Finding 505107 (2023-003)

Material Weakness
Requirement
N
Questioned Costs
-
Year
2023
Accepted
2024-11-08
Audit: 327788
Organization: City of Long Beach (CA)
Auditor: Kpmg LLP

AI Summary

  • Core Issue: The City did not inspect the required number of HOME-assisted units, failing to meet HUD's standards for inspection frequency and statistical sampling.
  • Impacted Requirements: Compliance with Housing Quality Standards and 2 CFR 200.303 regarding internal controls and inspection protocols.
  • Recommended Follow-up: Update the internal tracking system to ensure compliance with inspection requirements and maintain records for all HOME projects.

Finding Text

Finding Number: 2023-003 Program: HOME Investment Partnerships Program (HOME) ALN #: 14.239 Pass-through entity: NA – Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Numbers: M14-MC060518, M15-MC060518, M16-MC060518, M17-MC060518, M18-MC060518, M19-MC060518, M21-MC060518, and M22-MC060518 Federal Award Year: 11/18/2015–09/01/2023, 01/19/2017–09/01/2024, 09/22/2017–09/01/2025, 09/12/2018–09/01/2026, 09/04/2019–09/01/2027, 08/19/2021–09/01/2029, and 11/09/2022–09/01/2030 Compliance Requirement: Special Tests- Housing Quality Standards Criteria During the period of affordability (i.e., the period for which the nonfederal entity must maintain subsidized housing) for HOME-assisted rental housing, the participating jurisdiction must perform on-site inspections to determine compliance with property standards and verify the information submitted by the owners no less than (a) every three years for projects containing 1 to 4 units, (b) every two years for projects containing 5 to 25 units, and (c) every year for projects containing 26 or more units. The participating jurisdiction must perform on-site inspections of rental housing occupied by tenants receiving HOME/HOME-ARP-assisted tenant-based rental assistance to determine compliance with housing quality standards (24 CFR sections 92.209(i), 92.251(f), and 92.504(d)). Additionally, per 24 CFR 92.504(d)(1)(D), inspections must be based on a statistically valid sample of units appropriate for the size of the HOME-assisted project, as set forth by HUD through a document published in the Federal Register. For projects with one to four HOME-assisted units, a participating jurisdiction must inspect all of the HOME-assisted units and all inspectable areas for each building with HOME-assisted units. However, per the HUD 2013 final rule, not less than 20% of the units can be inspected. Additionally, 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 housing quality standards are appropriately performed and documented. Conditions Found The City failed to complete inspections on the required number of HOME-assisted units and within the time period required. During our testwork we noted that 4 of the 11 property selections had less than 20% of the units inspected. Additionally, we noted that 5 of the 11 inspections did not occur within the required one-, two-, or three-year time period since the previous inspection date. The City maintains a log that indicates the property, address, minimum number of inspections required, number of units, the responsible monitor, and if the inspection passed or failed. However, the log is unable to detect that at least 20% of HOME-assisted units per project are selected for inspection. The log calculates a minimum of 15% of HOME units inspected per property/project. Additionally, per HUD regulations, the City must make a statistical sample of HOME-assisted units within a project. The log is not indicative of a statistical sample. Lastly, the log does not track all HOME projects, thus, the City is not able to demonstrate its compliance with the frequency of inspection of all sites. Cause Due to staffing constraints and the number of required inspections, the City was not able to inspect at least 20% of the units within all projects and within the required time. Further, the City’s log is not designed to include all the required elements for frequency and number of inspections. Effect Not inspecting the proper number of units and within the correct time period could cause the City to be non-compliant with HUD requirements. Questioned Costs Not applicable Repeat finding A similar finding was not reported in the prior year. Statistical sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the City update the internal tracker to ensure that 20% of HOME units are inspected, inspections are based on a statistical sample, and that all inspections occur within the required time. Additionally, the City should track all projects to ensure they are in compliance with all HOME-assisted projects. Views of Responsible Officials The Community Development Department has faced challenges in meeting its inspection goals, primarily due to resource limitations, staff redeployment and the impact of COVID-19. It is taking steps to address these issues by forming an in-house inspection team and adopting elements from HUD’s yet-to-be-released NSPIRE system. For example, three full-time positions have been filled as of May 2024 to assist with the Housing Quality Standards (HQS) efforts. While HUD guidelines have stated an acceptable rate of 15-20% in their own HQS guidelines, the City set its goal at 20%. Therefore, it is important to note that this finding is not indicative of a failure to meet the regulatory standard, but rather to meet an internal one. Furthermore, the testing shows that the standard was met when the universe of projects and inspections is examined. The Community Development Department aimed to complete 20% of inspections and achieved a completion rate of 19.65% during the fiscal year under audit. The City maintains that the intent of the regulation was met through this standard and this finding has been issued, because the inspections were uneven across individual projects. This can be attributed to resource limitations, reliance on the Housing Authority’s inspection system, and COVID-19 delays, which led to significant backlogs from prior years when access was limited. The Community Development Department is now taking more systematic, proactive measures to improve the inspection process, particularly through filled vacancies, in-house inspections conducted by department staff, and an active log indicating inspection targets. As a result, during the current fiscal year, there has been a smoother, more data-driven, systematic approach to meeting HQS requirements, as evidenced by the substantial decrease in backlog. The Department is on track to ensure that every project will meet an inspection target that meets the NSPIRE standards (as currently drafted). Response to Views of Responsible Officials As noted in the criteria section above, 24 CFR 92.504(d)(1)(D) states, inspections must be based on a statistically valid sample of units appropriate for the size of the HOME-assisted project, as set forth by HUD through a document published in the Federal Register. For projects with one to four HOME-assisted units, a participating jurisdiction must inspect all of the HOME-assisted units and all inspectable areas for each building with HOME-assisted units. However, per the HUD 2013 final rule, not less than 20% of the units can be inspected. Therefore, 20% of units are required to be inspected at each property. The 20% is not calculated based on total number of loans or HOME assisted units at the City, as indicated in Management’s response. Additionally, the City was unable to demonstrate that inspections were based on a statistically valid sample.

Corrective Action Plan

Program: HOME Investment Partnerships Program (HOME) Finding: 2023-003 Contact Person: April Apodaca Administrative & Financial Services Bureau Manager Community Development Department Phone: (562) 570-6611 Email: April.Apodaca@longbeach.gov Planned Actions: The Community Development Department has faced challenges in meeting its inspection goals, primarily due to resource limitations, staff redeployment and the impact of COVID-19. It is taking steps to address these issues by forming an in-house inspection team and adopting elements from HUD’s yet-to-be-released NSPIRE system. For example, three full-time positions have been filled as of May 2024 to assist with the Housing Quality Standards (HQS) efforts. The Community Development Department is now taking more systematic, proactive measures to improve the inspection process, particularly through filled vacancies, in-house inspections conducted by department staff, and an active log indicating inspection targets. As a result, during the current fiscal year, there has been a smoother, more data-driven, systematic approach to meeting HQS requirements, as evidenced by the substantial decrease in backlog. The Department is on track to ensure that every project will meet an inspection target that meets the NSPIRE standards (as currently drafted). The Community Development Department will continue to monitor HUD’s proposed NSPIRE standards and will rely on in-house inspections and continued alignment with those until they are finalized. HUD has indicated that the standards will not be finalized until 10/1/2025. Expected Completion Date: 9/30/2024

Categories

Matching / Level of Effort / Earmarking

Other Findings in this Audit

  • 505102 2023-002
    Material Weakness Repeat
  • 505103 2023-002
    Material Weakness Repeat
  • 505104 2023-002
    Material Weakness Repeat
  • 505105 2023-002
    Material Weakness Repeat
  • 505106 2023-002
    Material Weakness Repeat
  • 505108 2023-003
    Material Weakness
  • 505109 2023-003
    Material Weakness
  • 505110 2023-003
    Material Weakness
  • 505111 2023-003
    Material Weakness
  • 505112 2023-004
    Material Weakness
  • 505113 2023-004
    Material Weakness
  • 505114 2023-004
    Material Weakness
  • 505115 2023-004
    Material Weakness
  • 505116 2023-004
    Material Weakness
  • 505117 2023-005
    Material Weakness
  • 505118 2023-005
    Material Weakness
  • 505119 2023-006
    Material Weakness
  • 505120 2023-006
    Material Weakness
  • 505121 2023-007
    -
  • 505122 2023-007
    -
  • 505123 2023-008
    Material Weakness
  • 505124 2023-008
    Material Weakness
  • 505125 2023-009
    Material Weakness
  • 505126 2023-009
    Material Weakness
  • 505127 2023-010
    Material Weakness
  • 505128 2023-011
    Material Weakness
  • 1081544 2023-002
    Material Weakness Repeat
  • 1081545 2023-002
    Material Weakness Repeat
  • 1081546 2023-002
    Material Weakness Repeat
  • 1081547 2023-002
    Material Weakness Repeat
  • 1081548 2023-002
    Material Weakness Repeat
  • 1081549 2023-003
    Material Weakness
  • 1081550 2023-003
    Material Weakness
  • 1081551 2023-003
    Material Weakness
  • 1081552 2023-003
    Material Weakness
  • 1081553 2023-003
    Material Weakness
  • 1081554 2023-004
    Material Weakness
  • 1081555 2023-004
    Material Weakness
  • 1081556 2023-004
    Material Weakness
  • 1081557 2023-004
    Material Weakness
  • 1081558 2023-004
    Material Weakness
  • 1081559 2023-005
    Material Weakness
  • 1081560 2023-005
    Material Weakness
  • 1081561 2023-006
    Material Weakness
  • 1081562 2023-006
    Material Weakness
  • 1081563 2023-007
    -
  • 1081564 2023-007
    -
  • 1081565 2023-008
    Material Weakness
  • 1081566 2023-008
    Material Weakness
  • 1081567 2023-009
    Material Weakness
  • 1081568 2023-009
    Material Weakness
  • 1081569 2023-010
    Material Weakness
  • 1081570 2023-011
    Material Weakness

Programs in Audit

ALN Program Name Expenditures
14.871 Section 8 Housing Choice Vouchers $109.58M
14.871 Covid-19 Section 8 Housing Choice Vouchers $9.90M
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $8.84M
21.023 Covid-19 Emergency Rental Assistance Program $6.76M
10.557 Wic Special Supplemental Nutrition Program for Women, Infants, and Children $4.81M
14.218 Community Development Block Grants/entitlement Grants $3.83M
93.391 Activities to Support State, Tribal, Local and Territorial (stlt) Health Department Response to Public Health Or Healthcare Crises $2.97M
14.231 Covid-19 Emergency Solutions Grant Program $2.63M
14.267 Continuum of Care Program $2.49M
17.259 Wioa Youth Activities $1.82M
93.354 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response $1.50M
21.027 Covid-19 Coronavirus State and Local Fiscal Recovery Funds $1.38M
20.106 Covid-19 Airport Improvement Program $1.34M
93.498 Covid-19 Provider Relief Fund and American Rescue Plan (arp) Rural Distribution $1.17M
93.917 Hiv Care Formula Grants $1.11M
93.086 Healthy Marriage Promotion and Responsible Fatherhood Grants $1.10M
15.514 Reclamation States Emergency Drought Relief $1.08M
10.561 State Administrative Matching Grants for the Supplemental Nutrition Assistance Program $1.03M
97.056 Port Security Grant Program $931,745
93.069 Public Health Emergency Preparedness $917,989
15.504 Title Xvi Water Reclamation and Reuse Program $850,412
14.900 Lead Hazard Reduction Grant Program $795,149
14.905 Lead Hazard Reduction Demonstration Grant Program $790,056
93.268 Immunization Cooperative Agreements $765,063
93.967 Centers for Disease Control and Prevention Collaboration with Academia to Strengthen Public Health $686,801
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $645,239
93.323 Epidemiology and Laboratory Capacity for Infectious Diseases (elc) $424,261
97.067 Homeland Security Grant Program $369,977
16.825 Smart Prosecution Initiative $353,473
14.896 Family Self-Sufficiency Program $344,211
93.977 Sexually Transmitted Diseases (std) Prevention and Control Grants $321,057
15.916 Outdoor Recreation Acquisition, Development and Planning $310,615
20.205 Highway Planning and Construction $296,991
14.231 Emergency Solutions Grant Program $270,907
16.835 Body Worn Camera Policy and Implementation $252,470
14.239 Home Investment Partnerships Program $239,741
17.277 Wioa National Dislocated Worker Grants / Wia National Emergency Grants $236,914
20.106 Airport Improvement Program $227,664
16.738 Edward Byrne Memorial Justice Assistance Grant Program $212,696
10.559 Summer Food Service Program for Children $207,866
16.838 Comprehensive Opioid, Stimulant, and Other Substances Use Program $197,989
20.616 National Priority Safety Programs $179,047
16.560 National Institute of Justice Research, Evaluation, and Development Project Grants $151,117
93.994 Maternal and Child Health Services Block Grant to the States $150,165
20.600 State and Community Highway Safety $144,593
93.778 Medical Assistance Program $140,991
21.016 Equitable Sharing $133,000
15.557 Applied Science Grants $112,593
66.472 Beach Monitoring and Notification Program Implementation Grants $102,678
93.070 Environmental Public Health and Emergency Response $93,711
93.197 Childhood Lead Poisoning Prevention Projects, State and Local Childhood Lead Poisoning Prevention and Surveillance of Blood Lead Levels in Children $91,128
14.895 Jobs-Plus Pilot Initiative $87,063
97.042 Emergency Management Performance Grants $82,000
93.914 Hiv Emergency Relief Project Grants $69,207
93.558 Temporary Assistance for Needy Families $68,144
14.241 Housing Opportunities for Persons with Aids $57,714
93.940 Hiv Prevention Activities Health Department Based $51,943
97.106 Securing the Cities Program $37,947
93.354 Covid-19 Public Health Emergency Response: Cooperative Agreement for Emergency Response: Public Health Crisis Response $36,190
17.278 Wioa Dislocated Worker Formula Grants $34,027
93.421 Strengthening Public Health Systems and Services Through National Partnerships to Improve and Protect the Nation�s Health $25,000
16.742 Paul Coverdell Forensic Sciences Improvement Grant Program $16,009
93.116 Project Grants and Cooperative Agreements for Tuberculosis Control Programs $14,250
15.530 Water Conservation Field Services (wcfs) $14,069
93.008 Medical Reserve Corps Small Grant Program $10,000
14.256 Neighborhood Stabilization Program (recovery Act Funded) $6,429
97.042 Covid-19 Emergency Management Performance Grants $4,880
16.710 Public Safety Partnership and Community Policing Grants $3,968
17.258 Wioa Adult Program $3,890
97.024 Emergency Food and Shelter National Board Program $2,646
14.218 Covid-19 Community Development Block Grants/entitlement Grants $172