oversight

The Kansas City, Kansas, Housing Authority's Controls Over Its Section 8 Program Are Adequate, Except When Conducting Quality Control Reviews of Its Routine Housing Inspections

Published by the Department of Housing and Urban Development, Office of Inspector General on 2005-04-18.

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

                                                                Issue Date
                                                                         April 18, 2005
                                                                Audit Report Number
                                                                             2005-KC-1004




TO:        Andrew L. Boeddeker, Director, Office of Public Housing, 7APH

           //signed//
FROM:      Ronald J. Hosking, Regional Inspector General for Audit, 7AGA

SUBJECT: The Kansas City, Kansas, Housing Authority’s Controls Over Its Section 8
           Program Are Adequate, Except When Conducting Quality Control Reviews
           of Its Routine Housing Inspections


                                    HIGHLIGHTS

 What We Audited and Why

             We reviewed the controls over the Section 8 program of the Kansas City, Kansas,
             Housing Authority (Authority) to determine whether the Authority is operating its
             Section 8 program in accordance with U.S. Department of Housing and Urban
             Development (HUD) requirements. We reviewed the Authority because we had
             not conducted a review of its Section 8 program for more than 10 years and the
             Authority is one of the larger housing authorities in the Kansas City and regional
             area.

 What We Found


             The Authority has adequate controls over its Section 8 program, except when
             conducting quality control reviews of its routine Housing Quality Standards
             inspections. The Authority has adequate controls to ensure that its staff properly
             assesses tenant eligibility, assigns appropriate unit size, and calculates Section 8
             subsidy payments. The Authority also has adequate controls over the inspectors’
             daily practices of conducting timely and well-documented inspections and
             enforcing corrective action when the inspector identifies violations.
           However, the Authority currently conducts its quality control inspections
           simultaneously with the routine inspections. This gives the inspector prior
           knowledge of the units that will be inspected for quality control purposes.

What We Recommend
           We recommend that the Director, Office of Public Housing, verify that the
           Authority amends its quality control plan to require that the Authority select and
           conduct quality control inspections separately from routine inspections.

           For each recommendation without a management decision, please respond and
           provide status reports in accordance with HUD Handbook 2000.06, REV-3.
           Please furnish us copies of any correspondence or directives issued because of the
           audit.

Auditee’s Response
           The Authority agreed with our conclusion and recommendation, and plans to seek
           approval from its Board of Commissioners to amend its quality control plan to
           comply with HUD requirements. We provided the draft report to the Authority on
           April 5, 2005, and the Authority provided its written response on April 15, 2005,
           as requested.

           The complete text of the Authority’s response can be found in appendix A of this
           report.




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                            TABLE OF CONTENTS

Background and Objectives                                                          4

Results of Audit
      Finding: The Authority’s Process for Conducting Quality Control Reviews of   5
         Routine Housing Inspections Is Inadequate

Scope and Methodology                                                              7

Internal Controls                                                                  8

Appendix
   A. Auditee Comments                                                             9




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                      BACKGROUND AND OBJECTIVES

The Kansas City, Kansas, Housing Authority assists families and individuals with low and
moderate incomes by providing safe, affordable, quality housing. The Authority presently
administers more than 1,000 Section 8 vouchers and has a Section 8 budget of $4,325,021 for
fiscal year 2005. The State of Kansas chartered the Authority on August 6, 1957. A 12-member
Board of Commissioners provides oversight to the agency and its staff, and an Executive
Director manages the day-to-day operations.

One means of providing quality housing is through the U.S. Department of Housing and Urban
Development’s (HUD) Section 8 voucher program. The voucher program is the Federal
Government’s major program for assisting very low-income families, the elderly, and the
disabled to afford decent, safe, and sanitary housing in the private market. Housing choice
vouchers are administered by public housing authorities that receive Federal funds from HUD to
administer the program.

Section 8 housing assistance is provided on behalf of the family or individual, and participants
are responsible for locating their own housing. Participants are free to choose any housing that
meets the requirements of the program. Rental units must meet minimum standards of health
and safety, as determined by the public housing authority. When the voucher holder finds a unit
that he or she wishes to occupy and reaches an agreement with the landlord over the lease terms,
the public housing authority must inspect the dwelling and determine that the rent requested is
reasonable.

The public housing authority determines a payment standard that is the amount generally needed
to rent a moderately priced dwelling unit in the local housing market, and that is used to calculate
the amount of housing assistance (subsidy) a participant will receive. The public housing
authority calculates the maximum subsidy allowable and pays the monthly subsidy directly to the
landlord on behalf of the participant. The participant pays the difference between the actual rent
charged by the landlord and the amount subsidized by the program.

Our overall objective was to determine whether the Authority is operating its Section 8 program
in accordance with HUD requirements. We conducted our review to determine whether the
Authority has adequate controls to ensure its compliance with HUD requirements when assessing
tenant eligibility, assigning the appropriate unit size to avoid overhousing or underhousing of
tenants, and calculating tenant rent subsidy payments. We also conducted our review to
determine whether the Authority has proper controls in place to ensure compliance with HUD
requirements when conducting Housing Quality Standards inspections and when enforcing
action to correct violations.




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                                RESULTS OF AUDIT

Finding: The Authority’s Process for Conducting Quality Control
     Reviews of Routine Housing Inspections Is Inadequate
The Authority does not have a reliable quality control process in place to ensure that Housing
Quality Standards inspections are conducted according to HUD requirements. The supervisor
conducts quality control reviews of the inspector’s work with the inspector as the inspector
conducts routine inspections. Authority management does not consider it necessary to conduct
quality control inspections separately from routine inspections. Without reliable controls to
ensure proper inspections, HUD and the Authority cannot be assured that the inspector’s
evaluations of Section 8 units consistently meet HUD requirements and that tenants are living in
decent, safe, and sanitary housing.


 Inspection Quality Control
 Process Is Not Adequate

              The Authority’s quality control process for inspections is inadequate and does not
              ensure that inspections are conducted according to HUD requirements. HUD
              requires housing authorities to complete quality control reviews of a sample of the
              routine (i.e., initial and periodic) inspections performed as part of the Authority’s
              normal course of business. The Authority conducts required quality control reviews;
              however, the Section 8 Director or other qualified staff conducts these reviews with
              the inspector while the inspector is inspecting the same unit as a routine inspection.
              Therefore, the inspector has prior knowledge of the units that will be inspected for
              quality control purposes. Without an adequate quality control process, HUD and the
              Authority cannot be assured that the inspector’s overall work is adequate and meets
              HUD requirements and that tenants are living in decent, safe, and sanitary housing.

              HUD regulation 24 CFR [Code of Federal Regulations] 985.3 provides
              performance indicators that public housing authorities are required to use in
              preparing annual certifications regarding management of their Section 8 program.
              One indicator assesses whether an Authority supervisor or other qualified person
              has reinspected a sample of units for quality control and annual recertification
              purposes. The regulation requires the supervisor to reinspect units in which the
              regular inspector has completed a routine inspection in the past 3 months. The
              regulation does not allow for simultaneous inspections, but instead requires
              quality control inspections on recently completed, routine inspections.

              The Authority told us that it performs the inspections simultaneously for the
              tenants’ convenience and to ensure that violations did not occur in the time
              between the initial and the quality control inspections. The Authority also told us




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          that it relies on guidance provided by Nan McKay & Associates, a well-known
          trainer on HUD Section 8 program requirements.

          The Nan McKay & Associates training manual says that one way to evaluate the
          performance of regular inspectors is to accompany each inspector on a sample of
          routine inspections and perform simultaneous quality control inspections of the
          unit. However, the manual points out that a weakness of this approach is that the
          inspector’s performance may be affected by the presence of the supervisor and the
          results may not be an accurate view of the inspector’s normal practices. The
          manual also says that a better approach is to select units that have been recently
          inspected (i.e., not simultaneous inspections). It should also be noted that HUD
          does not formally approve private training programs on Section 8 requirements,
          and HUD officials do not support simultaneous quality control inspections.

          In summary, the Authority does not use a reliable quality control process to evaluate
          the performance of its inspector. The current process is unreliable because the
          supervisor conducts quality control reviews of the regulator inspector’s work at the
          same time as the inspector is conducting routine inspections as part of the normal
          course of business. This process allows the inspector to have prior knowledge of the
          units that will be inspected for quality control purposes. Therefore, HUD and the
          Authority lack assurance that tenants are living in decent, safe, and sanitary housing
          and that HUD subsidies are provided only for acceptable housing.

Recommendation

          We recommend that the Director, Office of Public Housing, verify that the Kansas
          City, Kansas, Public Housing Authority

          1A. Amends its quality control plan for evaluating Housing Quality Standards
              inspections to require that the Authority select and conduct the quality
              control inspections separately from the routine inspections.




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                          SCOPE AND METHODOLOGY

We conducted our review from November 2004 through February 2005 at the Authority’s offices
at 1124 N. 9th Street, Kansas City, Kansas. Our review generally covered the period from October
1, 2003, through December 31, 2004. We expanded our review to the period of a tenant’s initial
tenancy when necessary.

To achieve our objectives, we conducted interviews with the Authority’s staff and staff of the local
Public Housing office. We also reviewed the Authority’s policies and procedures, its hardcopy and
computer tenant files, records of payments to tenants and property owners, its Housing Quality
Standards inspection files, and its audited financial statements. In addition, we reviewed Federal
regulations, HUD’s Rental Integrity Monitoring reports, and Section 8 Management Assessment
Program reports. We also conducted inspections of tenant units.

To conduct our testing, we initially selected a sample of 10 tenants that received Section 8
assistance during our review period. In any area tested in which we identified deficiencies in the
processing of the 10 initial tenant files, we expanded our sample to 15 tenant files. We also selected
a separate sample of 10 units that had received inspections in December 2004 and conducted onsite
inspections of these units to test for adequate inspections by Authority staff.

We conducted our review in accordance with generally accepted government auditing standards.




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                             INTERNAL CONTROLS

Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following objectives are being achieved:

   •   Effectiveness and efficiency of operations,
   •   Reliability of financial reporting, and
   •   Compliance with applicable laws and regulations.

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance.



 Relevant Internal Controls
              We determined the following internal controls were relevant to our audit objectives:
                 • Controls over assessment of tenant admissions (eligibility)
                 • Controls over assignment of appropriate unit size to avoid overhousing or
                     underhousing of tenants
                 • Controls over calculating tenant rent subsidy payments
                 • Controls over conducting Housing Quality Standards inspections and
                     enforcing corrective action for violations

              We assessed the relevant controls identified above.

              A significant weakness exists if management controls do not provide reasonable
              assurance that the process for planning, organizing, directing, and controlling
              program operations will meet the organization’s objectives.

 Significant Weaknesses
              Based on our review, we believe the following item is a significant weakness:
                     • The Authority’s quality control process does not ensure that inspections
                        are conducted according to HUD requirements.


 Separate Communication of
 Minor Deficiencies

              During the review, we identified minor compliance errors in three tenant files. We
              discussed the errors with Authority management, and the Authority agreed with our
              analyses and corrected the errors.


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                 APPENDIX

Appendix A

             AUDITEE COMMENTS




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