Issue Date
July 27, 2006
Audit Report Number
2006-AT-1015
TO: Olga I. Saez, Director, Public and Indian Housing, San Juan Field Office,
4NPH
FROM: James D. McKay
Regional Inspector General for Audit, 4AGA
SUBJECT: The Municipality of Bayamon Housing Authority, Bayamon, Puerto Rico,
Did Not Ensure Section 8-Assisted Units Were Decent, Safe, and Sanitary
HIGHLIGHTS
What We Audited and Why
As part of the U.S. Department of Housing and Urban Development (HUD),
Office of the Inspector General’s (OIG) strategic plan, we audited the
Municipality of Bayamon Housing Authority’s (Authority) Section 8 Housing
Choice Voucher program. Our audit objective was to determine whether Section
8 units met housing quality standards in accordance with HUD requirements.
What We Found
Our inspection of 66 Section 8 units found that 58 units (88 percent) did not meet
minimum housing quality standards. Of the 58 units, 15 were in material
noncompliance with housing quality standards. As a result, tenants lived in units
that were not decent, safe, and sanitary, and the Authority made housing assistance
payments for units that did not meet standards. We estimate that over the next year,
the Authority will disburse housing assistance payments of more than $1.4 million
for units in material noncompliance with housing quality standards.
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What We Recommend
We recommend that the director of the Office of Public Housing require the
Authority to inspect all of the 58 units that did not meet minimum housing quality
standards to verify that the landlords took appropriate corrective actions to make
the units decent, safe, and sanitary. If appropriate actions were not taken, the
Authority should abate the rents or terminate the tenants’ vouchers. The director
should also require the Authority to implement an internal control plan and
incorporate it into the Authority’s Section 8 administrative plan to ensure that
units meet housing quality standards and inspections meet HUD requirements to
prevent an estimated $1.4 million from being spent on units that are in material
noncompliance with standards.
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 discussed the findings with the Authority and HUD officials during the audit.
We provided a copy of the draft report to Authority officials on June 26, 2006, for
their comments and discussed the report with the officials at the exit conference
on July 10, 2006. The Authority provided its written comments to our draft report
on July 13, 2006.
The Authority generally disagreed with the finding. However, the Authority
identified a number of actions it has taken to improve its controls. The
Authority’s response, except for 12 attachments, along with our evaluation of that
response, can be found in appendix B of this report. The attachments are available
upon request.
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TABLE OF CONTENTS
Background and Objectives 4
Results of Audit
Finding 1: Tenants Lived in Units That Were Not Decent, Safe, and Sanitary 5
Scope and Methodology 13
Internal Controls 16
Appendixes
A. Schedule of Questioned Costs and Funds to Be Put to Better Use 17
B. Auditee Comments and OIG’s Evaluation 18
C. Criteria 32
D. Schedule of Units in Material Noncompliance with Housing Quality Standards 33
3
BACKGROUND AND OBJECTIVES
The Municipality of Bayamon Housing Authority (Authority) administers approximately 1,800
housing choice vouchers in Bayamon, Puerto Rico, and its vicinity. The annual assistance
payments and administrative fees approach $13 million. The Authority’s housing department
was assigned the responsibility of administering the Section 8 program. The Authority’s records
for the Section 8 program are maintained at Marginal Virgilio Davila, Bayamon, Puerto Rico.
The objective of our audit was to determine whether the Authority’s Section 8 units met housing
quality standards in accordance with U.S. Department of Housing and Urban Development
(HUD) requirements.
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RESULTS OF AUDIT
Finding 1: Tenants Lived in Units That Were Not Decent, Safe, and
Sanitary
Our inspection of 66 units showed that 58 units (88 percent) did not meet minimum housing
quality standards. Of the 58 units not meeting standards, 15 were in material noncompliance
with housing quality standards. Projecting the results of the statistical sample to the population
indicates at least 1,475 of the Authority’s 1,813 units did not meet minimum housing quality
standards and 261 units were in material noncompliance with housing quality standards. This
occurred because the Authority did not implement an effective internal control plan that ensured
units met minimum housing standards and inspections complied with requirements. As a result,
tenants lived in units that were not decent, safe, and sanitary, and the Authority made housing
assistance payments for units that did not meet standards. Based on the sample, we estimate that
over the next year, the Authority will disburse housing assistance payments of more than $1.4
million for units in material noncompliance with housing quality standards.
Health and Safety Hazards Were
Predominant
We inspected a statistical sample of 66 units with an Office of Inspector General
(OIG) housing inspector and the Authority’s inspectors and found that 15 units
with 149 deficiencies were in material noncompliance with housing quality
standards. Appendix D provides details on the 15 units.
The following table lists the most frequently occurring deficiencies for all 66 units
we inspected.
Number of Number of Percentage of
Type of deficiency deficiencies units units
Illumination and electrical 169 52 78.8
Structure and materials 42 26 39.4
Water supply 35 25 37.9
Smoke detectors 12 12 18.2
Other 39 23 34.8
Total deficiencies 297
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The most predominant deficiencies were electrical hazards, including exposed
wiring, missing outlet covers, improper wiring of water heaters, inoperable
outlets, and unshielded electrical wires.
Main electrical connection resting on plywood sheet above
metal roof, creating an electrical shock hazard.
Breaker panel in kitchen with no internal fixed cover and with
exposed electrical contacts, creating an electrical shock hazard.
The tenant stated that this deficiency had existed since move-
in, around October 2003.
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Improper wiring of water heater with exposed wire
connections, creating an electrical shock hazard. In addition,
the pressure relief valve has no discharge pipe. The tenant
stated that this deficiency existed at the time of the last
Authority inspection.
Hole in the bedroom wall (next to bed) and missing outlet
cover, creating an electrical shock hazard.
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Improper wiring of a secondary breaker box to primary
breaker. This deficiency was not reported by the Authority
during its June 7, 2005, inspection.
Unauthorized and improperly installed shower heater, creating
an electrical shock hazard.
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8
We also found other health and safety hazards, including water leaks, stairs or
porches needing handrails, vermin or rodent infestation, bedrooms with no
windows, and missing or inoperable smoke detectors.
Pealing paint due to water leak on living room ceiling.
Second floor porch has no guardrails. The tenant stated that
this deficiency had existed since move-in, around June 2002.
This deficiency was not reported by the Authority during its
January 31, 2006, inspection.
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Front entrance porch has no guardrail and handrail. The tenant
informed us that this condition had existed since move-in,
around May 2003. This deficiency was not reported by the
Authority during its February 9, 2006, inspection.
Rusted out hole in the bottom of bathroom tub, creating a
cutting hazard.
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Signs of rodent infestation (droppings) inside sink cabinet in
kitchen.
View of bedroom that has no window and does not provide
adequate air circulation, except for wind driven ventilator next
to the ceiling fan. This deficiency was not reported by the
Authority during its January 30, 2006, inspection.
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The Authority Is Required to
Ensure Properties Meet
Standards
The Authority is required by HUD and its administrative plan to inspect Section 8
units at least once a year to ensure that the properties meet minimum conditions
for compliance with standards. HUD requires and the Authority’s administrative
plan provides minimum conditions that must exist for a unit to be considered
decent, safe, and sanitary. Each unit must meet minimum housing quality
standards for the entire period of tenancy.
We found 225 deficiencies that existed at the time of the Authority’s most recent
inspection, but the inspectors did not identify or did not report them. Damage
from water leaks, missing guardrails, bedrooms with no windows, and improper
electrical installations were some of the deficiencies not reported by inspectors.
Authority inspectors informed us that some of the deficient inspections were
attributed to oversight or their unfamiliarity with HUD requirements.
Conclusion
Because the Authority did not implement adequate internal controls, it made
housing assistance payments for units that did not meet housing quality standards.
The Authority did not maintain adequate controls to ensure that inspections met
HUD requirements. Management must emphasize the importance of housing
quality standards and implement policies and procedures that ensure it complies
with HUD requirements and gives tenants the opportunity to live in decent, safe,
and sanitary conditions. By making the necessary improvements, we estimate the
Authority will prevent more than $1.4 million in Section 8 funds from being spent
on units that are in material noncompliance with standards.
Recommendations
We recommend that the director of the Office of Public Housing
1A. Require the Authority to inspect the 58 units that did not meet minimum
housing quality standards to verify that the owners took appropriate
corrective actions to make the units decent, safe, and sanitary. If
appropriate actions were not taken, the Authority should abate the rents or
terminate the housing assistance payment contracts.
1B. Require the Authority to develop and implement an internal control plan
that ensures units meet housing quality standards and inspections meet
HUD requirements to prevent more than $1.4 million from being spent on
units that are in material noncompliance with standards.
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SCOPE AND METHODOLOGY
Our audit objective was to determine whether Section 8 units met housing quality standards in
accordance with HUD requirements. To accomplish our objective, we did the following:
• Reviewed applicable laws, regulations, and other HUD program requirements.
• Reviewed the Authority’s Section 8 policies, procedures, and administrative plan.
• Interviewed HUD and Authority management and staff.
• Reviewed the Authority’s latest independent public accountant report and HUD program
monitoring reviews.
• Obtained a download of the Authority’s Section 8 housing stock for the Housing Choice
Voucher program as of February 6, 2006.1
• Selected a statistical sample of units for inspection from the Authority’s Section 8
housing stock for the Housing Choice Voucher program as of February 6, 2006.
• Reviewed previous Authority inspection reports.
• Inspected 66 units with an OIG housing inspector and the Authority inspectors to
determine whether the units met housing quality standards. We performed the
inspections from April 3 to 20, 2006.
The download of the Authority’s Section 8 housing stock for the Housing Choice Voucher
program resulted in 1,813 active units in Puerto Rico. We used a statistical software program to
calculate the sample size. Based on a confidence level of 90 percent, a precision level of 10
percent, and an assumed error rate of 50 percent, the software returned a statistical sample of 66
units. We used the Audit Command Language software to select a random sample from the
1,813 units and to generate 60 additional sample units to be used as replacements if needed.
We used statistical sampling because each sampling unit is selected without bias from the audit
population, thereby allowing the results to be projected to the population.
We inspected 12 of the replacement units because 12 of the primary units were no longer being
subsidized or the tenants had moved to new units. We selected the replacement units in
succession until the required 66 units were inspected.
1
To achieve our audit objectives, we relied in part on computer-processed data contained in the Authority’s
database. Although we did not perform a detailed assessment of the reliability of the data, we did perform a
minimal level of testing and found it to be adequate for our purposes.
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Projecting the results of the 58 failed units in our statistical sample to the population indicates the
following:
The lower limit is 81.39 percent x 1,813 units = 1,475 units not meeting housing quality
standards.
The point estimate is 87.88 percent x 1,813, units = 1,594 units not meeting housing quality
standards.
The upper limit is 94.37 percent x 1,813 units = 1,710 units not meeting housing quality
standards.
Of the 58 failed units, 15 units were in material noncompliance with housing quality standards.
We based our assessment on prior Authority inspection reports, tenants’ comments, and our
observation and judgment of the condition of the unit during inspection. We judged units to be
in material noncompliance with housing quality standards because of the overall poor condition
of the unit, one of the fail conditions was a preexisting condition that either was not identified or
not reported at the time of the Authority’s last inspection, one of the fail conditions was a 24-
hour emergency deficiency, and/or the unit had inadequate repairs.
Projecting the results of the 15 units that were in material noncompliance with housing quality
standards to the population yields the following:
The lower limit is 14.40 percent x 1,813 units = 261 units in material noncompliance with
housing quality standards.
The point estimate is 22.73 percent x 1,813 units = 413 units in material noncompliance
with housing quality standards.
The upper limit is 31.06 percent x 1,813 units = 563 units in material noncompliance with
housing quality standards.
The Authority’s February 6, 2006, housing assistance payments register showed that the average
monthly housing assistance payment was $458. Using the lower limit of the estimate of the
number of units and the average monthly housing assistance payment, we estimated that the
Authority would annually spend at least $1,434,456 (261 units x $458 average payment x 12
months) for units that are in material noncompliance with housing quality standards. This
estimate is presented solely to demonstrate the annual amount of Section 8 funds that could be
put to better use on decent, safe, and sanitary housing if the Authority implements our
recommendations. While these benefits would recur indefinitely, we were conservative in our
approach and only included the initial year in our estimate. We also considered that (1) the
Authority did not identify many of the past conditions during its most recent inspections and (2)
the units would not be scheduled for another inspection for another year under normal
circumstances.
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We conducted our fieldwork from February through May 2006 at the Authority’s offices in
Bayamon, Puerto Rico. Our audit period was from July 1, 2004, through January 31, 2006, but
we expanded our audit period as needed to accomplish our objectives.
We conducted the audit in accordance with generally accepted government auditing standards
and included tests of management controls that we considered necessary under the
circumstances.
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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:
• Compliance with laws and regulations – Policies and procedures that
management has implemented to reasonably ensure resource use is
consistent with laws and regulations.
• Safeguarding of resources – Policies, and procedures that management has
implemented to reasonably ensure resources are safeguarded against waste,
loss, and misuse.
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 did not have adequate internal controls to ensure that
Section 8 units met housing quality standards (see finding 1).
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APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
AND FUNDS TO BE PUT TO BETTER USE
Funds to be put
Recommendation to better use 1/
1B $ 1,434,456
_________
Total $ 1,434,456
1/ “Funds to be put to better use” are estimates of amounts that could be used more
efficiently if an Office of Inspector General (OIG) recommendation is implemented.
This includes reductions in outlays, deobligation of funds, withdrawal of interest subsidy
costs, costs not incurred by implementing recommended improvements, avoidance of
unnecessary expenditures noted in preaward reviews, and any other savings which are
specifically identified. In this instance, if the Authority implements our
recommendations, it will cease to incur Section 8 costs for units that are not “decent, safe,
and sanitary” and instead will expend those funds for units that meet HUD’s standards.
Once the Authority successfully improves its controls, this will be a recurring benefit.
Our estimate reflects only the initial year of this recurring benefit.
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Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1
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Comment 2
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Comment 3
20
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Comment 4
Comment 5
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Comment 6
Comment 7
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Comment 8
Comment 9
Comment 10
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Comment 11
Comment 12
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Comment 13
25
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Comment 14
Comment 15
26
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Comment 16
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Comment 17
Comment 18
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Evaluation of Auditee Comments
Comment 1 Our report does not state or imply that all Section 8 units did not meet housing
quality standards. The audit report showed that 58 units (88 percent) of the units
we inspected did not meet housing quality standards, and that 15 of these units
were in material noncompliance with standards.
Comment 2 The measures taken by the Authority should help to improve procedures and
controls over its unit inspections. As the Authority pointed out in its response,
these efforts were taken as the result of the deficiencies found during our audit.
Our audit showed the Authority did not identify many of the violations from our
inspections, and most were recurring violations. The $1.4 million figure
represents a reasonable and conservative estimate of the dollar impact avoided by
implementing the recommendation. We believe the conclusion, recommendation,
and definition of funds to be put to better use in appendix A clearly communicates
what this number represents.
Comment 3 Our report does not state that all of the deficiencies found in the Section 8 units
were present at the time of the Authority’s inspections. Our report clearly states
that 225 deficiencies existed at the time of the Authority’s most recent inspection,
but the inspectors did not identify or did not report them.
Comment 4 Ground fault circuit interrupter does not trip - We agree that ground fault circuit
interrupters are not required by HUD’s housing quality standards as the Authority
pointed out in its response. However, if ground fault current interrupters are
present in a unit, our appraiser determined if they were working properly. This is
consistent with requirements contained in 24 CFR [Code of Federal Regulations]
982.401(f), which states that electrical outlets must be in proper operating
condition. Improperly working ground fault circuit interrupters poses a potential
hazardous condition.
Comment 5 Lack of breaker box cover or loose cover, holes in breaker box, missing breakers -
Our appraiser did not count as a violation breaker panels with no doors. The
items were cited as a violation because the breaker panels had exposed electrical
contacts, creating an electrical shock hazard.
Comment 6 Cracked switches and outlets plates - We agree that a hairline crack in cover
plates does not violate the housing quality standards as the Authority pointed out
in its response. We adjusted our report to eliminate this previously cited violation
in file numbers 382CV, 702-CV, and 1376CV. In the remaining four cases, cover
plates were broken and remain as cited violations.
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Comment 7 Missing lens on lamps, expose wires - HUD’s Housing Choice Voucher Program
Guidebook, Chapter 10, addresses housing quality standards, including
illumination and electricity standards. Specifically, it states that authorities must
be satisfied that the electrical system is free of hazardous conditions, including:
exposed, uninsulated, or frayed wires, improper connections, improper insulation
or grounding of any component of the system, overloading of capacity, or wires
lying in or located near standing water or other unsafe places. Globes were not
cited as a violation unless the light was hanging by a wire without adequate
support, improperly connected, exposed to the elements, or there were exposed
wires that pose a potential electrical hazard.
Comment 8 Exposed wire connections for lamps, fans and other electrical connections -
Uncovered “Romex” type electrical wires were not cited as a violation unless the
wire was not covered by rubber or plastic insulation, frayed, or improperly
installed creating an electrical shock hazard. In all four cases cited by the
Authority, the violations we cited included the use of regular lamp cord (not
“Romex”) as part of the permanent wiring of the unit, with improper electrical
connections or exposed wires.
Comment 9 Open ground outlet - We agree that grounded outlets are not required by HUD’s
housing quality standards as the Authority pointed out in its response. However,
if grounding type outlets are present in a unit, our appraiser determined if they
were working properly. This is consistent with requirements contained in 24 CFR
[Code of Federal Regulations] 982.401(f), which states that electrical outlets must
be in proper operating condition. An improperly grounded outlet poses a
potential hazardous condition.
Comment 10 Deteriorated paint - We agree that lead-base paint hazard requirements apply
when units are occupied by minors as the Authority pointed out in its response.
The deteriorated paint was not cited as a lead-based paint violation in the four
units pointed out by the Authority. Our appraiser cited the items as violation
because scaling, peeling, chipping, or loose paint was (a) above an area used for
preparation of meals, or (b) caused by water leaks in the unit. In one of the units
we cited the violation, the Authority’s inspector also reported the same condition
we found; ultimately the tenant was instructed to vacate the unit.
Comment 11 File number 485CV - Our appraiser did not count as a violation breaker panels
with no doors. The items were cited as a violation because the breaker panels had
exposed electrical contacts, creating an electrical shock hazard. Our inspection
showed the dwelling unit did not meet applicable standards.
Comment 12 File number 553CV - If ground fault current interrupters are present in a unit, our
appraiser determined if they were working properly. This is consistent with
requirements contained in 24 CFR [Code of Federal Regulations] 982.401(f).
Globes were not cited as a violation unless the light was hanging by a wire
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without adequate support, improperly connected, exposed to the elements, or
there were exposed wires that pose a potential electrical hazard. Our inspection
showed the dwelling unit did not meet applicable housing standards.
Comment 13 File number 033CV - If ground fault current interrupters are present in a unit, our
appraiser determined if they were working properly. This is consistent with
requirements contained in 24 CFR [Code of Federal Regulations] 982.401(f). We
agree that dead vermin does not violate the housing quality standards as the
Authority pointed out in its response. We adjusted our report to eliminate this
previously cited violation. Our inspection showed the dwelling unit did not meet
applicable housing standards.
Comment 14 File number 150V - If grounded type outlets are present in a unit, our appraiser
determined if they were working properly. This is consistent with requirements
contained in 24 CFR [Code of Federal Regulations] 982.401(f). Our appraiser
did not count as a violation breaker panels with no doors. The items were cited as
a violation because the breaker panels had exposed electrical contacts, creating an
electrical shock hazard. Our inspection showed the dwelling unit did not meet
applicable standards.
Comment 15 File number 399CV - Our appraiser did not count as a violation breaker panels
with no doors. The items were cited as a violation because the breaker panels had
exposed electrical contacts, creating an electrical shock hazard. Our inspection
showed the dwelling unit did not meet applicable standards.
Comment 16 File number 614V - If grounded type outlets are present in a unit, our appraiser
determined if they were working properly. This is consistent with requirements
contained in 24 CFR [Code of Federal Regulations] 982.401(f). Our inspection
showed the dwelling unit did not meet applicable standards.
Comment 17 File number 667V - If ground fault current interrupters are present in a unit, our
appraiser determined if they were working properly. This is consistent with
requirements contained in 24 CFR [Code of Federal Regulations] 982.401(f).
Our inspection showed the dwelling unit did not meet applicable housing
standards.
Comment 18 We evaluated the Authority’s response. We adjusted our report to eliminate four
previously cited violations, but made no other changes. Therefore, there was no
need to issue a revised draft report.
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Appendix C
CRITERIA
Federal Regulations at 24 [Code of Federal Regulations] 982.54(a)(c)
Housing agencies must adopt a written administrative plan that establishes local policies for
administration of the program in accordance with HUD requirements. The housing agencies
must administer the program in accordance with their administrative plan.
Federal Regulations at 24 [Code of Federal Regulations] 982.401(a)(3)
All program housing must meet housing quality standards performance requirements, both at
commencement of assisted occupancy and throughout the assisted tenancy.
Federal Regulations at 24 [Code of Federal Regulations] 982.405(a)
The public housing authority must inspect the unit leased to a family before the initial term of the
lease, at least annually during assisted occupancy, and at other times as needed to determine
whether the unit meets housing quality standards.
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Appendix D
SCHEDULE OF UNITS IN MATERIAL NONCOMPLIANCE
WITH HOUSING QUALITY STANDARDS
Types of violations**
File Illumination Structure and Water Lead-based Smoke Interior air
number and electrical materials supply paint detectors quality
505-V 0 0 1 0 0 1
230-V 1 1 1 0 0 0
632-CV 7 1 2 0 0 0
1072-CV 8 0 1 5 0 0
486-CV 4 1 1 0 0 0
1337-CV 2 0 4 3 0 0
684-CV 7 3 0 0 1 0
007-CV 3 4 0 0 0 0
209-CV 4 1 1 0 1 0
175-CV 3 3 0 0 1 0
1166-CV 3 1 1 0 0 0
754-V 11 4 1 5 0 0
1100-CV 6 2 1 0 1 1
514-CV 8 2 1 0 0 0
903-CV 7 4 1 5 0 0
**
The table does not indicate all violations we found in the unit. We only included the most frequently
occurring and serious violations.
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The Municipality of Bayamon Housing Authority, Bayamon, Puerto Rico, Did Not Ensure Section 8-Assisted Units Were Decent, Safe, and Sanitary
Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-07-27.
Below is a raw (and likely hideous) rendition of the original report. (PDF)