oversight

Weaknesses in Planning and Managing a Housing Code Enforcement Project in St. Louis

Published by the Government Accountability Office on 1971-06-03.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                            t Project
In St. Louis    5-167655




Department of Housing and
  Urban Development




BY THE CQMPTROLLER    GENERAL
OF THE UNITED  STATES
                    COMF’TROLLER     GENERAL     OF    THE      UNITED      STATES
                                   WASHINGTON.      D.C.     20548




 B-167655




Dear   Mr.    Clay:

          This is our report     on weaknesses         in planning     and managing
a housing      code enforcement       project    in St. Louis,     Missouri.      This
project     was carried     out under     the code enforcement          program      ad-
ministered       by the Department        of Housing     and Urban      Development.
This examination        was made pursuant          to your request.

        Copies       of this report     are         being        sent to the Secretary    of
Housing    and      Urban   Development              and       to the Mayor    of St. Louis.

       We plan to make no further          distribution      of this report    unless
copies   are specifically    requested,     and then we shall        make distribu-
tion only after    your agreement       has been obtained         or public  announce-
ment has been made by you concerning                 the contents    of the report.

                                                 Sincerely               yours,




                                                    Comptroller              General
                                                    of the United            States

The Honorable     William            L.   Clay
House  of Representatives




             50TH      ANNIVERSARY          1921-     1971
            COMPTROLLER
                      GENERAL'SRKPORTTO                                 HEAKNESSESIN PLANNING AND MANAGING
I           THEHONORABLEWILLIAML. CLAY                                  A HOUSINGCODE ENFORCEMENT' PROJECT
I
            HOUSEOF REPRESENTATIVES                                     IN ST. LOUIS
                                                                        Department of Housing and Urban
                                                                        Development B-167655


            DIGEST
            ------
I                                                                                               7-Y
            WHYTHEREVIEWWASMADE
                     Congressman William L. Clay requested the General Accounting Office
                     (GAO) to review particular          aspects of _-_,-
                                                                       a housing
                     project in St. Louis, Missouri.                               .wicode
                                                                            ~.eLI...*  __.,"....enforcement
                                                                                                ,.,.. YI
                           __.___,,_
                                 _"I._+.a,.
                                        .-*-C-fC.*r.\..
                                                    .,
    I                The project,     which included three primarily           residential            areas9 was
                     designed to bring all properties            into compliance with the city hous-
    I
                     ing code within 3 years.           The city's    project was approved by the
                     Department of Housing and Urban Development (HUD) in February 1967,
                     and a grant contract of $1,986,095 was awarded in April 1967 and was
                     increased to $2,258,095 in June 1969.

                     The Congressman suggested that           GAO determine      whether

                           --there   was a comprehensive     plan for    rehabilitations
    I
    I
    I
                           --HUD and city   officials    were adhering      to predetermined      policy,
    I
    I                      --HUD was fulfilling   its responsibilities   to ensure that               the city
    I
    I                         kept its comitments    and adopted procedures to protect                residents
     I                        from unscrupulous contractors,
     I
     I
     I                     --minimum housing standards had been applied equitably                to the prop-
     I
     I
                              erty of both resident and nonresident owners$ and
     I
     I                     --HUD had attempted to determine the truth            about rumors of kickbacks
     I
     I                        from contractors to city inspectors.
      I
      I
      I              The Congressman also provided GAOwith information  on five cases in
      I              which residents complained of difficulties they experienced under the
      I
      I
                     project.
      I
      I
      !
      1     FINDINGSAND CONCLUSIONS
      I
       I
       I             Pi!anning and approval of the project
       I
       I
       I             The city selected the project           areas, and HUD approved them, largely
       I             on the basis of an automobile           drSve through them, sometimes referred
       I
        I
        I   Tear   Sheet
        I
        I                                                                           JUWE        3,19-71
        I
        I
                                                                 I
        I
        I
        I
to as a windshield  inspection; the 1960 census data on family income; and
a city report on a 1953 study of housing conditions which showed at that
time over 50 percent of the properties  in the area needed major repairs.

Neither the city nor HUD inspected the interiors of any properties
before approval of the areas and award of the Federal grant.
(See pp. 3 and 9.)
As a result of the lack of an adequate survey of the areas, the city
failed to meet project goals (see p. 13) and encountered such prob-
lems as

  --extensive      deterioration    of many properties     in the areas;

  --inability     of many property owners, because of their low economic
     status,    to get loans to pay for repairs and improvements;

  --difficulties      in hiring    and retaining    personnel   qualified   to carry
     out project     activities;    and

  --difficulties   in obtaining       contractors    to work in the project     areas.
     (See pp- 10 to 12.)

Depart~~res from instrue tions
HUD did not check on the project regularly      and thoroughly enough and
thus did not learn of problems that might have been resolved on a
timely basis.    For examples HUD Central Office instructions    required
regional representatives     to visit the project areas and to obtain de-
tailed information    on progress at least every 3 months; those visits
were not made. (See pa 24.)

Unkept commitments
Many property owners were not given the opportunity,         as promised by
the city,     to take part in the selection  of contractors    to work on their
properties.      The city's  building commissioner stated that he decided to
restrict    the work to some of the large contractors     to speed up the work.
Written procedures recently put into effect by the city,          however, pro-
vide for participation      by property owners in contractor     selection.
(See p. 37.)

Although the grant contract stipulated    that an architect be hired to
advise property owners, the city had not hired one. The city deter-
mined that the services of an architect    were not needed. A HUD offi-
cial stated that, in his opinion, the lack of an architect    on the
project staff had no detrimental   effect on the project.   (See p. 36.)
I   City    inspections      generally        were not adequate         to be sure that       contract
    work on residents'          properties        had been performed         satisfactorily.
I   (See pa 28.)          On the basis        of HUD test    inspections,         it is questionable
    whether     many properties         certified     by city     inspectors        as complying      with
    the housing        code actually       had been brought         into compliance.
    (See pp. 25 and 26.)

    Application       of standards       to propertzj

    GAO's review     disclosed     no evidence     that        housing     codes had been         ineq-
I
    uitably  applied      to properties     of either          resident     or nonresident          owners.
    (See p. 16.)

    Alleged     kickbacks
    Rumors published          in St.    Louis    newspapers      regarding     alleged      kickbacks
    from contractors          to city    inspectors     were     not substantiated          by a HUD
I
    investigation.           (See p.    26.)

    Residents     ’ complaints

    GAO does not disagree           with    the city's      judgment  that,    of the five   cases
    of residents'       complaints       reported     to Congressman     Clay,   three  were un-
    justified.       GAO's review,         however,     substantiated    most of the facts      on
    which      the complaints      were based.         (See p- 40 and ppe 28 to 33.)




I

I
                             Contents
                                                              Page

DIGEST                                                          1

CHAPTER

        1    INTRODUCTION                                       4

        2    PLAN FOR REHABILITATING PROJECT AREAS              8

        3    APPLICATION OF HOUSING CODES TO PROPERTIES
             OF RESIDENT AND NONRESIDENT OWNERS                16

        4    MONITORING OF THE PROJECT BY HUD                  24

        5    COMPLIANCE BY HUD AND CITY OFFICIALS WITH
             PROMISES TO AREA RESIDENTS                        36

        6    CONCLUSIONSAND AGENCY COMMENTS                    39

        7    SCOPE OF REVIEW                                  42

APPENDIX

         I   Letter   dated July 31, 1969, from Congressman
               William L. Clay to the General Accounting
                Office requesting  the investigation           45

    II       Letter   dated October 16, 1970, from the Act-
                ing Assistant   Secretary for Renewal and
                Housing Management, Department of Housing
                and Urban Development to the General Ac-
                counting Office                                47

  III        Letter   dated September 29, 1970, from the
                Mayor of the City of St. Louis, Missouri,
                to the General Accounting  Office              49

                            ABBREVIATIONS
FHA          Federal Housing Administration
GAO          General Accounting  Office
HUD          Department of Housing and Urban Development
COMPTROLLER
         GENERAL'SREPORTTO                        WEAKNESSESIN PLANNING AND MANAGING
THEHONORABLE
           WILLIAML. CLAY                         A HOUSINGCODEENFORCEMENTPROJECT
HOUSEOFREPRESENTATIVES                            IN ST. LOUIS
                                                  Department of Housing and Urban
                                                  Development B-167655

DIGEST
------

WHYTHEREVIEWWASMADE
    Congressman William L. Clay requested the General Accounting Office
    (GAO) to review particular  aspects of a housing code enforcement
    project in St. Louis, Missouri.

    The project,  which included three primarily      residential areas9 was
    designed to bring all properties     into compliance with the city hous-
    ing code within 3 years.    The city's    project was approved by the
    Department of Housing and Urban Development (HUD) in February 1967,
    and a grant contract of $1,986,095 was awarded in April 1967 and was
    increased to $2,258,095 in June 1969.

    The Congressman suggested that GAO determine           whether

         --there   was a comprehensive   plan for rehabilitation,

         --HUD and city   officials   were adhering   to predetermined   policy,

         --HUD was fulfilling    its responsibilities to ensure that       the city
            kept its cotnnitments and adopted procedures to protect        residents
            from unscrupulous contractors,

         --minimum housing standards had been applied equitably          to the prop-
            erty of both resident and nonresident owners, and

         --HUD had attempted to determine the truth        about rumors of kickbacks
            from contractors to city inspectors.

    The Congressman also provided GAOwith information  on five cases in
    which residents complained of difficulties they experienced under the
    project.


FINDINGSANDCONCLUSIONS
    Planning and approva2 of the project
    The city selected the project        areas, and HUD approved them, largely
    on the basis of an automobile        drive through them, sometimes referred
to as a windshield  inspection; the 1960 census data on fam-lly income; and
a city report on a 1953 study of housing conditions which showed at that
time over 50 percent of the properties  in the area needed ~major repairs..

Neither the city nor HUD inspected the interiors of any properties
before approval of the areas and award of the Federal grant.
(See ppn 8 and 9.)
As a result of the lack of an adequate survey of the areas3 the city
failed to meet project goals (see pa 13) and encountered such prob-
1ems as

  --extensive      deterioration     of many properties     in the areas;

  --inability      of many property owners3 because of their low economic
     status,     to get loans to pay for repairs and improvements;

  --difficulties       in hiring    and retaining    personnel   qualified   to carry
     out project      activities;    and

  --difficulties   in obtaining        contractors    to work in the project     areas.
     (See ppo 10 to 12.)

Departures      from instructions

HUD did not check on the project regularly    and thoroughly enough and
thus did not learn of problems that might have been resolved on a
timely basis.    For example, HUD Central Office instructions  required
regional representatives   to visit the project areas and to obtain de-
tailed information   on progress at least every 3 months; those visits
were not made. (See pa 24.)

Unkept commitments

Many property owners were not given the opportunity,        as promised by
the city) to take part in the selection      of contractors   to work on their
properties.     The city's  bui'lding commissioner stated that he decided to
restrict    the work to some of the large contractors     to speed up the work.
Written procedures recently put into effect by the city,, however9 pro-
vide for participation     by property owners in contractor    selection.
(See pm 37.)
Although the grant contract stipulated    that an architect be hired to
advise property owners3 the city had not hired one. The city deter-
mined that the services of an architect    were not needed. A HUD offi-
cial stated that, in his opinion, the lack of an architect    on the
project staff had no detrimental   effect on the project.   (See pa 36.)
City inspections   generally were not adequate to be sure that contract
work on residents'   properties      had been performed satisfactorily.
(See p. 28.) On the basis of HUD test inspections,          it is questionable
whether many properties     certified    by city inspectors as complying with
the housing code actually     had been brought into compliance.
(See pp. 25 and 26.)

Application   of standards to propertg
GAO's review disclosed no evidence that      housing codes had been ineq-
uitably applied to properties  of either     resident or nonresident owners.
(See p. 16.)

AZZeqedkickbacks
Rumors published in St. Lolylis newspapers regarding alleged      kickbacks
from contractors  to city inspectors were not substantiated       by a HUD
investigation.   (See p. 26.)

Residents' complaints
GAO does not disagree with the city's   judgment that, of the five cases
of residents'   complaints reported to Congressman Clay, three were un-
justified.    GAO's review, however, substantiated most of the facts on
which the complaints were based. (See p. 40 and pp. 28 to 33.)




                                     3
                                 CHAFTER 1

                                INTRODUCTION
        Section 117 of the Housing Act of 1949, as amended
(42 U.S.C. 14681, authorized         HUD to make grants to cities,
other municipalities,       and counties     for the purpose of as-
sisting    these local governments in administering         eoncen-
trated    code enforcement    programs in deteriorating      areas.
The program is expected to arrest          the spread of blight     be-
fore more extensive      urban renewal involving      major rehabili-
tation    or clearance becomes necessary.         A minimum of prop-
erty acquisition      and demolition    and of dislocation    of resi-
dents is intended under the program.

      Federal grants to a local government for a code en-
forcement project   may not exceed two thirds1    of the costs
of planning and administering   a project.    The   local govern-
ment must provide funds for the remaining costs,

         Code enforcement         project    expenditures     include the costs
of (1) organizing,            programming,      scheduling,     coordinating,
and supervising          code compliance activities,            (2) making prop-
erty inspections,           reinspections,       and valuations,       (3) holding
administrative         and appeals board hearings,            (4) demolishing
unsound structures,             (5) providing     relocation     assistance    to
displaced       families,individuals,           and businesses,      (6) advis-
ing and assisting          property       owners and tenants in the prep-
aration      of applications         for obtaining     direct    Federal reha-
bilitation        grants and loans, and (7) providing              or repairing
public     improvements,         such as streets,      curbs, sidewalks,
street     lighting,      and tree planting.

       Section 312 of the Housing Act of 1964, as amended
 (42 U.S.C. 1452b), authorized        HUD to make loans to owners
and tenants of property      situated    in a concentrated   code en-
forcement project     area for the rehabilitation       of such prop-
erty.    Generally   such loans may not exceed $12,000 for each
dwelling    unit;  however, in high-cost     areas, the limit   is
$17,400.


1Three fourths   for      any locality       having   a population      of
 50,000 or less.
                                         4
       Section 115 of the Housing Act of 1949 (42 U.S.C. 1466),
as amended by the Housing and Urban Development Act of 1965
 (79 Stat. 457), authorized      HUD to make grants,    not to ex-
ceed $1,500, to a person who owns and occupies property
situated    in concentrated    code enforcement project    areas for
the rehabilitation       of such property  to meet applicable
codes.    The limitation     on the amount of a grant was raised
to $3,000 and to $3,500, respectively,         by the Housing and
Urban Development Acts of 1968 (82 Stat. 476) and 1969
 (83 Stat. 379).

       Section 114 of the Housing Act of 1949, as amended
 (42 U.S.C. 1465), authorized       HUD to make relocation  grants
to local public agencies to reimburse them for payments
made to individuals,      families,   and businesses for expenses
incurred    in relocating   as a result   of a code enforcement
project.

        The city is responsible       under the grant contract      for
inspecting      all properties    in the code enforcement project
and for working with the property            owners to have all code
violations      corrected.     The city is required      by the grant
contract    to offer assistance        to the property    owners in ob-
taining    contractors     to correct    code violations    and in ob-
taining    Federal rehabilitation        loans and grants if the prop-
erty owners desire,        and are eligible     for, such Federal fi-
nancial assistance.

        In March 1966 the city of St. Louis submitted       to the
HUD Regional Office,     Fort Worth, Texas (Region V), an ap-
plication    for a Federal grant for a code enforcement proj-
ect covering four areas of the city.        One of the areas was
deleted from the proposed project       because of its high per-
centage of nonresidential     buildings   and the following    three
areas were left.
                                                             Dwelling
Project      areas   Population     Acreage    Properties      units
Academy North            5,706         124.9        807         1,466
Academy South            6,480         143.4        805         1,588
O'Fallon South           3,678         106.1        745         1,230

     Total                             374.4
                                       --        2,357          4,284


                                   5
        In its application        the city estimated     that 2,018, or
86 percent,        of the properties     and 3,012, or 70 percent,      of
the dwelling        units in the three project      areas had code
violations      and that the project       cost would amount to
$2,017,342.         The application     showed that the city would pay
one third      of the costs,      or $672,447, and that Federal funds
would be needed to finance the remaining              two thirds   of the
costs,     or $1,344,895.       In addition,    the city estimated    that
additional      Federal funds totaling       $641,200 would be needed--
$313,200 for relocation           payments and $328,000 for rehabili-
tation     grants.

        In February 1967 the HUD Central Office       approved the
project    and in April   awarded a grant contract      of $1,986,095.
In June 1969, HUD approved an increase of $272,000 in the
grant to provide additional       funds for rehabilitation      grants.
This increase raised the Federal grant to $2,258,095 which
comprised $1,344,895      for two-thirds    share of the estimated
project    costs and $313,200 and $600,000 for 100 percent of
the relocation     payments and rehabilitation     cost, respec-
tively.

       Congressman William L. Clay requested           that   we review
the code enforcement     project  and suggested        that   our review
include consideration     of whether

      --there      is a comprehensive plan     for   the total   rehabili-
          tation     of the affected areas,

      --HUD and city officials   responsible  for administering
         the project are adhering to predetermined   policy,

      --there    is equitable  application     of the minimum housing
          standards  to the property     of resident  and nonresident
         owners,

      --HUD is fulfilling  its responsibilities           to ensure that
         commitments made by the city under           the project  are
         being fulfilled,

     --the    city had adopted regulations        which would protect
         the residents     from unscrupulous     contractors and un-
         reasonable    contracts,  and


                                    6
     --HUD had attempted to determine whether there was any
        reasonable   support for rumors of kickbacks from con-
        tractors   to city inspectors.

To aid us in our review,  the Congressman furnished   us with
summaries of certain  complaints that he had received   from
residents of the project  area.

        Our comments on the questions raised by the Congress-
mm? and on other matters which we believe are pertinent       to
his request,    are contained in the following chapters of this
report.




                                7
                                       CHAPTER 2

                PLAN FOR REHABILITATING PROJECT AREAS

       The objective    of the code enforcement     grant contract
entered into by HUD and the city of St. Louis was to rehabil-
itate   the project    areas.    The grant contract    provided for
following   the city's     plan for carrying   out the project.
The city's   plan provided     that the city

       --inspect    all properties   in the project             areas within
           5 months after   approval of the project              and bring
           these properties    into code compliance             within  3 years,

       --provide        certain   public      improvements,

       --maintain        each year during the period of the contract
          the prior       level of expenditures for code enforcement
          activities,        and

      --complete         the project       within   budgeted   costs.

       The city selected        and HUD approved the areas for in-
clusion   in the project       largely    on the basis of an automobile
drive through the area,          the   1960 census data on family in-
come of project      residents,      and a city report on a 1953 study
of housing conditions        which showed that in 1953 over 50 per-
cent of the properties         in the project     areas needed major
repairs,     The city's    grant application        showed that an esti-
mated 86 percent of the properties             in the project   areas had
code violations.

        City officials     told us that they had not made inspec-
tions of the interiors         of any of the properties        in the proj-
ect areas prior        to submitting   the application.        One of the
city officials       stated that members of the Mayor's Housing
Rehabilitation       Coordinating    Committee selected      the project
areas largely      on the basis of information        obtained by driv-
ing through the areas and by reference            to the 1953 housing
report.

      Our review of HUD's Region V records       showed, and our
discussions   with various HUD officials     confirmed  that HUD's
evaluation   of the proposed project     had, for the most part,
been limited     to a desk review of the application.               According
to HUD regional       officials,       the desk review had been made in
accordance with HUD policy to determine whether the city's
application     complied with HUD regulations.            HUD's Region V
Assistant    Regional Administrator           for Renewal Assistance,       who
is responsible      for administering         the code enforcement     pro-
gram y  advised    us  that      the region's    physical inspection     of
the proposed project          had been limited      to a windshield    in-
spection of the areas.

        HUD's Region V Federal Housing Administration              (FHA)
officials      in St. Louis told us that they had also made a
windshield       inspection   of the areas for the purpose of de-
termining      whether FHA would insure loans for residences              in
the areas if requested to do so, These officials                 also stated
that their inspection         had been made to determine whether at
least 90 to 95 percent of the properties               in the areas were
residential        and whether public facilities        were available      in
the areas.        As a result   of their    inspection    and recommenda-
tion,     only one area (Lindcll       North) was deleted from the
proposed code enforcement          project.     This area was deleted
because of its high percentage of nonresidential               buildings.
These officials        said that they had not inspected the in-
teriors      of any of the properties       in the project    areas.

ADMINISTRATION OF THE
CODE ENFORCEMENTPROJECT

      A HUD code specialist      indicated   in a trip report in
July 1967, 5 months after the approval of the project,          that,
because of a shortage of personnel,        the city would have to
make a diligent     effort  to complete the project    within the
3-year limit    required   by the grant contract.

       City officials      informed us that consideration      of staff-
ing problems 5 months after the project         was approved was not
a fair analysis       because the plan for carrying      out the proj-
ect did not provide lead time for obtaining           the necessary
staff    and because experience      with code enforcement     projects
in many cities      had shown that the first    6 months of a proj-
ect was generally       required   to gear up to administer      the
project.
        in July 1959 the city requested HUD to extend the
project    completion    date from February 25, 1970, to Novem-
ber 25, 1970. HUD did not grant this extension            but, after
reviewing     the project,    in December 1969 conditionally    ex-
tended the completion        date to June 30, 1970.    (See p. 34,)

       Some of the major problems encountered              by the city in
administering    the project     which apparently        forced the city
to request the extension        were (1) extensive         deterioration
of many of the properties        in the project      areas, (2) low
economic status of many of the property             owners which pre-
vented them from obtaining         loans in the amounts needed to
finance the cost of necessary repairs             and improvements to
bring their   properties     into code compliance,          (3) difficul-
ties in hiring     and retaining      personnel    qualified      to carry
out project   activities,      and (4) difficulties         in obtaining
contractors   to work in the project         areas.

Extensixe    deterioration        of properties

       We believe   that (1) the city's        estimate   that 86 percent
of the properties      in the project     areas had code violations
and (2) the 1953 report        on housing conditions        indicated
that,    because of extensive     deterioration,       the areas were not
suitable    for rehabilitation     under the code enforcement         pro==
gram.

        Furthermore,      the city's    semiannual progress report       for
the period ended December 31, 1969, showed that 94 percent
of the 2,260 properties           inspected had code violations.         City
officials      advised us that,       had they known the degree of de-
terioration      of the properties        in two of the three project
areas at the time the city            submitted  its application,     these
areas probably would not have been selected               for the code
enforcement      project.     The city officials      stated that they
had not had the time or funds necessary to make an adequate
survey of the areas before submitting              the grant application.

LOW   economic   status      of property   owners

      In many cases the Federal grants available     to individ-
ual property   owners were adequate to correct   only some of
the code violations,    In some cases Federal rehabilitation
loans needed to bring properties    into code compliance were


                                      10
not available  because property            owners did not have adequate
income to repay the loans.

        About 2 years after the code enforcement project          was
started,    HUD determined     that this was one of the reasons the
objective    of the project      was not being attained.     City of-
ficials    have told us that they now realize        that the low in-
come of the residents       of the project    areas created problems
in accomplishing     rehabilitation     of the areas.

Difficulties     in employing     personnel

        From inception     of the project,    the city encountered
difficulties     in hiring    and retaining     experienced      and quali-
fied personnel to carry out certain           project    activities--such
as developing work specifications           and processing       loan and
grant applications.

      City officials   stated that many of their difficulties
in employing personnel resulted    because the necessary ex-
perienced personnel were not available    to be hired.       They
stated also that the city lacked knowledgeable     personnel      to
train   its employees and that assistance   from HUD in this
regard was limited   to seminars and general meetings which
were of negligible   value.

       To help overcome these problems,        city officials      (1)
realigned    staff functions     in September 1969, (2) appointed
a new project     director   to administer   the code enforcement
program, and (3) hired a person experienced             in processing
loan applications       and a person experienced      in developing
contract   work specifications.       The specification       specialist
resigned,   however, and this position       was vacant as of Septem-
ber 29, 1970.

Difficulties     in contracting     for     proiect   work

        The city awards all contracts      for the rehabilitation      of
properties      for which owners obtain Federal grants or loans.
City officials        told us that they had difficulty      in finding
contractors       that were capable and willing      to work in the
project     areas.      They said that many contractors    who were
capable of doing the work were unwilling           to bid on such
rel.atively     small jobs and that many contractors       were

                                      11
unwilling  to work in the project    areas because of their     con-
cern for the safety of their   employees, the theft      of tools,
and the damage to equipment.     A city official    told us that,
because the contractors  did not want their      names disclosed,
he would not give us the names of these contractors.

      The city's  project   records generally   included only the
bid from the contractors      that had been awarded contracts.
We found no evidence as to whether more than one bid had
been solicited   or received or how it had been determined
that the bids accepted were reasonable.       City officials     have
pointed out that HUD regulations      clearly indicate    that for-
mal bidding is not necessary for contracts        of less than
$10,000 and that such contracts      may be negotiated    with one
or more prospective    bidders.

        In September 1969 the city established              a list    of eligi-
ble contractors     (at the time of our fieldwork              there were
nine contractors      on this list)       and procedures       for selecting
contractors.     The procedures        provided for a property           owner
to select three contractors          from the approved list           for bids
to be requested from the three contractors,                 and for the se-
lection    of the contractor      that submitted         the lowest bid.
Also, the procedures       provided that a property            owner may
select a specific      contractor      if his request and the reason
for his selection      is submitted       to the city in writing           and
approved by the city.         In such cases competitive            bids are
not solicited,     but the specific         contractor's     bid must ap-
proximate    a cost estimate      prepared by the city's           project
staff.

       Largely because of the four problems discussed above,
the city was unable to accomplish its objective      of rehabili-
tating   the project    areas. The city's attempts to rehabili-
tate the project     areas are discussed below.




                                       12
PROPERTIES
         INSPECTEDAND
BROUGHT
      INTO CODECOMPLIANCE
       The city's  plan for administering       the project provided
that the city complete initial       inspections    of all properties
in the project    areas within    5 months after project-approval
and bring all properties      into code compliance during the
3-year project    contract  period.     The city did not achieve
either   of these goals.

      None of the 2,357 properties       in the project    areas were
inspected within    the required     5-month period.    Progress in
making inspections     of the 2,357 properties,      according   to
the city's  progress reports,      is shown below for the first
32 months after project      approval.

      Months from approval          Properties   inspected
         of the project          Cumulative            Percent

                  5
                  7                     492                 21
                  8                     771                 33
                 14                  1,859                  79
                 20                  2,211                  94
                 26                  2,255                  96
                 32                  2,260                  96
        As of March 31, 1970, 37 months after approval of the
project,     66 properties still    had not been inspected.    The
reasons for not completing       the inspections,   according  to
project    records and discussions     with city officials,   are
summarized below.

           Access to premises refused:
                Resident owners                        60
                Nonresident   owners                    3
           Inspections   pending                       -3
                Total

        A project progress report   shows that as of December 31,
1969, only 1,326 or 56 percent,      of the properties   in the
project    areas were in code compliance,      Moreover, these per-
centages may be overstated     since, as discussed on pages 25
and 26, none of the 25 properties      inspected by HUD's internal
                                13
auditors   were in code compliance even though, in most in-
stances,   the city had certified  that they were in code com-
pliance.

        City officials     have informed us that they now recognize
that the original       plan to complete all initial        inspections
within     5 months was an error in judgment.         These officials
stated that their experience had shown that inspections
should not precede the processing           of loans and grants by
more than 30 days.         These officials    further  explained     that,
even though the initial         inspections   were not completed
within     5 months, as specified     in the city's   plan for admin-
istering     the project,    the inspections     were still    made too
early for the overall        program.

PRQVISION OF PUBLIC IMPROVEMENTS

        The city's      original project   budget, as approved by ?KJD,
included $644,600 for public improvements--tree             planting,
street     lighting,     street paving, curbs9 and alley work.        Proj-
ect records showed that at March 31, 1970, $395,195 had been
encumbered for these public improvements.             According to city
officials,       actual public improvement costs will be at least
$100,000 less than the budgeted amount due primarily               to an
overestimation         of street  lighting   costs included in the
project      budgeto

MAINTENANCE OF REQUIRED LEVEL OF EXPENDITURES
                                  .----
       The city's   plan for administering    the project cited        the
following   requirement    regarding  the level of expenditures
for code enforcement activities.

     "That during the period of the contract            for the
     code enforcement grant the City of Saint Louis
     will maintain a level of expenditures           for code
     enforcement activities,       exclusive    of expendi-
     tures in any Federally       assisted    code enforcement
     or Title    I urban renewal project       areas, that is
     not less than the average yearly expenditure             for
     such activities    throughout      the locality    for the
     two full   fiscal  years immediately       preceding the
     filing   of the application."
       The city's    accounting    records show that the city is
maintaining     the required    level of code enforcement      expendi-
tures.    The city's    average annual expenditure     for code en-
forcement for the 2 years preceding the filing           of the appli-
cation was about $900,000, and the average annual expendi-
ture for the first      3 years after     filing the application    was
about $l,ZOO,OOO.
COMPLETION OF PROGRAMWITHIN BUDGETEDCOSTS

      The city's     latest revised budget, as approved by HUD,
and the city's     reported   expenditures    as of March 31, 1970,
for project    activities   showed that project      expenditures    had
not exceeded the approved budget,           Approved budgeted amounts
and related    expenditures    were as follows:
                                                        Expenditures
                                                           incurred
                                                             through
    Pro.ject activities          Budgeted
                                        I_-  amount    March    31, 1970
                                                                       -
Administrative      costs          $     246,135         $     215,540
Legal costs                              110,000                49,855
Operations     costs                     672,239               609,432
Net demolition       costs                61,000                23,885
Public improvements                      609,600               395,195
Special services                         187,018                94,220
Contingencies                            117,200
Project    inspection      costs          14,150                11,418

     Total                             2,017,342             1,399,545

Rehabilitation        grants             600,000               339,479

Relocation       payments                313,200                    218

      Total   costs                $2,930,542
                                    -                    $1,739,242




                                   15
                                     CHAPTER 3

                        .APPLICATIQN OF HOUSING CODES

           TO PROPERTIES QF RESIDENT AND NONRESIDENTOWNERS

             A representative         of the Union-Sarah Gateway Center1
     advised us that several complaints              had been received by
     that organization          from residents     in the project   that during
     initial     inspections       the city inspectors    had given priority
     to the inspection          of properties    of resident   owners and had
     been more strict         in applying the codes to properties         of
     resident     owners than to nonresident          owners.    The represen-
     tative    told us that she could not document these complaints,
     and project      officials       told us that they had not been aware
     of such complaints.

            The cityvs    procedures provide for equitable          applica-
     tion of the minimum housing standards to resident                 and non-
     resident    owners through (1) initial        selection     of properties
     to be inspected without        regard to ownership,        (2) applying
     equal standards during initial          and final    inspections,     (3)
     allowing    property    owners equal opportunity        to achieve code
ii   compliance,     and (4) applying enforcement measures equitably.
     Our examination      of the implementation      of these procedures
     did not reveal any evidence that resident             or nonresident
     owners were discriminated        against.

     SELECTION OF BUILDINGS
     FOR INITIAL INSPECTIONS

             The cityvs   plan for administering        the code enforcement
     project     required  systematic    inspection     of all the properties
     in the project--     building    by building,     block by block,   The
     city's    inspection    procedures contained the same requirement
     for all neighborhood rehabilitation            programs.

     1Union-Sarah
II                 Gateway Center is one of several neighborhood
      service centers operated under a community action program
Y     financed by the Office of Economic Opportunity.    The cen-
II    ter serves an area which includes the Academy North and
      South areas of the code enforcement project.

                                         16
       Our examination     of project    files   showed, and our dis-
cussions with project       personnel confirmed,         that the pro-
cedures used to select properties            for initial     inspection
had been to divide the three areas of the project                 into two-
block segments and to assign each segment to an inspector,
The inspectors      were allowed to select any starting            point
within    their   assigned segments, but, once started,             inspec-
tions were to be made in sequence by location                and all ini-
tial   inspections     were to be completed within          5 months.
City officials      have said that they now recognize that the
plan to complete inspections          in 5 months was an error in
judgment,       (See p. 14.1

       Our examination   into the application       of the city's   in-
spection procedures    for 3 blocks of the project         showed that
the sequence of inspections      of the 69 properties,       22 of
which were owned by nonresidents,        frequently    did not con-
form to the sequence of property       locations,

       Inspectors    in each of the three project      areas told us
that they had been unable to inspect each property            in se-
quence primarily       because residents    either had not been home
or had refused to allow them to enter,            They told us that
multifamily     properties    had also been a problem because the
inspection     had to cover all units in the properties,         The
inspectors     stated that, when access to a building        or unit
could not be gained, they would go to the next property              in
sequence and would return later          to the units or properties
that had not been inspected.

       Project   inspection   records showed the dates the inspec-
tion was completed but not the dates of unsuccessful               at-
tempts to inspect a unit or a property.             We found inspec-
tion reports     on five multifamily     dwellings,    however, which
showed that the inspections        of all the dwelling      units in a
property    were not completed for as long as 3 months after
inspections     of the dwelling    units in the property       were be-
gun*
      As shown in the following     table,   for most of the 49
properties  included    in our examination,     inspections     were
completed within    5 months after they were started         in the
segments,   Inspections    of non-resident-owned      properties,


                                     17
however, were not completed on as timely            a basis    as were
inspections  of resident-owned properties.

                             Resident         Nonresident
                              owned               owned          Total
                            Num- Per-         Num-    Per-     Num- Per-
                            ber    -cent     -ber     cent     ber     cent

Properties    inspected,
  cumulative:
    1st month                 8         17     1         5       9        13
    2d month                 25         53     7        32      32        46
    3d month                 30         64    12        55      42        61
    4th month                37         79    17        77      54        78
    5th month                46         98    18        82      64        93
    After 5th month          47        100    22       100      69       100

The above table shows that the percentage of the 47
resident-owned   properties     inspected at the end of each of
the 5 months was higher than the percentage of the 22 non-
resident-owned   properties     inspected at the end of each of
the 5 months,    Initial    inspections   of resident-owned      prop-
erties   were completed the seventh month after the inspec-
tions were started,      whereas inspections    of non-resident-
owned properties    were not completed until      the 13th month
after the inspections      were started,

APPLICATION OF CODE REQUIREMENTS
IN INITIAL INSPECTIONS

        To test   the application   of code requirements       in the
city's    initial    inspections,  we selected at random       181 resi-
dential    properties     from the 2,255 properties    which    had been
inspected as of December 9, 1969,          The inspection      results
by type of ownership and code violation          are shown     below.




                                  1X
                                                        Ownership
                                       Total     Resident   Nonresident

Properties  in sample:
    Without code violations                 11         8            3
    With code violations                   170       125           45

            Total                          181       133          48

Types of violations:
    Plumbing                              552        335         217
     Electrical                           364        239         125
     Structural                        1,482         987         495
     Zoning                                11          5           6
     Sanitation      and rat   con-
        trol    (note a)                    55         38       17

            Number of code vi-
              olations                 2,464
                                       --~          1,604
                                                   .--__         --860
Average number of violations
  for each property with vi-
  olations                                  14         13          19
aEnforcement    of ordinances pertaining      to sanitation    and rat
 control   is not the responsibility       of the code enforcement
 project.    Violations     involving  these ordinances are re-
 ferred to the Sanitation        and Rat Control Section,     Health
 Division.    The city had a separate federally         funded pro-
 gram to eliminate      rats in the project     areas and other areas
 of St, Louis,

         As shown, the average number of code violations       re-
ported     for non-resident-owned      properties exceeded that re-
ported     for resident-owned     properties.




                                      19
ENFORCEMENTOF CODE REQUIREMENTS

        To determine whether property     owners    were given suf-
ficient    time to voluntarily    correct  code    violations     and
whether enforcement      measures were applied       impartially    by
the city,     we examined  into the procedures       followed    by the
city and reviewed the project       records on     cases on which
court action had been taken by the city.

       Information     in the cityss   files   applicable     to the 181
properties     included    in our sample indicated       that the city
had impartially      applied   its procedures and showed that
court action had been taken against          the owners of 15 of the
181 properties.        There was a wide variance       in the amount of
time that elapsed between the dates of inspections                and the
dates court action was brought by the city against the 15
property    owners-- from 7 to 25 months for resident            owners
and from 4 to 17 months for nonresident           owners.      City offi-
cials stated that this variance had resulted               because each
case must be dealt with on an individual            basis.

      We also reviewed available        project  records of all
cases on which court action had         been taken by the city as
of December 9, 1969.    A summary       of the status of these
cases9 by categories   as shown in       project   records2 follows.

                               Resident owner       Nonresident   owner
                               Number Percent        Number     Percent

Categories:
     Defendant not lo-
        cated                     6         7.1          14         9.7
     Case dismissed              14        16.7          16        11.0
     Defendant placed on
       probation                  17       20.2          23        15.9
     Case pending trial           10       12.0          36        24.8
     Case settled                -37       44,o          56        38.6

         Total cases
           filed                 -84      100.0         145       100.0

      The average time allowed for correction of code viola-
tions before court action was taken by the city on these
cases was 14.4 months for resident  owners and 13.1, months
 for nonresident   owners.  Our analysis   of data for 73 of the
 93 court cases classified   as settled   by the city showed
 that 26 resident   owners and 47 nonresident    owners had been
 fined from $5 to $10, plus court costs.      Although the prop-
'erty owners had been fined and the court cases had been
 settled,  not all the properties    had been certified  as being
 in compliance with the codes.

      HUD regulations     required   that the city certify     that
properties   had been brought into code compliance.          Our
analysis   of the project     records for the 93 cases classified
as settled   showed that the city had certified         code compli-
ance for only 58 of the properties.          The following   table
summarizes the status of certification         of code compliance
of these 93 settled    court cases.
                                                              Resident            Nonresident
                                                               0Wler                     0WIler                   Totals
                                                     Number
                                                    ------         Percent      Number            Percent   Nunher       Percent

      Code    compliance        certified              32                  86      26                 46       58             62
      Code    compliance        not certified         - 5                - 14     -30               - 54      35            38

             Total    settled      court    cases      2                 100
                                                                         -        2                 100       92
                                                                                                              -             100


We did not ascertain  the status of code compliance                                                                      for the
35 properties for which the city had not certified                                                                       code
compliance.

      The city's   project      officials advised us that they had
not established    any standard time limits       for property
owners to comply with the codes, that the intent           was to
bring all properties       into compliance during the 3-year
period of the project        through persuasion   rather than force,
and that court action was taken only as a last resort.
Even in court action,        it was intended that the action be a
persuasive   device and that heavy fines not be imposed.

        In commenting on our draft    report,    the city told us
that court action was instituted        only after all other means
of persuasion    and cooperation    had failed     and that,    if a
property    owner agreed to correct     the violations      at the di-
rection    of the court,  the city would be obligated         to report
to the court the progress being made by the property               owner.
The city also stated that,       if in the court"s     discretion     the
major code violations     were corrected      and only minor code
violations    remained, the court may dismiss the case.             The

                                                                21
city stated further  that, as of September 17, 1970, all
court cases either  had been settled, with the properties
brought into code compliance,  or had been dismissed,

STANDARDAPPLIED IN FINAL INSPECTIONS

       HUD regulations       incorporated     into the grant contract
required      the city to make interim        and final   inspections    of
all rehabilitation        work accomplished under a rehabilitation
grant or loan to determine whether the work was progressing
satisfactorily       and was completed in accordance with the
construction      contracts.      Also, the regulations        required
that the city make a follow-up            call on these property
owners within      60 days after final        inspections    to determine
whether there were any complaints             regarding   the work and,
if sop to help the owners obtain corrective               action by the
contractors.

       We found no evidence in the city's              project   records
that any of the required          interim     inspections,     or the 60-day
follow-up      calls,   had been made. Also, the project             director
told us that none of these inspections                or follow-up    calls
had been made. He stated that follow-up                 calls generally
were limited       to those made as a result          of complaints     from
property      owners.    Supervisory      inspectors    said that they had
periodically       made tests of the inspection           work done by
their    staff   but had not maintained          a record of these tests.

       As a result     of a HUD special    investigation      which in-
cluded inspection       of 25 properties     (see pp* 25 and 261, the
city assigned inspectors        not connected with the code en-
forcement     project   to reinspect    132 project    properties     for
which the rehabilitation        had been completed and which had
involved HUD grants or loans, including            23 of the 25 prop-
erties   which the HUD inspection        had shown to be not in code
compliance.       As indicated   in the following      table,    the city's
reinspections      showed that 81 of the 132 properties           were not
in compliance with the codes,




                                     22
                                                       Compliance
                                      Number           with codes
           Properties               inspected         Yes       &I

       Resident owned                     128         49            79
       Nonresident owned                    4          2           - 2
             Total                        -132        D51          81
The city's    reinspection  of the 23 properties    which HUD had
found to be not in code compliance showed that 19 of the 23
still   did not meet code requirements.      As shown above, the
reinspections     involved primarily resident-owned     properties.

      At the time of our review, the city was engaged in ef-
forts   to correct   the code violations       of the 81 properties
which did not meet code requirements.             For code violations
which were to have been corrected           under contracts        that had
been awarded to contractors,       city inspectors          told us that
most of the contractors      had agreed to complete the required
work and that in many cases it had been completed.                    For
code violations     not covered under contracts,            owners had
been notified     to correct  the additional        violations.        City
inspectors    told us that many of these additional              violations
were the result     of inadequate    initial     inspections       and in-
complete work specifications.

        In commenting on our draft report,           the city stated
that certain      of the additional    violations       had resulted      be-
cause of the time lapse between its initial                inspections
and its development of work specifications                and that certain
violations      had been overlooked    in order to tailor          the con-
tracts     to the available    Federal financing        in the belief      that
doing something rather than doing nothing was better                   for
the neighborhood       and for the indigent       property     owners.




                                     23
                                      CHAPTER 4

                      MONITORING OF THE PROJECT BY HUD

            In our opinion,     HUD has not adequately monitored    the
    project     to ensure that the city has performed in accordance
    with its commitment under the program.          Had HUD monitored
    the project     more closely,    problems which the city had in ad-
    ministering     the project    might have been identified   and re-
    solved on a timely basis.

             On the basis of our review of applicable               Federal regu-
     lations     and discussions      with agency officials,         we believe
     that the responsibilities           of HUD in connection        with the op-
    eration      of a code enforcement project            have been limited       to
    monitoring       project  operations       to ensure conformance with the
    approved plans for rehabilitating               the project     areas.    Central
    Office     instructions      to HUD regional       office   representatives,
    which were in effect           at the time the St. Louis project             was
    approved, required        regional      representatives       to obtain detailed
    information       on project     operations     through site visits        at
    least every 3 months.

            During these site visits,       the regional  office   represen-
    tatives     were to inspect at least 10 percent of the properties
    which the city reported          during each 3-month period as having
    been brought into compliance with city codes.              The grant con-
    tract    required       the city to submit detailed  progress reports
    every 6 months, to HUD, which HUD could use in monitoring
I   project     activities.

I          Our review of HUD's Region V records              showed, and our
    discussions     with HUD's Region V officials            confirmed,      that
    HUD regional     office    representatives       had not made these re-
    quired inspections        of the St. Louis project.           HUD's monitor-
    ing of the project        appeared to consist       primarily     of 20 brief
    visits    to the city,     between March 1967 and March 1969, by Re-
    gion V personnel.         Only seven of these visits          were made by
    code enforcement        specialists.      Generally    these 20 visits        were
    of a l-day duration        and were not directed         toward obtaining
    the information       on the code enforcement         project   although re-
    quired by HUD instructions.             Reports of these visits         indi-
    cated that
             .    the   city   (1)    had a  backlog   of  loan   applications


                                           24
and (2) had been unable to hire qualified     individuals to
carry out project   operations.    We found no conclusive evi-
dence in HUD files    that action had been taken by HUD offi-
cials to correct   these problems.

        The Assistant   Regional Administrator            for Renewal Assis-
tance,    Region  V,  could   not    explain   why    the   site representa-
tives had not followed         the Central     Office     instructions     re-
quiring    the site visits       and inspections.         HUD Washington of-
ficials    said that they did not know whether the regional                   of-
fices had complied with these instructions.                    The Assistant
Regional Administrator         stated further       that irregularities        re-
garding the project       that were reported          in the St, Louis news-
papers in June 1969 had not been disclosed                 by his staff.       He
expressed the opinion        that regional      office     representatives
apparently     had not properly       monitored     the St. Louis project.

        On January 26, 1970, the Director        of the Field Services
Division    for Region V issued to HUD regional             office    represen-
tatives    a memorandum which stated specific           responsibilities
and procedures     for monitoring    and reporting         on rehabilitation
projects.      These procedures    cover the routine         inspection      of
all phases of planning       and execution     activities,         the identi-
fication    of problems,    and the assistance        in solving      these
problems and require      the regional    office     representatives         to
inspect at least 10 percent of the properties                reported     by the
local public body as having been brought into code compliance
during each quarter.

SPECIAL INVESTIGATION AND AUDIT
OF PROJECT ACTIVITIES MADE BY HUD

       After the charges of irregularities      in the project       were
publicized   in St, Louis newspapers, HUD representatives            from
the Office   of Investigation,   the Office   of Renewal Assistance,
and the Office    of Audit made a special   investigation      during
June, July,    and August 1969.

       An audit report  issued in October 1969 contained   the
findings   of both the Office  of Renewal Assistance   and the Of-
fice of Audit.     Some of the findings  were that:

      1. Objectives      of the program were not          attained--of  25
         rehabilitated      properties  inspected,         none met the

                                       25
          codes even though in most instances            the city     had
          certified that they did conform.

      2. Initial  and final       inspections     made by city      inspectors
         were inadequate.

      3. Contractors'      rehabilitation       work was inferior      and in-
         complete.

      4. The entire     project    was poorly     managed by the city.

      5. Work specifications       were inadequate and apparently
         were tailored     to fit   the financial  capabilities    of
         the owners rather      than to correct   code violations.

      6. Grant    funds were used for       ineligible    work.

      7. Deficiencies       in the city's    loan processing    activities--
         including      inadequate verification      of applicants'       in-
         comes and improper method of increasing            grants--had
         resulted     in the approval of loans to ineligible            ap-
         plicants.

      The Office   of Investigation    examined into complaints
and charges of irregularities       and into the charge of kickbacks
by contractors   to city officials     and employees as well as
rumors of a gift    of a fur coat to a public official.

      The examination     included interviews  with more than 50
people and inspection      of the endorsements on certain   canceled
checks.

      The Office  of Investigation   report  dated September 23,
1969, stated that the charges of kickbacks       and a gift  of a
fur coat had not been substantiated;      however, the following
complaints   and charges had been verified.

     "Complaints       of slipshod work by contractors       reha-
     bilitating      properties      in the designated   code en-
     forcement      areas confirmed by code specialists        of
     Renewal Assistance         Office,   who also found that
     specifications       prepared by the City for rehabili-
     tation     work did not meet the City's        Minimum Hous-
     ing Standards ordinances."

                                       26
      "Allegations    that homeowners had no choice      in se-
      lection    of contractors verified."

       As a result     of its special investigation,     HUD, by
letter    dated July 31, 1969, suspended the city's         authority
to approve rehabilitation       grants.    HUD also notified     the
city that it would take no further         approval action on pend-
ing rehabilitation       loans.  In December 1969 this authority
was restored      subject to certain    assurances to be given by
the city.      (See pe 34.)




                                  27
           PROTECTION OF INTEREST OF AREA RESIDENTS
           IN DEALING WITH CONTRACTORS

                  The city%     procedures provided       that the following        ac-
           tions be taken to protect        the interests        of project   area res-
           idents     in dealing with contractors:            (1) inspecting     resi-
           dents' homes to determine work to be done to meet code
            standards,    (2) preparing    contract     work specifications,
            (3) providing    help to area residents         in selecting     contrac-
           tors,    (4) inspecting    homes to determine whether work re-
           quired by the contract        specifications      was performed,      and
            (5) obtaining    releases   of liens which contractors           placed
           against properties       as security      for payment for work per-
           formed.

                 In our opinion,    however, the city did not adequately
           implement these procedures.        As discussed on pages 25 to 27,
           HUD found that inspections      by city inspectors    had been in-
           adequate, that residents     had not participated     in selection
           of contractors,    and that in many cases the repair work on
           houses of resident    owners had not been performed in ac-
           cordance with contract     specifications    although a certifi-
           cate of final   inspection   had been issued by the city.

      !I          Our tests   showed that inspections    performed by city
      ii   inspectors    generally  had not been adequate to protect     the
      w    interests    of the property  owners by assuring that all con-
           tract   work had been performed satisfactorily.

                   The Congressman, in requesting      our review,     furnished
           us with information       on five cases in which residents         of the
           project    area complained about the code enforcement           project.
  Ii       Four of these cases involved complaints           about contractors'
  #
           work.     We were able to talk with only three of the five
I .


           residents     to obtain additional    information    regarding     the
           complaints.      The following    comments pertain     to these com-
           plaints.
                 Case number l--5090      Ridge Avenue

                  The resident  complained that (1) water leaked into the
           living   room and the bathroom when it rained,    (2) a wooden
           fire   escape was slippery   when wet, (3) a door was promised
           but had not been built,     and (4) she was not receiving  re-
           ceipts   for payments on her loan.
                                               28
      HUD's inspection      of this property   after   city officials
had certified      that it was in compliance with the codes dis-
closed 20 code violations.         Eight of these code violations
would have been corrected       had the contractor     complied with
contract    specifications.     For example, the contract       re-
quired the removal of 400 square feet of brick to eliminate
a bulge in the rear wall and the resetting           of brick,    a door,
and window jambs at an estimated         cost of $1,152; however,
HUD found that this work had not been done.

      The causes of the leaks were not corrected  because of
an omission from the contract  of a requirement  that brick
above second-floor  windows be removed, relaid,  and properly
supported above the windows to prevent seepage of rainwater
through the upper walls.

        The wooden fire   escape consisted      of stairs     leading
from the second floor      to the ground floor.        A window pro-
vided access to the stairs       from the second floor.            The prop-
erty owner said that she wanted a door installed                that would
give access to the stairs.         She was vague, however, as to
any promises and as to who had made them.             The work speci-
fications    did not provide for a door, and project              officials
told us that a door leading to the stairs            was not required
to meet the housing code.        Project   officials      also said that
outdoor stairs    which become slippery       when wet are not in
violation    of the housing code.       HUD found, however, that a
hand rail    for the fire    escape had not been properly             secured
to the building.

      A representative  of the mortgage company has told us
that the owner uses money orders to make payments on the
loan on this property   and that his firm does not issue re-
ceipts for payments made in this manner but that the prop-
erty owner is furnished   a statement  of the account each
yeare   The owner told us that she did not know whether she
had received an annual statement.

      Case number L-5119        Raymond Avenue

      The complaint  was that live electrical     wires were left
uncovered for 6 months after     the contractor    had been paid
for his work.    This condition,    along with five others,    that
remained after   the city had certified     that the building   was

                                      29
in compliance with the codes was cited as code violations
by HUD inspectors.        None of these conditions    resulted    from
failure     to comply with the contract,    because project      of-
ficials     had not provided for work on these items in the work
specifications.       City inspectors   subsequently    reinspected
the building     and found that code violations      did exist but
that these resulted       because several items of work required
by the contract      had not been done properly.

        We talked with the property          owner and observed the wir-
ing.     There  was  an   opening   in  the   wall along one side and
another in the bottom of an electrical               service box through
which insulated      wiring running to the back of the service
box could be seen.         City officials      informed us that a new
service box had been installed,             somewhat smaller than the
one removed and that insulated            romax wiring could be seen
entering     the new service box.         In commenting on our draft
report,    the city stated that the complaint as stated was
not justified.       At the time of our review, HUD had not made
a reinspection      of the property.

       Case number 3--5109       Ridge Avenue

      The owner expressed dissatisfaction         with both the qual-
 ity and the cost of the work.      As to quality,     the only item
cited was the positioning     of a vent pipe in the bathroom.
The owner indicated     that, after she had questioned       the ex-
tent of repairs   required,   the contract     price had been low-
ered from $3,905 to the grant limit        of$3,000,    Also, the
owner showed us another bid which she had reported to be
about half the amount of the contract.          Cur examination   of
the bid showed that it covered only plumbing work and not
the carpentry   and other required    work,

        According to the city's          project    loan officer,     on De-
cember 18, 1968, the successful              contractor     submitted a bid
of $3,905 for repairs          to this property.         The bid was not
accepted by project        officials,       but the specifications       were
revised to delete certain            work, and on March 19, 1969, the
contractor      submitted a bid of $2,939 based on the revised
specifications.         The revised bid was accepted.             City of-
ficials     told us that the specifications             had,been revised to
eliminate      certain   work which the owner had already done and
that there was no justification              for the complaint.

                                     30
‘   s    .



              The project     files showed no evidence that any bids
        were received     from other contractors.    Also, the project
        loan officer    stated that they had no information    on any
        other bids on this job.

              After the certification      of final   inspection    was pre-
        pared on May 26, 1969, city inspectors          found two items on
        which workmanship was unsatisfactory         and the contractor
        made corrections.      During its inspection        of this property,
        however, HUD found four code violations           that had not been
        included for correction       under the contract,       At the time of
        our review,    the city had not determined what action would
        be taken to correct     the code violations,

              Case number 4--5050     Maple Avenue

              The owners complained (1) that they applied for a loan
        in December 1967 and received  conflicting  information  from
        time to time over a period of 18 months as to whether a
        loan could be approved and that eventually    the loan was
        denied, (2) that the property  was damaged by fire on July 4,
        1968, but most of the damage was to one room, and (3) that
        the city had demolished the home and attached a lien of
        $1,100 against the land.

               On July 30, 1968, the city recommended to HUD that the
        owners' loan application         submitted    in December 1967 be dis-
        approved.      The city's    project   records indicated      that a
        decision    regarding     the loan application     had been delayed
        because of the owners' credit          rating   and because the prop-
        erty already was encumbered by a commercial loan.                 The
        city's   project    records contained a report dated May 3, 1968,
        from a credit      bureau.    Also, the city's     project    records
        showed that the city had recommended that the loan be dis-
        approved because of the unsatisfactory            credit   rating   of the
        owners as shown by the credit          bureau rating.

                On April 7, 1969, 9 months after        the fire,    the owners
        submitted    another application       for a rehabilitation      loan to
        be used for repairs        estimated   to cost $16,230.      By letter
        dated April     21, 1969, HUD advised the city that this ap-
        plication    could not be approved because (1) it involved
        substantial     reconstruction      or new construction     which was
        not authorized      under the code enforcement program and

                                            31
 (2) F'HA"s appraisal of the property   after   the fire  did not
 place any value on the building.     By letter    dated June 2,
 1969, the owners were advised by the city that their        loan
 applications  had been disapproved.

        City building    inspectors     condemned the building   on
 November 14, 1968, because of damage from the fire,            and the
 owners were requested       to demolish the building.       The owners
 did not comply, and, consequently,          the city demolished the
 building     in August 1969.     Costs of $899 incurred     in doing
 this and an administrative         charge of 10 percent of the cost
 to demolish the building       were included in a lien which was
 filed    against  the lot.

     We were unable to locate the property             owners to obtain
more information      regarding     their complaints.     In commenting
on our draft    report,     the city stated that (1) the fire was
much more extensive       than indicated    by the complaint,    (2) the
owners did not qualify         for the requested    loan, and (3) the
complaints   were not justified.

       Case number 5--5071         Vernon   Avenue

       The ownercomplainedthat      (1) she did not have an op-
portunity   to select   the contractor,   (2) one of the contrac-
tors doing much of the work under the St. Louis project        was
awarded the contract,      although other bids were received,    and
 (3) water leaked into the basement from some point near a
large air duct.

         The project  records show that a contractor             submitted       a
bid dated June 28, 1968, for work to be done on this prop-
erty.      There is no evidence in the project          files      that other
bids were solicited       or received.     A project      official       told
us that the contractor       subsequently    withdrew       the bid because
of a heavy work load and that another contractor                   (the one
cited in the owner's complaint)         accepted the city's            request
to perform the work at the price proposed by the first                      con-
tractor.      The records do not indicate       whether the property
owner was involved      in selecting    a contractor.          We have com-
mented on page 12 on the practices          of the city and the in-
volvement of property       owners in selecting       contractors         and
on measures being undertaken         by the city to improve these
practices.

                                       32
        We were unable to contact the owner who we understand
is an elderly      lady in poor health.     A building    inspector
supervisor     told us that he and two plumbing inspectors          ac-
companied by the owner's son, who also is a plumber, had
visited    this property   to investigate     the reported water
leaks.     He stated that they did not find any leaks and that
they had received no further       complaints    from the owner.

      The project    records showed that this property        was in
compliance with the housing codes; however, HUD's            inspection
of this property     cited five code violations    which     had not
been included for correction       under the contract.       At the
time of our review,       the city had not taken action      to correct
the code violations.




                                   33
HUD ACTION

       HUD's major enforcement      device is the withholding        of
funds.     Accordingly,    after HUD  had   confirmed   in  July   1969
that the city had not protected         the interests    of project
area residents       in dealing with contractors,      HUD suspended
the city's    authority    to approve rehabilitation       grants.    HUD
also notified      the city that it would take no further          approval
action on pending rehabilitation         loans.     (See p. 27.)

      As result     of HUD's action,   the city reinspected     132
properties--    all of which had involved HUD grants or loans.
(See p. 22.) The city's       inspections    substantiated    many of
HUD's findings,      and, in a December 1969 letter,       HUD notified
the city that:

      "As a result   of a full review of the Code Enforce-
      ment Program in St. Louis, the actions being un-
      dertaken by the City to improve the administration
      of these activities,    and in the interest of creat-
      ing a minimum of hardship for area residents    of
      the Code Enforcement area, the Department of Hous-
      ing and Urban Development is:

            "1.   Granting   an extension of time for the com-
                  pletion  of this project  until June 30,
                  1970.

            "2.   Authorizing    the resumption     of grant pay-
                  ments for rehabilitation       activities.
                  These grant payments will not be made on
                  contracts   for rehabilitation       without the
                  review and concurrence       of the Regional
                  Office on each case.

            "3.   Prepared to approve rehabilitation     loans
                  as appropriately  submitted   in connection
                  with improvements to properties    in the
                  Code Enforcement area.

     "These actions by the Department          of Housing and
     Urban Development are predicated          on your assur-
     ances that:


                                    34
     11
          1,   All rehabilitated     properties   will    be
               brought into full     compliance   with    the
               codes.

     "2.       All rehabilitated    properties     are brought
               into full compliance with the terms and
               conditions    of the Rehabilitation     Contract.

     "3.       All rehabilitation     work is performed in a
               workmanlike     manner at reasonable  cost and
               completed expeditiously.

     "4.       A properly    authenticated      Certificate of
               Completion will be issued for each reha-
               bilitated   property.       (Signed in person by
               an appropriate     officer    of the City.)

     "5.       The City will   continue to do everything
               it can be reasonably     expected to do to as-
               sure correction   or completion   of the pre-
               vious deficient   rehabilitation   work.
     116. That the City will complete all public im-
          provements needed in the project    area, in-
          cluding street work, and will also take
          appropriate   action to assure that all
          abandoned cars and other types of debris
          are removed from the area.

"Our files     reflect   that Budget No. 2 for this proj-
ect was approved July 9, 1969, but the necessary
contract    which would have made the revision       effec-
tive has not been issued pending resolution          of the
problems encountered        in carrying out the project.
After you have had an opportunity        to review the
actions required       in terms of the time period re-
flected    above, the Department of Housing and Urban
Development is prepared to act favorably         on a re-
vised budget, shifting        funds from one category to
another or, if the need is justified,         to extend the
contract    offer which would increase rehabilitation
grants from $328,000 to $600,000.

"All Federal participation    in the project             will
cease as of June 30, 1970."
                           35
                                 CHAPTER    5


               COMPLIANCE BY HUD AND CITY OFFICIALS

                  WITH PROMISES TO AREA RESIDENTS

        We identified    the following        commitments, agreements,
or promises made to area residents              by HUD or city officials:
 (1) establishment     of a citizens        committee in each project
area, (2) f ree architectural           services     to property  owners,
(3) free individual        consultation       services,    and (4) partici-
pation in contractor        selection.        In addition,    we were told
by a representative        of one of the Gateway Centers that the
City Building       Commissioner had promised that qualified             res-
idents of project      areas would be employed in some capacity
to work in the project.          The information        that we obtained
relative    to each promise is summarized in the following
sections of this chapter.

ESTABLISHMENT OF A CITIZENS COMMITTEE

       HUD's grant contract      with the city provided that,        in
each of the areas selected for a concentrated            code enforce-
ment program, a citizens        committee be formed, composed of
property   owners, tenants,      businessmen, clergymen,      school
principals   and teachers.       To meet this requirement,       the city
consulted   and used the services       of existing   organizations
in the community--   the   Gateway    Centers,   the St.  Louis Feder-
ation of Block Units,      Inc., and the Mayor's Citizens          Advi-
sory Committee.

ARCHITECTURAL SERVICES

        Although the grant contract         provided that the services
of an architect        be made available     to property      owners for
limited     professional     advice, the city did not hire one.
The project      director    told us that project      officials      'had
determined that the services          of an architect       were not
needed.      The HUD Assistant      Regional Administrator         for Re-
newal Assistance,         who is an arc'hitect,    said that,      in his
opinion,     the lack of an architect        on the project      staff had
no detrimental       effect   on the project.



                                     36
INDIVIDUAL CONSULTATION SERVICES

       Offices   staffed      primarily    by inspectors    were estab-
lished by the project           in each project     area to provide in-
dividual     consultation       services   to residents    with problems
involving     the code enforcement program.             In addition,   the
property     owners were furnished         brochures which showed names
of other project        officials      who they could contact.       Avail-
able project     records did not show whether these services
were used by area residents.

PARTICIPATION IN CONTRACTORSELECTION

       The city's   project    director    stated in a letter          dated
July 28, 1967, to the chairman of the Mid West Citizens
Council that the choice of the contractor               would be the home-
owners prerogative      unless the owner requested assistance
from the project     office,      HUD's special investigation             (see
pp@ 25 and 27) and our review of residents!                complaints      re-
vealed that the homeowners rehabilitating               their    property
with Federal financial        assistance    had little       or no voice in
selecting    the contractors.        The city's     building     commissioner
stated that homeowners did not select the contractor,                     be-
cause he decided to restrict          the work to some of the large
contractors     to speed up the work.         Written     procedures re-
cently put into effect        by the city,      however, provide for
property    owners to participate        in contractor       selection.
(See p. 12.)

EMPLOYMENTOF AREA RESIDENTS IN PROJECT

        A representative       of one of the Gateway Centers told us
that the city's       building    commissioner   had promised that
qualified     residents     of the project    would be employed in
some capacity       to work in the project.        She said that no res-
idents 'had been hired although two or three whom she be-
lieved were qualified          had been referred    to the city.   She
could not remember their names.

      We discussed this matter with the building    commissioner.
He stated that he had made no promises of employment and
that suc'h promises would be beyond 'his authority.    He said
that,  in meetings with area residents   during the early
stages of the project,   the matter of jobs had been discussed

                                     37
and that the people had been told that they could submit
applications  for employment in the project to the city
through its regular  employment c'hannels.

       Subsequently,    we discussed the hiring          of area residents
with the building      commissioner's      administrative      assistant.
He said that this was discussed at a meeting of the Mayor's
Citizens    Advisory Committee in December 1968, He furnis'hed
us a copy of the minutes of this meeting.                The minutes show
that various committee members, city officials,                and citizen
guests attended the meeting.           During the meeting,       one of
the citizen     guests pointed out that most people in the area
had complained to the Union-Sarah Gateway Center rather
than to the city's      building    division.     The minutes state
that the building      commissioner      suggested 'hiring an individ-
ual to act as coordinator        for the center and the building
division    with respect to citizens'         complaints.

       The administrative       assistant    advised us that,        as a re-
sult of this discussion,         the Union-Sarah Gateway Center 'had
referred   a man to his office         for possible employment in this
position.    He said that he had interviewed              the man and de-
cided he was qualified        to fill     the liaison     position    and
that he had requested a representative               of the Union-Sarah
Gateway Center to have a contract            written    setting    forth the
terms of employment.        He said, however, that he had not re-
ceived the contract       nor had any further         contact with the
center regarding     this matter.

       To determine the status of the proposed contract,      we
contacted   the representative      of Union-Sarah Gateway Center.
The representative       told us that a lot of hedging had gone
on between the city and the center regarding where the liai-
son person would be located and who would be his immediate
superior   and that, by the time these issues were settled
and a contract     written,   the man who had applied for the po-
sition   had found another job.

      We were unable to identify         any other    job applicants     as
residents  of the project.




                                    38
                                  CHAPTER 6

                 CONCLUSIONS AND AGENCYCOMMENTS

     The city had problems in administering        the project     and
was unable to comply with its plan which provided fc:l.- bring-
ing all properties     into code compliance within     3 yek%rs from
the date of the project     approval.   Furthermore,    on the basis
of the results    of test inspections   made by the HUD staff,       it
is questionable    whether many properties     on which rehabilita-
tion work has been completed and certified        by city inspectors
as being in code compliance were in compliance with city
codes at the time of our fieldwork.

        Information       on housing and economic conditions            which
was available         before the project       was approved indicated          that
the extensive         deterioration      of many of the properties         in the
project     areas was such as to prevent them from being rehabil-
itated within         the period of the grant contract           and with the
resources      available      to the property      owners.    We believe that
an adequate study of the feasibility                of rehabilitating        the
properties--      including       an analysis   of the structural       condi-
tion of the properties             in the project    areas, and the economic
status of the property             owners --would have enabled the city
to avoid many of the problems it encountered                  in administering
the project       and would have shown that the project               areas were
not suitable        for rehabilitation        under the code enforcement
program.

       Although the city may not have fully            applied the minimum
housing standards     in all cases, we found no evidence that
resident    and nonresident    owners were not treated         equally.
Many property    owners, however, did not get opportunities,              as
promised by the city,       to participate       in the selection     of con-
tractors    to do work on their      properties.

       The city's    follo;J-up    inspections       of contract  work done
on properties      generally    were not adequate to protect          the in-
terests    of the owners by assuring            that all required   work had
been satisfactorily         completed.       Also, the city did not have
an architect      on its project       staff    as provided in its grant
application.



                                        39
       Rumors published in St. Louis newspapers regarding      al-
leged kickbacks    from contractors    to inspectors  were not sub-
stantiated   by a special investigation      of the project by HUD.

       Our review substantiated     most of the facts on which the
five residents'      complaints  were based,   City officials     stated,
however, that the facts did not justify        the complaints     in
three of the cases (numbers 2, 3, and 4).          On the   basis   of
available    information    on these cases, we do not disagree with
the city officials'      view that the complaints    were not justi-
fied.     The city did not comment on the remaining two cases.

      We believe that more adequate monitoring   of the proj-
ect by HUD would have helped to identify    and resolve problems
as they arose.

         In a letter  dated October 16, 1970 (see app. II),          the
Acting Assistant      Secretary    for Renewal and Housing Manage-
ment commented on the matters discussed in our draft report.
He stated that, before recommending approval of the city's
grant, HUD personnel inspected            the proposed areas and elim-
inated several proposed areas because they did not meet eli-
gibility     criteria  and that, in light        of regulations  existing
at that time, the regional         office    was of the opinion that
the areas were suitable        for a concentrated      code enforcement
program.

        As discussed on page 9, inspection        of the proposed
areas was limited      to a windshield    inspection    and only one
area (Lindell     North) was eliminated      from the project.    After
receipt    of HUD's written    comments, we discussed this matter
with HUD officials      who could provide evidence that only one
area was deleted.       This area was deleted because of the high
percentage of nonresidential       buildings.

      The Acting Assistant       Secretary      stated that, regardless
of the amount of project        monitoring     by HUD, the responsibil-
ity for initiating,      administering,       and carrying      out a feder-
ally supported code enforcement program in a sound, econom-
ical,  and efficient     manner rests with the local public body
that has entered into a contract           with the Government for
such purposes.       He stated,    however, that in January 1970 the
Ft. Worth Regional Office implemented a surveillance                  system
to provide for better       surveillance      of project    files   and for

                                     40
      ,ete inspections   of a sample number of properties.         The
    Jeillance   system is under the direction       of the regional
L iiceQs Field Services Division       and, if properly    imple-
mented, should result      in improved administration     of the
code enforcement program.

       In a letter    dated September 29, 1970 (see app. III),
the Mayor of St, Louis provided the cityss             comments on the
matters discussed in this report.             Although the Mayor dis-
agreed with certain       details    in the report,    he stated that
the results     of the federally       supported housing code enforce-
ment program had fallen         short of the goals which the city
and HUD had set.

      The Mayor stated that the programIs shortcomings         re-
sulted primarily   because the area selected was not conducive
to this program, either    physically   or economically,      He ac-
knowledged errors and admitted to a lack of knowledge re-
garding the administration    of rehabilitation      loans grid grants
but said that HUD had not given the city the required          assis-
tance and guidance in the administration        of the loan and
grant programs,

       The Mayor has expressed the belief         that the code en-
forcement program can be a success if enforcement               areas are
selected more carefully         and the city gets more cooperation
from HUD officials        and its code enforcement      specialists.     He
added that HUD should provide guidance,           information,       in-
structions,    direction,     or training   necessary to effectively
administer   the program,

      Other comments included in the city's   reply          have been
incorporated  in the appropriate sections   of this          report.




                                     41
                               CHAPTER 7

                           SCOPE OF REVIEW

        Our review was directed   toward obtaining   information
directly    pertinent  to the request of a member of the Con-
gress.     We reviewed various aspects of the city's      administra-
tion of the co'de enforcement project,      the problems experi-
enced by the city in conducting      the activities,    and the sta-
tus of the project,

        We reviewed audit and investigative          reports    pertaining
to the project     which were prepared by HUD representatives;
examined pertinent       records at HUD's Central Office in Wash-
ington,    D.C., at the regional      office   in Ft. Worth, Texas
(Region V), and at the city of St. Louis; and discussed var-
ious matters,     including    the planning and execution          of the
project,    with officials     at these locations.         We contacted
representatives      of the Union-Sarah Gateway Center, the Human
Development Corporation        of Metropolitan      St. Louis, and the
St. Louis Federation        of Block Units,    Inc.,    to obtain informa-
tion to assist us in our review.            We also reviewed the cir-
cumstances regarding        the five complaints      referred    to us by
the Congressman and discussed the complaints               with three of
the five property      owners.




                                   42
APPENDIXES




 43
                                                                                  APPENDIX I




                                July    31, 1969




The Honorable Elmer 6. Staats
Comptroller  General of the United            States
General Accounting Off ice
441 6 Street
Washington,  D.C. 20548

Dear Mr. Staats:

I respectfully      call your attention     to a matter requirin”jL
your immediate consideration.           In accordance with your P 2
responsibilities       for assessing the expenditure      and appli-
cation of public funds by federal agencies,           I request    that
your office      conduct an investigation     of the St. Louis
Concentrated      Code Enforcement Program @IO. E-4).

I suggest that     your investigation    address itself          to,   but
not be limited     to, determining    the following:

(1)   Is the St. Louis minimum housing standards  law being
      applied equally in regard to resident  and non-resident
      owners?

(2)   Is there a comprehensive         plan    for the   total   rehabilitation
      of the effected areas?

(3)   Are those afffcials  of Housing and Urban Development and
      the City of St, Lsuis who are responsible    for administering
      the program adhering to a specific  pre-determined   policy?

(4)   Has ffUD exer~$aed sufficient  leadership  and leverage to
      assure that’the   City of St. Louis performs in accordance
      with its commitments under the Code Enforcement programs?

(5)   Has HUD utilized     all legal means to force the City of St.
      Louis to adopt regulations     which would protect the residents
      of the Code Enforcement Area from unscrupulous     contractors   and
      unreasonable    contracts?




                                         45
APPENDIXI



    Page 2
    Hon. Elmer B. Staats


    (6)   Has IRJD attempted to determine    if there are any reasonable
          grounds to substantiate    the many rumors of kickbacks between
          contractors   and city inspectors.

    I have brought this n&tter to the attention  of Secretary George
    Romney and.1 have urged him to give this program his attention
    prior to authorizing  a nine month extension recently  requested
    by the City of St, Louis.

    In view      of the housing needs which so clearly   exist in our community
    and the      basis for attending this need through a federal    fund expendi-
    ture, I      hope you will submit this situation   to a thorough investigation
    as soon      as possible.

    Sincerely,



    William L. Clay
    Member of Congress

    WLC:cl




                                             46
                                                                                                  APPENDIX        II



                          DEPARTMENT      OF    HOUSING      AND      URBAN     DEVELOPMENT
                                               WASHINGTON,    D. C.    20413




                                                                                                     IN   REPLY   REFER   TO:
  OFFICE OF   THE ASSISTANT   SECRETARY
FOR RENEWAL     AND HOUSINGMANAGEMENT




                                                                                              OCT 16 1970
          Mr. B. E. Birkle
          Assistant  Director, Civil Division
          United States General Accounting
          Off ice
          Washington, D. C.    20548

          Dear Mr. Birkle:

          The Secretary has asked me to respond to your letter of July 30, lgr(O,
          requesting the Department's comments on your draft of a proposed
          report to a member of Congress entitled:  "Review of Certain Aspects
          of Code Enforcement Project Missouri E-4, St. Louis, Nissouri,  Depart-
          ment of Housing and Urban Development."

          The Fort Worth Regional Office approved Missouri E-4 in February 1967.
          The project was one of the early code enforcement projects approved in
          the Region.   During the application  review process, several proposed
          areas were eliminated   because they did not meet eligibility criteria.

          HUD personnel inspected the proposed project areas before the application
          was recommended for approval, and in the light of regulatLons existing    at
          that point in time, the Regional Office was of the opinion that the areas
          were in fact suitable for a concentrated code enforcement progras??. During
          these early stages of project review, the St. Louis FHA Insuring Office
          participated  and found the proposed project areas acceptable for approving
          Section 220 mortgage insurance loans on residential  structures.

          During the past year the Fort Worth Regional Office has found that test
          inspections  made by BUD staff indicate that a number of propertics which
          were reported to be completed (and so certified  by city inspectors as
          being in code compliance) were not in fact in complPctr,ce.

          Complaints of slipshod work by contractors                        rehabilitating       groper-ties in
          Missouri E-4 project area-0 were confirmed                       by RAO sta;f' during %n
          investigation in mid-1969.   The s-ttff also                      verified     the al.le@t:tiils   tha1:
          home owners had no choice in the selection                        of contrecrors.

                                                             47
 APPENDIX II




In January i2'(!3, the For< I~Jorti? Regional Office implemented a surveillance
c-;)stet2, xrlder ihc direction    of its Field Services Division           (TJrban Renewal
Hec032sentacives >, to prsvide      for better surveillance          of project files
an3 com9lete     ifls:3ectlofiz XT a, sample n,aiiber of properties.          It is the
feeling of the Regional Office that if this system is followed through
in the neb: Area Offices,       it will assure management that an effective
surveillance     z;rstea is available    to monitor local reports, files,                 and
the o_ualit:r ak quan'iitz cf rehabilitation.           However, it should be kept
in mind t:M,'; rz~ardle Es of' the amount     of project rmnitorin~           *done    by   HTJ?
field personnel, ';.he ac";uzl responsibility        for initiating,        administering
and carrying ocf, R federally       assisted code enforcement program in a
SOUtXi,   e?.x?mical an3 Fffi.cienL manner rests with the local               r;l?bllc     body
that has enlcre? TnLo ,a con:.rac-t k-ith the Government for such purposes.

                                                              Sincerely,



                                                             Norman V. Matson
                                                             Acting Assistant Secretary




                                               48
                                                                                                                    APPENDIX III




                                                          September             29,    1970




                     Mr. B.    E. Birkle
                     Office    of Associate       Director
                     Civil Division
                     U. S. General       Accounting        Office
                     Washington,     D. C.      20548


                     Dear      Mr.     Birkle:

                                   I am enclosing      a report     which comments       on the
                     preliminary      draft    of the General       Accounting    Office's
                     investigation        into   the operation      of certain    aspects     of
                     our MO. E-4 Housing           Code Enforcement
                                                            .            Program.

                                   This point-by-point        comment,       along with      some
                     general      observations,       has been, submitted         to William
                     Trantina,       Director     of Public   Safety,      by Mr. Kenneth       0.
                     Brown,     Building       Commissioner,    and Mr. Albert        J. Nerviani,
                     Administrator          of our Housing    Rehabilitation         Program.

                                   You will         notethat      Mr. Brown and Mr. Nerviani
                     are somewhat         critical        of the assistance         which HUD has
                     rendered      to this        program.         It is my sincere         hope,     how-
                     ever,     that with        the reorganization          of HUD and some
                     personnel       that     are taking        over responsibility            for
                     housing      programs,         we might make a fresh           start      forget-
                     ting    the past and looking               to future     opportunities            for
                      improvements        through        cooperation      of our administrators
                     and the administrators                  of HUD.

                                                                                      Sincerely,




   GAO       note:     The enclosure       was not   included   in the report      because    of the detail   nature     of the    comments
                       it contained;     however,    the comments     in the     enclosure    were considered        in revising    the re-
                       port.

U.S.   GAO    Wash.,    DA!.

                                                                       49