Finding 501929 (2023-001)

The Housing Authority had inadequate internal controls for ensuring compliance with the Housing Quality Standards inspection requirements of its Project-Based Rental Assistance Program. Assistance Listing Number and Title: 14.195 – Project-Based Rental Assistance (PBRA) Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: WA19R000018; WA190038002; WA19M000050; WA190015002 Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2022-002 Description of Condition The Housing Authority spent $909,939 in 2023 under the Project-Based Rental Assistance Program, which provides rental assistance to help low-income families afford decent, safe and sanitary rental housing. Federal regulations require recipients to establish and follow internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. The Housing Authority must inspect units leased to families at the beginning of occupancy and at least annually to determine if the units meet federal Housing Quality Standards (HQS), as well as maintain inspection documentation to demonstrate compliance. Our audit found the Housing Authority’s internal controls were ineffective for ensuring compliance with the program’s inspection requirements. The Housing Authority has procedures for identifying units requiring inspections. However, the procedures did not ensure the Housing Authority completed annual inspections as required. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition The Housing Authority adopted a new process for conducting all inspections for a given property during the same month. However, this process did not ensure that the Housing Authority consistently completed inspections for individual units within one year of the most recent inspections. Effect of Condition Using nonstatistical sampling, we tested 25 tenant files requiring housing unit inspections. Our testing found the Housing Authority inspected all 25 units in 2023, but did not complete 14 of these inspections within one year of the previous inspection, as the program requires. Without timely inspections, the Housing Authority cannot demonstrate that its housing units met HQS inspection requirements and that they were being consistently maintained in a decent, safe and sanitary manner. Recommendation We recommend the Housing Authority improve internal controls to ensure it complies with HQS inspection requirements. Housing Authority’s Response In 2023, CCWHA resumed its annual inspections of leased units, assigning a specific inspection month to each property. We acknowledge that, during this transition, certain units were not inspected within the expected annual timeline, as noted by the State Auditor's Office. This was primarily due to tenant refusals and necessary rescheduling. To address this, CCWHA has implemented the following corrective measures: 1.Revised Inspection Schedule: We have adopted a new system to ensure that inspections are completed in the month preceding the assigned inspection month from the prior year. 2.Ongoing Staff Training: Housing Authority staff responsible for inspections will continue to receive regular training to emphasize the importance of timely, comprehensive assessments. This training reinforces the need for compliance with federal Housing Quality Standards (HQS) and the importance of maintaining accurate records. We fully understand the importance of adhering to HQS requirements to ensure a safe and healthy living environment for our tenants. We are committed to continuously improving our inspection processes and appreciate the opportunity to address these concerns. Auditor’s Remarks We appreciate the Housing Authority's commitment to resolving the issues noted and will follow up during the next audit. Applicable Laws and Regulations Title 24 CFR Part 884, Section 8 Housing Assistance Payments Program for New Construction, section 217, Maintenance, operations, and inspections establishes requirements to conduct periodic inspections to determine if the owner is meeting his obligation to maintain the units in Decent, Safe, and Sanitary condition and to provide the agreed upon utilities and other services. HUD Handbook 4350.3 Occupancy Requirements of Subsidized Multifamily Housing Programs, November 2013, 6-29 Unit Inspections, requires that owners perform unit inspections on at least an annual basis to determine whether appliances and equipment in the unit are functioning properly and to assess whether a component needs to be repaired or replaced. 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.