The Housing Authority had inadequate internal controls for ensuring compliance with Housing Quality Standards inspection requirements.
Background
Housing Voucher Cluster
During fiscal year 2023, the Housing Authority spent $3,219,386 under the Housing Voucher Cluster program, which includes the Section 8 Housing Choice Vouchers program (HCVP) and Mainstream Voucher program. Of the amount spent, $1,240,294 was spent on the Emergency Housing Vouchers that is not subject to Housing Quality Standards (HQS) inspection requirements for 2023 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.
Moving to Work Demonstration Program
During fiscal year 2023, the Housing Authority spent $51,608,041 under the Moving to Work Demonstration Program. The purpose of the Moving to Work Demonstration Program is to give public housing agencies the flexibility to design and test various approaches for providing and administering housing assistance that: (1) reduce cost and achieve greater cost effectiveness in federal expenditures, (2) give incentives to families with children where the head of household is working, seeking work, or is preparing for work by participating in job training, educational programs, or programs that assist people to obtain employment and become economically self-sufficient, and (3) increase housing choices for
low-income families.
Additionally, 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.
Description of Condition
The Housing Authority must inspect units leased to families initially once a family moves in and at least once every two years to determine if they meet federal HQS requirements.
Our audit found the Housing Authority did not establish effective internal controls to ensure compliance with each program’s HQS inspection requirements. Specifically, the Housing Authority did not perform timely inspections as required.
Housing Voucher Cluster
We consider this internal control deficiency to be a material weakness that led to material noncompliance. This issue was reported as a finding in the prior audit.
Moving to Work Demonstration Program
We consider this internal control deficiency to be a significant deficiency. This issue was not reported as a finding in the prior audit.
Cause of Condition
The Housing Authority did not have a consistent inspector during the audit period. It also had delayed inspections in the prior audit period, which added to the list of inspections becoming due during the current audit period. Due to the large number of biennial inspections becoming due, and the lack of staffing trained on inspections, the Housing Authority was unable to ensure all units received the required biennial inspections timely.
Effect of Condition
Housing Voucher Cluster
Using statistical sampling, we tested 26 tenant files. Our testing found 16 tenants for which the Housing Authority did not perform inspections timely. Because the Housing Authority did not perform inspections timely, it cannot demonstrate that the housing units met HQS inspection requirements.
Moving to Work Demonstration Program
Using statistical sampling, we tested 29 tenant files. Our testing found two tenants for which the Housing Authority did not perform inspections timely. Because the Housing Authority did not perform inspections timely, it cannot demonstrate that the housing units met HQS inspection requirements.
Recommendation
We recommend the Housing Authority strengthen internal controls to ensure it complies with HQS inspection requirements. Specifically, the Housing Authority should ensure inspections are being performed in accordance with federal requirements.
Housing Authority’s Response
Everett Housing Authority acknowledges the above-referenced finding. The agency’s lack of internal controls to ensure compliance with the requirement to conduct HQS inspections was first identified during the audit for the time period from July 1, 2021 to June 30, 2022.
As discussed more fully in EHA’s response to the finding last year, multiple factors resulted in this finding, including a lack of staff and contract capacity.
Since EHA received the audit finding last year related to inadequate internal controls over HQS, the agency has undertaken measures to increase internal controls and capacity to conduct inspections and take other corrective actions within the required time frame, including:
• Developing and implementing a plan to transition from reliance on contract inspectors to hiring an in-house inspections team to conduct required HQS inspections.
• Hiring and training three Housing Inspectors, with the first hired on January 5, 2023.
• Hiring, and training an Inspections Coordinator, who is responsible for the scheduling and communications aspects of inspections compliance, including compliance with the requirements to correct deficiencies within specified time frames.
• Training 25 property management staff in the Housing Management department to conduct initial and biennial inspections of the Project-Based Voucher units that EHA owns and operates, starting July 1, 2023.
• Assigned oversight of the four inspections staff to an HCV Manager, to increase direct oversight of their work.
As a result of these measures, EHA has made significant progress in catching up on late inspections and we expect to be in full compliance with inspection requirements applicable to the voucher program no later than December 31, 2024.
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 the 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 405, PHA initial and periodic unit inspection, establishes inspection requirements for housing quality standards.