886.323 ( e) states that if HUD notifies the owner that he has failed to maintain a dwelling unit in decent, safe, and sanitary condition, and the owner fails to take corrective action within the time prescribed in the notice, HUD may exercise any of its rights or remedies under the contract, or Regulatory Agreement, if any, including abatement of housing assistance payments (even if the family continues to occupy the unit) and rescission of the sale. Auditor?s recommendation: The project management should implement internal control and procedures to assure that all units under contract be decent, safe and sanitary. Required repairs should be completed timely.

Corrective Action Plan

Views of Responsible officials and corrective actions: The inspections of Los Hucares I could not be completed annually, as required, due to restrictions related to Covid 19. Inspections for all units will be done before December 31, 2022. Work orders were not completed because many of the repairs are extraordinary, and personnel take more time to complete them. Maintenance personnel is not enough for all repairs needed and project require additional funds for all needs. We prioritized emergency repairs on occupied units and vacant units. We met with owner representative to discuss alternatives for additional funds for the project and they are in the process to evaluate them. Instructions were imparted to the project Administrator to inspect all units semiannually rather than annually, according to the Management Agent?s Procedures, starting on January 2023. In addition, we have created working groups from other projects to assist in the repairs to the units. We will continue following up Owner representative for another source of funds to comply with all Federal Regulations.

Categories

HUD Housing Programs Internal Control / Segregation of Duties

Other Findings in this Audit

  • 602258 2022-001
    Significant Deficiency Repeat

Programs in Audit

ALN Program Name Expenditures
10.415 Rural Rental Housing Loans $1.11M
14.195 Section 8 Housing Assistance Payments Program $371,189