SCHEDULE OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Spokane Housing Authority January 1, 2022 through December 31, 2022 2022-001 The Housing Authority had inadequate internal controls for ensuring compliance with Housing Quality Standards enforcement requirements of its Housing Voucher Cluster program. Assistance Listing Number and Title: 14.871 ? Section 8 Housing Choice Vouchers 14.879 ? Mainstream Vouchers Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: WA055VO/WA055AF Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: Yes, Finding 2021-001 Description of Condition During fiscal year 2022, the Housing Authority spent $43,681,168 under the Housing Voucher Cluster program, which includes the Section 8 Housing Choice Vouchers program (HCVP) and Mainstream Vouchers program. Of the amount spent, $1,424,677 was spent on the Emergency Housing Vouchers award that is not subject to Housing Quality Standards (HQS) enforcement requirements for 2022 and is not included in this finding. The HCVP provides rental assistance to help families with very low incomes afford decent, safe and sanitary rental housing. The Mainstream Voucher program enables families, for whom the head, spouse or co-head is a person with disabilities, to lease affordable private housing of their choice. Federal regulations require recipients 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. The Housing Authority must inspect units leased to families at least every two years to determine if they meet federal HQS. For units under Housing Authority Payment (HAP) contract that fail to meet HQS, the Housing Authority must require owners to correct any cited life-threatening HQS deficiencies within 24 hours of inspections. Owners must correct non-life-threatening HQS deficiencies within 30 calendar days of inspections or within a specified Housing Authority-approved extension. If owners do not correct 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 correction period, or it must terminate the HAP contract. The Housing Authority must keep documentation demonstrating compliance with HQS enforcement requirements. Our audit found the Housing Authority?s established internal controls were ineffective for ensuring compliance with the program?s HQS enforcement requirements. Although the Housing Authority had internal controls for requiring owners to correct HQS deficiencies within 30 calendar days of inspections, it did not establish effective controls for requiring owners to correct any cited life-threatening HQS deficiencies within 24 hours of inspections, as the program requires. We consider this internal control deficiency to be a material weakness that led to material noncompliance. Cause of Condition Although the Housing Authority provides housing inspection training to employees, personnel responsible for conducting the HQS inspections did not follow procedures for ensuring owners corrected cited life-threatening deficiencies within 24 hours of inspections. Additionally, during monitoring of the program, Housing Authority staff did not identify that personnel had not followed up with some owners who were cited for deficiencies to ensure they corrected them timely. After the fiscal year 2021 audit was completed in September 2022, the Housing Authority implemented corrective action measures, but the noncompliance found in the current audit was for cited life-threatening deficiencies that occurred before the prior audit was completed. Effect of Condition Using statistical sampling, we tested 29 failed inspections. Our testing found four with cited life-threatening HQS deficiencies for which the Housing Authority did not have documentation demonstrating it followed up on the inspections and required the owners to correct the deficiencies within 24 hours of inspections. Additionally, it did not comply with the requirement to stop the HAP for one owner who did not correct deficiencies timely. The Housing Authority reinspected the units within 30 days to verify whether the owners corrected the deficiencies and stopped the HAP for one owner. Because the Housing Authority did not follow up on HQS deficiencies within the required time frame, it cannot demonstrate that the housing units met HQS enforcement requirements. Recommendation We recommend the Housing Authority strengthen internal controls for ensuring it complies with HQS enforcement requirements. Specifically, the Housing Authority should follow up on cited life-threatening HQS deficiencies and require owners to correct them within 24 hours of inspections, as the program requires. Housing Authority?s Response Spokane Housing Authority acknowledges the above reference finding. Although personnel responsible for conducting the HQS inspections and ensuring owners corrected the cited life-threatening deficiencies were trained on policy and procedure, SHA did not establish the internal controls to ensure proper follow-up was made. In September 2022, SHA, established a Housing Support Specialist position, which will log life-threatening HQS deficiencies as documented on the HQS inspector?s reports daily and follow-up with the landlord within the 24-hour timeframe to ensure that repairs have been addressed and completed. If repairs have been made pursuant to the directive given by the inspector, then a letter will be sent to the landlord and tenant indicating that the 24-hour hazards have been fixed. If the landlord fails to comply within the 24-hour timeframe, then the unit fails, and a Notice of Termination of HAP letter will be sent to the landlord and tenant. SHA will work with the tenant to start the process of locating a new unit that passes HQS. The log of deficiencies will be reviewed by the Inspections Coordinator regularly as an additional internal control. 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 404, Maintenance: Owner and family responsibility; PHA remedies, establishes enforcement requirements for housing quality standards.