From Les Sparks:

Here is a short answer to an interesting question – Yes. Sort of…

Let me explain. The very fact that they had a physical inspection at all is reportable in the schedule of prior audit findings, section 3. THe fact that the score was 60 is not that relevant. So, there is an entry in the Schedule of prior audit findings. Now going below 60 is an issue for REAC that results in a noncompliance flag being placed in HUD’s APPs system for that client and also generally restricts surplus cash distributions until the flag is cleared.

Now, finally to your real question as to whether this is a finding for your audit. That depends on whether things are corrected or not. Having a bad physical inspection is in indication that the client’s internal control over maintenance is not working. Why, and further, what have they done to fix it since it occurred. Obviously risk is higher, now your procedures should indicate whether they have taken corrective action or not. If they are still not doing well, then it would be a finding for you. There is no regulatory requirement that it automatically be a finding for you.