oversight

Review of the McKeesport Housing Authority �s Section 8 and Public Housing Programs, McKeesport, Pennsylvania

Published by the Department of Housing and Urban Development, Office of Inspector General on 2005-07-29.

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

                                                                  Issue Date
                                                                         July 29, 2005
                                                                  Audit Report Number
                                                                        2005-PH-1014




TO:         James Cassidy, Director, Office of Public Housing, Pittsburgh Field Office,
              3EPH



FROM:       Daniel G. Temme, Regional Inspector General for Audit, Philadelphia Regional
            Office, 3AGA

SUBJECT: Review of the McKeesport Housing Authority’s Section 8 and Public Housing
          Programs, McKeesport, Pennsylvania


                                   HIGHLIGHTS

 What We Audited and Why

             We reviewed the McKeesport Housing Authority’s (Authority) Section 8 and
             public housing programs. Our objective was to determine whether the Authority
             operates its Section 8 and public housing programs according to U.S. Department
             of Housing and Urban Development (HUD) requirements.

 What We Found

             We found no significant deficiencies with the Authority’s administration of its
             Section 8 program. However, the Authority’s current physical inspection process
             is not effective in ensuring its low rent units are always properly maintained in
             good operable condition. Specifically, the Authority’s 1) method of scheduling its
             low rent inspections is causing a backlog in the maintenance division, 2) low rent
             inspectors are not completing thorough inspections or adequately documenting
             the inspection results, and 3) procedures to ensure deficiencies identified during
             its inspections are completed in a timely manner are not effective. In addition, the
           Authority’s low rent housing inspectors report to the director of security, rather
           than to the director of applications and leasing who is responsible for ensuring the
           units meet housing quality standards. As a result, the Authority’s low rent housing
           units are not always maintained in an efficient and effective manner. This was
           demonstrated when five of the Authority’s eight low rent properties received
           individual failing scores ranging from 45 to 59 points on its fiscal year 2004 Real
           Estate Assessment Center inspection for its Public Housing Assessment System
           review.

What We Recommend

           We recommend that the Authority implement a number of policies and
           procedures that will improve its low rent inspection process. These policies
           should ensure that low rent inspections are scheduled throughout the year, the
           inspections are thoroughly completed and properly documented, and a follow-up
           inspection procedure is implemented to ensure previous deficiencies are corrected
           in a timely manner. In addition, we recommend that the Authority modify its
           organization so that the low rent inspectors report to the director of applications
           and leasing as opposed to the director of security.

           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


           We provided our draft report to the McKeesport Housing Authority on June 15,
           2005. We discussed the findings and recommendations with HUD and
           McKeesport representatives on June 23, 2005. At that meeting, the McKeesport
           Housing Authority representatives agreed with the issues and recommendations
           presented in our report. Formal written comments documenting their agreement
           were received on July 8, 2005. The complete text of the McKeesport Housing
           Authority’s response can be found in Appendix A of this report. We did not
           provide an OIG evaluation to the response, instead, any adjustments that were
           deemed necessary based upon the auditee comments were made directly to the
           report.




                                            2
                             TABLE OF CONTENTS


Background and Objectives                                                          4

Results of Audit
Finding 1: The Authority’s Low Rent Physical Inspection Process Is Not Effective   5

Scope and Methodology                                                              10

Internal Controls                                                                  11

Appendixes
   A. Auditee Comments                                                             12




                                              3
                      BACKGROUND AND OBJECTIVES


The McKeesport Housing Authority (Authority) was incorporated as a public corporation of the
Commonwealth of Pennsylvania to provide housing for qualified individuals in accordance with the
rules and regulations prescribed by the U.S. Department of Housing and Urban Development
(HUD). The Authority received $9,082,141 in HUD operating subsidies from 2001 through 2003.
As of February 11, 2005, the Authority had disbursed $3,018,458 of its fiscal year 2004 Operating
Fund, $2,281,444 of its fiscal year 2004 Section 8 Housing Choice Voucher program funding, and
$598,382 of its fiscal year 2004 Public Housing Capital Fund.

A five-member board of commissioners governs the Authority. The commissioners are appointed
by the mayor with advice and consent of the city counsel. The appointments are for staggered
five-year terms. James Brewster is the board chairman, and the Authority’s executive director is
John H. Kooser, Jr.

The Authority’s Section 8 program consists of 542 units in its inventory. In addition, the Authority
manages eight properties with 1,064 low rent units. Results from the Authority’s fiscal year 2004
Real Estate Assessment Center physical inspection reports indicate that five of the eight properties
received a failing physical condition score (less than 60 points). The failing scores ranged from 45
to 59. Overall, the Authority is just barely considered a standard performer with a physical condition
score of 18.39 out of 30 on its Public Housing Assessment System review.

To ensure compliance with the housing quality standards, the Authority has three housing
inspectors on staff: one full-time public housing inspector, one full-time inspector who splits his
time between public housing and Section 8 inspections, and one part-time Section 8 inspector.
There is one additional inspector who is only responsible for reviewing the exterior and common
areas of the properties.

Over the past year, the local HUD Office of Public Housing has conducted numerous reviews at
the Authority. Some of the deficiencies noted during those reviews related to the maintaining of
tenant files, using funds that were not approved in the federal budget, and high vacancy rates in
the low rent program. Our review did not cover any areas the department has previously
identified; instead, we focused our review on the Authority’s administration of its Section 8 and
public housing programs.

Our overall objective was to determine whether the Authority operates its Section 8 program and
its public housing program according to HUD requirements.




                                                  4
                                 RESULTS OF AUDIT


Finding 1: The Authority’s Low Rent Physical Inspection Process Is
Not Effective
The Authority’s physical inspection process is not effective in ensuring its low rent units are
always properly maintained in good operable condition. This occurred because the Authority
does not have adequate policies and procedures in place to ensure its physical inspection process
is effective in identifying physical deficiencies and that those deficiencies are corrected in a
timely manner. Specifically, the Authority’s 1) method of scheduling its low rent inspections is
causing a backlog in the maintenance division, 2) low rent inspectors are not completing
thorough inspections or adequately documenting the inspection results, and 3) procedures to
ensure deficiencies identified during its inspections are completed in a timely manner are not
effective. In addition, the Authority’s low rent housing inspectors report to the director of
security, rather than to the director of applications and leasing who is responsible for ensuring
the units meet housing quality standards. As a result, the Authority’s low rent housing units are
not always maintained in an efficient and effective manner. This was demonstrated when five of
the Authority’s eight low rent properties received individual failing scores ranging from 45 to 59
points for the fiscal year 2004 Real Estate Assessment Center inspection for its Public Housing
Assessment System review.




 Timing/Scheduling of Low Rent
 Inspections Is Causing a
 Backlog in the Maintenance
 Division


               The Authority’s low rent inspectors complete their inspections sporadically over a
               six-month period, amounting to 10 weeks worth of work. According to HUD’s
               regulations, an inspection is to be completed on every public housing unit at least
               annually. Although the inspections are completed and deficiencies are found, we
               have concerns over the timing of the inspections. Instead of spreading the
               inspections out over a 52-week period, the McKeesport Housing Authority low
               rent inspectors complete all of their inspections using a compressed inspection
               schedule. This compressed schedule allows for excessive down time. On one
               occasion, the low rent inspector commented on the number of inspections he and
               the other inspector had completed during the morning and stated that during the
               next week, he would schedule only a couple of days of inspections and lay back
               for awhile. If the inspectors are not used throughout the entire year, we question




                                                5
                 the need to have one full-time and one part-time inspector on board for an entire
                 year.

                 In addition, using the compressed inspection schedule has led to an excessive
                 backlog in the maintenance department. When we discussed the inspection
                 process with maintenance staff, they expressed concerns with the number of work
                 orders that come in at one time. They explained that during the 2004 inspection
                 period, more than 2,000 work orders were forwarded for completion. In our
                 sample of 35 units, we found that for 13 units that failed their inspections by the
                 Authority, it took 50-288 days to correct the deficiencies cited. We believe that
                 completing the inspections throughout the entire year may alleviate a possible
                 backlog in the maintenance department, allowing deficiencies to be corrected
                 more quickly.


    Low Rent Inspectors Are Not
    Adequately Documenting
    Inspection Results


                 Although the Authority is completing annual inspections of its public housing
                 units, 1 the inspection forms used to document the inspections are not completely
                 filled out. In a sample of 34 2 public housing unit inspection reports, we noted the
                 inspector was hand stamping them as opposed to directly signing the reports. In
                 addition, there were very few other markings and/or notes showing whether the
                 units passed or failed their inspections. We were unable to determine that all 34 of
                 the units included in our sample had failed their inspections until the inspector
                 explained his method for documenting the inspection reports.


    Low Rent Inspectors Are Not
    Completing Thorough
    Inspections


                 Although the Authority’s low rent housing inspectors inspected the low rent units
                 one month before the Real Estate Assessment Center completed its inspections of
                 the units, the units continued to fail. For example, six of the units tested as part of
                 our sample were also part of a HUD inspection. In comparing the two sets of
                 inspections, we noted that both inspectors found deficiencies with the units in

1
  The Authority’s inspectors completed 797 annual public housing inspections during 2004. Of these inspections,
428 units failed to meet HUD’s housing quality standards. The remaining 267 units were not inspected for the
following reasons: 262 were vacant, 3 units were used for other purposes or did not appear on the annual
contributions contract, and 2 units were not assessable during the planned inspection.
2
  Our sample consisted of 35 units; however, one unit was vacant, thus an inspection report was not completed for
the review period, leaving 34 inspection reports to be reviewed.


                                                         6
            question. However, the items questioned by the HUD inspector were not always
            the same as those noted by the Authority inspector. In two of the cases, the
            Authority and HUD inspectors found the same deficiencies. These deficiencies
            continued in spite of a work order completed by the maintenance staff stating the
            item was fixed. For an additional unit, the work order was not completed until
            December 2004, seven months after the Authority inspection and six months after
            the HUD inspection. A proper follow-up inspection system might alleviate some
            of the housing quality standards deficiencies noted within these units.

Deficiencies Are Not Corrected
within the Required 30 Days



            Once a public housing unit fails its annual housing quality standards inspection,
            the inspector completes a work order for the maintenance staff to correct the
            noted deficiency; the work order is used as a substitute for a follow-up inspection
            on the units. Thus, it is assumed by the Authority that once the work order is
            completed, the unit will meet the housing quality standards. However, we found
            the units may not meet housing quality standards for a considerable length of
            time. Reviewing the work orders associated with our sample of 34 public housing
            units, we found that 21 units had been fixed within the 30 days as required by the
            Authority and 13 units that failed their inspections were not corrected for 50-288
            days. By not correcting the deficiencies within the 30-day requirement, the
            Authority is not meeting its obligation to providing housing that is in good
            operable condition.


Low Rent Housing Inspectors
Do Not Report to the
Appropriate Management Staff


            According to the Authority’s January 2005 organization chart, the low rent
            housing inspectors report directly to the director of security, instead of to a
            manager who is responsible for ensuring the units are in good operable condition.
            This management structure may have had an adverse effect on the Authority’s
            ability to ensure all units are adequately inspected to meet housing quality
            standards. The deputy director explained that the low rent housing inspectors were
            assigned to the director of security to ensure there is some independence between
            the inspectors and the maintenance department staff. Although this logic may be
            valid, having the low rent housing inspectors report directly to the director of
            applications and leasing would provide the Authority with a better structure for
            ensuring the units meet the housing quality standards.




                                             7
             In the auditee’s response, the executive director explained that the Authority
             incorrectly informed the audit team that the inspectors report to the director of
             security. Instead, he explained that the inspectors will be reporting to a manager
             that will be responsible for ensuring the inspections are completed accurately and
             appropriately. Based upon our understanding this manager will be the same
             individual that the inspectors currently report to, only with a different title.


Conclusion


             In summary, the deficiencies noted in the low rent inspection process have
             affected the overall quality of the low rent units. As demonstrated in the fiscal
             year 2004 physical assessment scores, provided by the Real Estate Assessment
             Center, five of the Authority’s eight properties received a failing physical
             condition score (less than 60 points). The failing scores ranged from 45 to 59.
             Overall, the Authority is just barely considered a substandard physical performer
             with a physical condition score of 18.39 out of 30 on its Public Housing
             Assessment System review. Further, inspection reports completed by the
             Authority show that the Authority’s own inspectors failed more than 54 percent of
             its low rent units.

Recommendations



             We recommend that the director of Public Housing, Pittsburgh Field Office,
             require the McKeesport Housing Authority to

             1A.    Establish and implement an inspection process that requires at least one
                    inspection of each low rent unit over a 52-week period, instead of the
                    current compressed inspection schedule.

             1B.    Implement policies and procedures that will ensure the low rent units are
                    thoroughly inspected.

             1C.    Implement policies and procedures that will ensure the results of the low
                    rent inspections are accurately and completely documented on the low rent
                    inspection forms.

             1D.    Ensure a follow-up inspection process is developed and implemented. This
                    process should ensure deficiencies noted in failed units have been
                    corrected and implement an adequate quality control process.




                                              8
1E.   Modify the Authority’s organizational structure so the low rent housing
      inspectors report directly to the director of leasing and applications, rather
      than to the director of security.




                                9
                       SCOPE AND METHODOLOGY


To accomplish our objectives, we

   •   Interviewed Authority and local HUD employees;
   •   Reviewed applicable HUD regulations, monitoring files, and systems;
   •   Reviewed Authority policies and procedures relating to the Public Housing and Section 8
       programs; and
   •   Examined 35 low rent inspections and 27 Section 8 inspections to determine the
       inspection quality. Our sample was selected based upon the properties’ latest physical
       score.

We performed the majority of our fieldwork between January and May 2005 at the office of the
Authority located at 2901 Brownlee Street, McKeesport, Pennsylvania. The audit generally
covered the period April 1, 2003, to December 31, 2004, but was expanded when necessary.

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




                                             10
                             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:

              •   Management oversight processes - policies and procedures that management
                  has in place to reasonably ensure that the low rent units are meeting housing
                  quality standards.

              •   Monitoring of inspector performance - policies and procedures that
                  management has in place to ensure that adequate supporting documentation
                  substantiates the validity of the unit inspections.

              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 items are significant weaknesses:

              •   Lack of management oversight,
              •   Lack of adequate supporting documentation to support the low rent
                  inspections, and
              •   Lack of adequate policies and procedures for the low rent inspection process.


                                               11
                APPENDIXES


Appendix A


             AUDITEE COMMENTS


                   Auditee Comments




                    12
Auditee Comments




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