HOUSING AUTHORITY OF THE CITY OF BREMERTONLocal Government

The Housing Authority did not have adequate internal controls for ensuring compliance with Housing Quality Standard inspection requirements.         Assistance Listing Number and Title: 14.871 – Section 8 Housing Choice Vouchers 14.871 – COVID-19 Section 8 Housing Choice Vouchers Federal Grantor Name: U.S. Department of Housing and Urban Development Federal Award/Contract Number: WA003VO, WA003AF Pass-through Entity Name: N/A Pass-through Award/Contract Number: N/A Known Questioned Cost Amount: $0 Prior Year Audit Finding: N/A   Background The purpose of the Housing Choice Voucher (HCV) program is to provide rental assistance to help families with very low incomes afford decent, safe and sanitary rental housing. During fiscal year 2025, the Housing Authority received $29,287,712 in revenue for the HCV program. Federal regulations require recipients to establish, document and maintain effective internal controls that ensure compliance with program requirements. These controls include understanding program requirements and monitoring the effectiveness of established controls. Federal Housing Quality Standard (HQS) inspection requirements and Housing Authority policy require the Housing Authority inspect units leased to families before the start of the lease and at least biennially to determine if the unit meets federal HQS inspection requirements. Description of Condition Our audit found the Housing Authority did not have adequate internal controls for ensuring compliance with federal HQS inspection requirements or its own policy. Specifically, the Housing Authority did not perform on-time biennial inspections as required. We consider this internal control deficiency to be a significant deficiency. Cause of Condition The Housing Authority used a notification feature in its software to remind them when inspections were due. In May 2025, the Housing Authority became aware that this feature stopped providing notifications. The Housing Authority paused conducting biennial inspections from July to November 2025 to address the notification issue and to allow its only inspector to focus on initial inspections, as they were understaffed. In addition, the Housing Authority relied on outdated guidance when determining the correct deadlines for biennial inspections. Effect of Condition Using a statistical sample, we found the Housing Authority did not perform two out of 41 inspections on time. However, during that testing, we identified a risk of late inspections due to the reasons identified in the Cause of Condition above. We performed an additional sample related to this risk and found additional noncompliance. Based on our additional testing, we projected the Housing Authority did not perform 82 out of 1,185 inspections on time resulting in an overall 6.9% noncompliance rate. Because the Housing Authority did not perform inspections on time, it cannot demonstrate 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 performed at least biennially in accordance with federal requirements and its own policy. Housing Authority’s Response Management agrees with the finding. Bremerton Housing Authority (BHA) acknowledges that certain biennial Housing Quality Standards (HQS) inspections were not completed within required timeframes during the audit period. BHA takes its responsibility to provide decent, safe, and sanitary housing through the Housing Choice Voucher program seriously. The late inspections resulted from a Yardi notification and scheduling issue that affected BHA’s ability to reliably identify and schedule biennial inspections by due date. Once management became aware of the issue, BHA began reviewing the cause and took steps to resolve the system issue, strengthen inspection tracking, and address staffing capacity. BHA has resolved the primary Yardi scheduling issue and is implementing additional procedures to strengthen monitoring of upcoming, completed, and overdue inspections. BHA is also updating procedures for determining biennial inspection due dates and providing staff training on current HQS inspection requirements and BHA policy. BHA does not expect the inspection backlog to be fully corrected during the FY 2026 audit period. However, BHA has established a corrective action plan to bring inspections current by September 30, 2026, and expects to return to normal inspection operations effective October 1, 2026, the beginning of fiscal year 2027. BHA remains committed to strengthening internal controls over HQS inspection scheduling, monitoring, and completion to ensure inspections are performed timely and in accordance with federal requirements and BHA policy. Auditor’s Remarks We appreciate the steps the Housing Authority is taking to address these concerns. We will review the status of the Housing Authority’s corrective action during our 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.

2019-001 The Housing Authority did not have adequate internal controls to ensure compliance with Housing Quality Standard inspection requirements of its Section 8 Housing Choice Voucher Program. Description of Condition During fiscal year 2019, the Housing Authority reported $12,257,865 in Section 8 Housing Choice Voucher grant funds. The objective of the program is to provide rental assistance to help very low-income families afford decent, safe, and sanitary rental housing. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. We reviewed the Housing Authority?s internal controls and compliance with the Section 8 Housing Choice Voucher program requirements and determined the Housing Authority did not have adequate controls to ensure compliance with requirements for Housing Quality Standards (HQS) Inspections. The Housing Authority must inspect units at least every two years to ensure the unit meets federal Housing Quality Standards. In addition, it must prepare a unit inspection report to support the timing and results of the inspection. Two of 29 tenants tested did not have adequate support to demonstrate that the Housing Authority completed inspections timely. We found the Housing Authority: ? Performed one inspection about six months late ? Could not locate the support for one inspection to demonstrate it had been performed 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 changed its inspection frequency from annual to every two years in 2017, and it took some time to implement controls that were effective in properly identifying tenants that needed inspections with the change in expiration dates. In addition, the Housing Authority experienced turnover in its Housing Program department during the audit period, specifically in positions responsible for performing inspections. Effect of Condition Because the Housing Authority did not perform inspections in a timely manner, it cannot demonstrate that the housing units met housing quality standards. Recommendation We recommend the Housing Authority strengthen internal controls to ensure its federal programs meet program compliance requirements. Specifically, it must ensure it performs inspections within the prescribed time. Housing Authority?s Response Late Inspection: Due to being under-staffed in the Inspection Department as well as the Housing Specialist positions, BHA started doing manual tracking of Biennial Inspections. Overall, the process worked, however there was an inspection that was missed and not completed timely. BHA has since spent time and effort researching the inspections that were done to ensure they were timely. After an up-grade in our software, BHA?s software now has the capability to track Biennial Inspections and BHA?s Housing Program Manager reviews all inspections monthly to ensure there are no late inspections. Supporting Documentation: BHA had a Community Jobs volunteer whom we taught many tasks to, one of those tasks was to Document Image our monthly files and/or documents. This was the time frame that the inspection checklist was completed and committed to our document image file in error. BHA has a double check process with inspections, where the inspector completes the inspection, adds it to BHA?s software, puts a memo in the software and gives the inspection checklist to the appropriate Housing Specialist; all of those actions were done. It is our thought that the inspection checklist was mistakenly document imaged to the wrong file. BHA has since ceased to allow any volunteer or person other than the Housing Specialist who has responsibility for the file commit the inspection checklist to BHA?s document imaging system. Auditor?s Remarks We appreciate the Authority?s commitment to resolving this issue and thank the Authority for its cooperation and assistance during the audit. We will review the corrective action taken during the next regular 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. 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 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, establishes internal control requirements for management of Federal awards to non-Federal entities. Title 24 CFR Part 982 Section 8 Tenant-based assistance: Housing Choice Voucher Program, section 405, Subpart I, establishes housing quality standards, subsidy standards, inspection, and maintenance.