Issue Date July 11, 2006 Audit Report Number 2006-CH-1012 TO: Steven E. Meiss, Director of Public Housing Hub, 5APH for FROM: Heath Wolfe, Regional Inspector General for Audit, 5AGA SUBJECT: The Housing Authority of the County of Cook, Chicago, Illinois, Needs to Improve Its Section 8 Housing Program Administration HIGHLIGHTS What We Audited and Why We audited the Housing Authority of the County of Cook’s (Authority) Section 8 Housing Choice Voucher program (program). The audit was part of the activities in our fiscal year 2005 annual audit plan. We selected the Authority based upon a risk analysis that identified it as having a high-risk program. Our objective was to determine whether the Authority managed its program in accordance with the U.S. Department of Housing and Urban Development’s (HUD) requirements. This is the first of two audit reports of the Authority’s program. What We Found The Authority needs to improve its program administration regarding housing unit conditions, claiming of household dependents, and the reasonableness of program rents. Quality control reviews were not effective in identifying housing violations. Of the 83 housing units statistically selected for inspection, 64 did not meet HUD’s housing quality standards and 61 had 279 violations that existed at the time of the Authority’s previous inspection. The 61 units had between 1 and 17 preexisting violations per unit. The Authority improperly permitted 18 of 31,587 individuals reviewed to be claimed as dependents in more than one program unit. This resulted in more than $20,000 in overpayments of program housing assistance. The Authority also failed to determine the reasonableness of program rents before approving housing assistance payment contracts for 11 of the 20 tenant files reviewed and lacked documentation to support when its rent reasonableness database was last updated. As a result, program funds were not used efficiently and effectively, and fewer funds were available to assist low and moderate-income families on the Authority’s waiting list. What We Recommend We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to reimburse its program from nonfederal funds for the improper use of more than $123,000 in program funds, ensure that program housing units inspected during this audit are repaired to meet HUD’s housing quality standards, and implement procedures and controls to address the findings cited in this audit report. These procedures and controls should help ensure that nearly $10.1 million in program funds are spent on housing units that meet HUD’s requirements. 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 discussion draft audit report to the Authority’s former executive director, its former board chairman, and HUD’s staff during the audit. We held an exit conference with the Authority’s former executive director on May 19, 2006. We asked the Authority’s former executive director to provide comments on our discussion draft audit report by June 15, 2006. The Authority’s former executive director provided written comments dated June 14, 2006. The Authority disagreed with findings 1 and 2, but agreed with finding 3. The complete text of the written comments, except for four attachments that were not necessary to understand the former executive director’s comments, along with our evaluation of that response, can be found in appendix B of this report. We provided HUD’s acting director of the Chicago Office of Public Housing with a complete copy of the Authority’s written comments plus the four attachments. 2 TABLE OF CONTENTS Background and Objectives 4 Results of Audit Finding 1: Housing Quality Standards Were Not Adequately Enforced 5 Finding 2: The Authority Needs to Enhance Its Controls over Individuals Claimed as Dependents by Program Tenants 12 Finding 3: The Authority’s Rent Reasonableness Process Was Inadequate 15 Scope and Methodology 17 Internal Controls 19 Appendixes A. Schedule of Questioned Costs and Funds to Be Put to Better Use 21 B. Auditee Comments and OIG’s Evaluation 22 C. Criteria 35 D. Units with Preexisting Violations 37 3 BACKGROUND AND OBJECTIVES The Housing Authority of the County of Cook (Authority) is the second largest public housing authority in Illinois. It is a municipal corporation established in 1946 under the Illinois Housing Act to engage in the acquisition, development, leasing, and administration of a low-rent housing program and other federally assisted programs. The Authority administers a Section 8 Housing Choice Voucher program (program) funded by the U.S. Department of Housing and Urban Development (HUD) in 122 suburban communities in Cook County, Illinois. The Authority provides assistance to low and moderate-income individuals seeking decent, safe, and sanitary housing by subsidizing rents with owners of existing private housing. As of March 1, 2006, the Authority had 11,705 units under contract with annual housing assistance payments totaling more than $101.2 million in program funds. Our objective was to determine whether the Authority managed its program in accordance with HUD’s requirements. This is the first of two audit reports of the Authority’s program. 4 RESULTS OF AUDIT Finding 1: Housing Quality Standards Were Not Adequately Enforced The Authority did not adequately enforce HUD’s housing quality standards. Our inspections found that 64 of the 83 program units did not meet minimum housing quality standards and 61 had violations that existed before the Authority’s last inspection. The violations existed because the Authority lacked effective procedures and controls over its unit inspections. As a result, nearly $101,000 in program funds was not used efficiently and effectively to provide units that were decent, safe, and sanitary. HUD’s Housing Quality Standards Not Met From the Authority’s 3,325 program units that passed its inspection between July and September 2005, we statistically selected 83 units for inspection by using the U.S. Army Audit Agency’s Statistical Sampling System software. The 83 units were inspected to determine whether the Authority ensured that its program units met HUD’s housing quality standards. Our appraiser inspected the 83 units between October 17 and November 10, 2005. Of the 83 units, 64 (77 percent) had 376 housing quality standards violations. Of the 376 violations, 10 were identified by the Authority during its previous inspection and were shown on the Authority’s inspection reports. In addition, 61 of the 64 units had 279 violations that existed before the Authority’s previous inspections and 38 units were considered to be in material noncompliance since they had health and safety violations that predated the Authority’s previous inspection. The following table categorizes the 376 housing quality standard violations in the 64 units. 5 Number of Category of violations violations Electrical 89 Security 51 Windows 51 Floor 27 Interior walls 21 Smoke detectors 20 Exterior surface 18 Lead-based paint 15 Ceiling 14 Fire exits 11 Range/refrigerator 9 Sink 8 Tub/shower unit 7 Hot water heater 6 Roof 5 Space for food storage and preparation 5 Exterior stairs 4 Ventilation 3 Flush toilet in enclosed room 2 Infestation 2 Interior stairs 2 Other potential hazardous features 2 Access to unit 1 Foundation 1 Safety of heating equipment 1 Site and neighborhood (rotted fence with exposed nails) 1 Total 376 We provided our inspection results to the former director of HUD’s Chicago Office of Public Housing and the Authority’s former executive director on December 16, 2005. Electrical Violations Eighty- nine electrical violations were present in 45 of the Authority’s program units inspected. The following items are examples of electrical violations listed in the table: outlets with open grounds, light fixtures hanging from wires, no cover on junction box, ground fault circuit interrupters not tripping, holes and gaps in the breaker box, and exposed wires. The following pictures are examples of electrical violations identified in the program units inspected. 6 Unit for household #44248 had exposed wires in unsecured electrical junction box. Unit for household #14195 had a fan lamp hanging from wires in the kitchen. Security Violations Fifty-one security violations were present in 31 of the Authority’s program units inspected. The following items are examples of security violations listed in the table: locks on exterior doors not working, blocked fire exits, broken door jams, deadbolt locks on bedrooms, and the use of unacceptable double-keyed deadbolt locks. The following pictures are examples of the security violations identified in the program units inspected. 7 Unit for household #28119 had a damaged door jam and loose screen door latch. Unit for household #26042 had a porch door blocked by a refrigerator. This door constitutes the secondary means of exit from the unit. Window Violations Fifty-one window-related violations were present in 28 of the Authority’s program units inspected. The following items are examples of window-related violations listed in the table: windows not able to open, window locks not working properly, mold on window sills and sashes, and cracked window panes. The following pictures are examples of window-related violations. 8 Unit for household #18698 had mold on a bedroom window sash and sill. Unit for household #7925 had a broken lock on bedroom window. HUD Funds Not Effectively Used The Authority did not effectively use program funds when it failed to fully enforce HUD’s housing quality standards. Our appraiser identified 61 units with housing quality standards violations that existed at the time of the Authority’s previous inspection. However, the Authority’s inspectors passed the 61 units. Our appraiser noted these preexisting housing quality standards violations on the applicable inspection reports that we provided to the Authority and HUD. 9 The Authority should not have made housing assistance payments on the 61 units due to the preexisting violations. The table in appendix D of this report lists the 61 units, the period after the Authority’s previous inspection (beginning after 21 days from the time of the failure) that the unit did not meet HUD’s housing quality standards, and $92,916 in housing assistance payments that should not have been paid by the Authority. In addition, the Authority should not be entitled to the associated administrative fees of $8,054. Causes for Violations Unit violations were not properly identified by the Authority’s inspectors because the Authority lacked written procedures for supervising and overseeing the performance of program inspections. The Authority was performing quality control inspections, but only one of its three field offices (Arlington Heights) was documenting the results of the quality control inspection log for the purpose of discussing violations with the original inspector. The other two field offices (Evanston and Harvey) lacked documentation (quality control inspection log) showing evidence of feedback provided to inspectors who missed violations. The Authority needs to establish effective procedures and controls to ensure that all field offices document the quality control inspections so that any misinterpretation or oversight of housing quality standards by the inspectors is corrected. While observing the Authority’s inspections during the audit survey, we noted that the Authority’s annual inspections did not always include examinations of the mechanical, plumbing, heating, and electrical systems and structure and roofing of the units. For example, an Evanston field office inspector concluded her inspection after inspecting only the interior of the unit. The inspector made no attempt to inspect the furnace, water heater, and electrical box that were located in the basement and required access from the outside of the unit. This inspector also failed to inspect the furnace, water heater, and electrical box in other units observed. During our observation of the Authority’s Harvey field office inspectors, we were informed that for multifamily buildings, items such as the furnace and water heater not in the individual units were only inspected before a tenant moved in. The Authority’s three field offices were not consistent in their application and interpretation of housing quality standards, which resulted in missed violations. For example, the Authority’s Arlington Heights and Harvey field office inspectors had outlet testers, but the Evanston field office inspectors did not. The Arlington Heights field office inspector was the only one that we observed inspecting the exterior of units. Also, the Arlington Heights field office inspector was the only one observed asking questions of each tenant related to housing quality standards. 10 Conclusion The Authority’s tenants were subjected to health and safety-related violations resulting in program units that failed HUD’s housing quality standards. If the Authority implements adequate procedures and controls over its unit inspections to ensure compliance with HUD’s housing quality standards, we estimate that $10,095,840 in future housing assistance payments will be spent for units that are decent, safe, and sanitary. We determined this amount by multiplying 1,230 units (estimate that would be in material noncompliance with housing quality standards if appropriate actions are not taken by the Authority) times $684 (average monthly subsidy of each housing unit). This amount was then annualized to give the total estimate of funds to be put to better use. Recommendations We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to 1A. Conduct followup housing quality standards inspections on housing units that failed inspection to determine whether violations still exist and abate housing assistance payments to landlords accordingly. 1B. Reimburse its program $100,970 from nonfederal funds ($92,916 for housing assistance payments and $8,054 in associated administrative fees) for the 61 units that contained preexisting violations not identified in the Authority’s previous inspection. 1C. Implement adequate procedures and controls to ensure that program inspections are performed adequately and that all units meet HUD’s housing quality standards. By implementing adequate procedures and controls, the Authority should help ensure that $10,095,840 in program funds support units that are decent, safe, and in sanitary condition over the next year. 11 Finding 2: The Authority Needs to Enhance Its Controls over Individuals Claimed as Dependents by Program Tenants The Authority needs to enhance its controls over individuals claimed by program households as dependents. It permitted 18 of 31,587 individuals reviewed to be claimed as program dependents by multiple households. This occurred because the Authority lacked adequate procedures and controls to review its tenant database to determine whether individuals were already claimed as dependents in another household. As a result, the Authority provided excessive housing assistance. Dependents Claimed in Two Households Weaknesses in the Authority’s procedures and controls for reviewing program tenant information allowed 18 individuals to be claimed as dependents in multiple households. According to HUD’s regulations at 24 CFR [Code of Federal Regulations] 982.551, the family must promptly notify the Authority if any family member no longer resides in the unit. Program dependents can only be claimed by one head of household and the head of household must be able to demonstrate that the dependent resided in the unit more than 50 percent of the time. The Authority provided information on its active program participants and their family members/dependents as of September 7, 2005, from its Emphasis computer system, which included 31,587 individuals. Using computer-assisted auditing techniques, we searched for duplicate Social Security numbers for the program participants and family members/dependents more than six years of age. Eighteen individuals were identified as being claimed as dependents in multiple households. While the error rate was small, this problem could increase if the Authority fails to implement adequate procedures and controls to eliminate the same dependent from being claimed by multiple households. Current Procedure for Checking Social Security Numbers As of April 30, 2006, the Authority’s Emphasis computer system has the ability to identify duplicate Social Security numbers for program heads of households but not their remaining family members/dependents. When adding additional family members/dependents to its program, the Authority’s intake department uses a manual system, looking up Social Security numbers in the Emphasis computer system. If a duplicate number is found, the Authority’s staff informs the renewal/adjustment department. However, this process was not efficient for reviewing the Authority’s entire program database. The Authority’s director of rent assistance said the Authority did not have the necessary computer software to 12 detect duplicate Social Security numbers for family members/dependents but hopes to have the software in the near future. The director also said that sometimes there is a temporary overlap in dependents when one household loses a dependent and requests an interim rental certification and another household adds the same dependent. The following table shows the 14 households (18 individuals) that inappropriately claimed dependents and the amount of excessive housing assistance, utility allowance, and/or utility reimbursement. It also includes one household that paid too much in rent since the household improperly claimed a dependent and the dependent had Social Security income. Excessive Excessive Excessive Household housing utility utility number assistance allowance reimbursement Total 013061 $2,952 $1,872 $2,304 $7,128 009398 168 0 0 168 029785 48 0 0 48 032012 60 10 0 70 014028 2,450 195 0 2,645 030427 600 295 395 1,290 014778 5,010 506 1,298 6,814 051838 192 0 0 192 051274 80 0 16 96 702313 84 0 0 84 027314 (1,140) 0 (760) (1,900) 029799 0 0 72 72 013065 24 0 0 24 051823 1,827 154 0 1,981 028232 1,112 176 248 1,536 Totals $13,467 $3,208 $3,573 $20,248 The utility allowance is calculated for each household based on the Authority’s schedule of average utility consumption by program unit size. The utility reimbursement represents the housing assistance payment exceeding the landlord’s rent that the Authority sends to the head of household or utility company. Conclusion For the tenant files in which the duplicate dependents were found, the head of household was either the dependent’s mother, grandmother, or an individual who obtained custody through a court. The Authority’s Section 8 staff allowed dependents to be claimed by a parent at the same time other individuals obtained custody through the courts. This occurred because the Authority’s staff did not search the database of active program tenants for duplicate Social Security numbers. As a result, the Authority provided $22,148 in excessive housing assistance to 14 households. 13 Recommendations We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to 2A. Reimburse its program $22,148 from nonfederal funds for the housing assistance improperly provided to the 14 households cited in this finding. 2B. Implement adequate procedures and controls to ensure program dependent allowances meet HUD’s regulations. 14 Finding 3: The Authority’s Rent Reasonableness Process Was Inadequate The Authority’s rent reasonableness was inadequate. The Authority did not always determine the reasonableness of program rents before housing assistance payment contracts were approved and lacked documentation to support when its rent reasonableness database was last updated. These problems occurred because the Authority lacked adequate procedures and controls over its rent reasonableness process. As a result, HUD and the Authority lacked assurance the contract rents were reasonable. The Authority Did Not Verify the Reasonableness of Rents Contrary to HUD’s regulations, the Authority did not always verify the reasonableness of program rents before renewing housing assistance payment contracts. Of the 20 randomly selected tenant files that had their housing assistance payment contracts renewed between April 2004 and August 2005, 11 were not verified for rent reasonableness before contract renewals (five had no evidence of rent reasonableness verifications). We reviewed the Authority’s documentation that showed the 11 contract rents were reasonable. According to 24 CFR [Code of Federal Regulations] 982.507, the Authority may not approve a lease until it determines that the initial program rent is reasonable. Further, HUD’s Housing Choice Voucher Guidebook 7420.10, chapter 9, requires housing authorities to ensure that rents charged by owners to program participants are reasonable. Since the Authority did not verify the reasonableness of rents in every case, the Authority and HUD lacked assurance that paid rents were reasonable. The Authority Did Not Document Database Updates The Authority did not have written procedures explaining how often and what methods were to be used for updating comparable rents in its rent reasonableness database. In addition, the Authority lacked documentation to support when comparable rents were collected and loaded into its database. According to chapter 9 of HUD’s Housing Choice Voucher Guidebook 7420.10, there should be written guidance describing how the database will be maintained and how rent reasonableness determinations will be made and documented. Chapter 9 also requires housing authorities to document the date of the rent reasonableness data collection so users know how old the data are when using or updating the data. Since the Authority did not document when and how the rent 15 reasonableness database was updated, it could not ensure that all rents used to determine rent reasonableness reflected current rents in the marketplace. Recommendation We recommend that the director of HUD’s Chicago Office of Public Housing require the Authority to 3A. Implement adequate procedures and controls over its rent reasonableness process to include, but not limited to verifying the reasonableness of rents before executing housing assistance payment contracts with owners and maintaining documentation to support the quality and timeliness of its rent reasonableness database. 16 SCOPE AND METHODOLOGY To accomplish our objective, we reviewed: • Applicable laws; regulations; and the Authority’s Section 8 administrative plan effective May 2000, and its operations manual; and HUD program requirements at 24 CFR [Code of Federal Regulations] Parts 5, 35, 960, 982, and 984; HUD Public and Indian Housing Notice 2005-9; and HUD’s Housing Choice Voucher Guidebook 7420.10. • The Authority’s accounting records, annual audited financial statements for the periods ending March 31, 2004 and 2005, general ledgers, bank statements and cancelled checks for April 2004 through August 2005, tenant files, policies and procedures, board meeting minutes for April 2004 through August 2005, organizational chart, and Section 8 annual contributions contract with HUD. • Downloaded tenant data for the Authority’s program as of September 7, 2005. • HUD’s reports and files relating to the Authority. We also interviewed the Authority’s employees, HUD staff, and program tenants. We statistically selected 83 of the Authority’s program units to inspect, using the U.S. Army Audit Agency’s Statistical Sampling software from the Authority’s 3,325 units that passed its inspection conducted from July through September 2005. The 83 units were selected to determine whether the Authority ensured its program units met HUD’s housing quality standards. Our sampling criteria used a 90 percent confidence level, 50 percent estimated error rate, and a precision of plus or minus 9 percent. Our sampling results determined that 38 of 83 units (46 percent) materially failed HUD’s housing quality standards. This was within our 50 percent estimated error rate; thus we did not need to adjust our sample size. Materially failed units were those units with health and safety issues that preceded the Authority’s previous inspection. The Authority’s August through October 2005 housing assistance payments registers showed that the average monthly housing assistance payment was $684. Using the lower limit of the estimate of the number of units and the average housing assistance payment, we estimated that the Authority will annually spend $10,095,840 (1,230 units times $684 average payment times 12 months) for units that are in material noncompliance with HUD’s housing quality standards. This estimate is presented solely to demonstrate the annual amount of program funds that could be put to better use on decent, safe, and sanitary housing if the Authority implements our recommendation. 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 preexisting violations during its most recent inspections, (2) the units would not be rescheduled for another inspection for another year under normal 17 circumstances, and (3) it would take the Authority at least a year to complete all inspections under an improved inspection process. Using our lower precision limit, we projected this error rate to the population of 3,325 units inspected and passed by the Authority over a three-month period. We estimated that the Authority spent $10,095,840 in housing assistance payments for 1,230 units that materially failed housing quality standards, computed as 1,230 units times the average annual housing assistance payment of $8,208. We performed our onsite audit work from September 2005 to March 2006 at the Authority’s former office located at 310 South Michigan, Chicago, Illinois. The audit covered the period April 1, 2004, through August 31, 2005. This period was expanded as necessary to accomplish our objective. We performed our audit in accordance with generally accepted government auditing standards. 18 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, • Compliance with applicable laws and regulations, and • Safeguarding resources. 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 objective: • Program operations - Policies and procedures that management has implemented to reasonably ensure that a program meets its objectives. • Validity and reliability of data - Policies and procedures that management has implemented to reasonably ensure that valid and reliable data are obtained, maintained, and fairly disclosed in reports. • Compliance with laws and regulations - Policies and procedures that management has implemented to reasonably ensure that resource use is consistent with laws and regulations. • Safeguarding resources - Policies and procedures that management has implemented to reasonably ensure that resources are safeguarded against waste, loss, and misuse. We assessed the relevant controls identified above. A significant weakness exists if internal controls do not provide reasonable assurance that the process for planning, organizing, directing, and controlling program operations will meet the organization’s objectives. 19 Significant Weakness Based on our review, we believe the following item is a significant weakness: • The Authority failed to exercise proper supervision and oversight of its program unit inspections (see finding 1). 20 APPENDIXES Appendix A SCHEDULE OF QUESTIONED COSTS AND FUNDS TO BE PUT TO BETTER USE Recommendation Funds to be put number Ineligible 1/ to better use 2/ 1B $100,970 1C $10,095,840 2A 22,148 Totals $123,118 $10,095,840 1/ Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity that the auditor believes are not allowable by law; contract; or federal, state, or local policies or regulations. 2/ “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 recommendation, it will cease to incur program 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 these recurring benefits. 21 Appendix B AUDITEE COMMENTS AND OIG’s EVALUATION Ref to OIG Evaluation Auditee Comments Comment 1 22 Ref to OIG Evaluation Auditee Comments Comment 2 23 Ref to OIG Evaluation Auditee Comments Comment 3 Comment 4 24 Ref to OIG Evaluation Auditee Comments 25 Ref to OIG Evaluation Auditee Comments Comment 5 Comment 6 26 Ref to OIG Evaluation Auditee Comments Comment 7 27 Ref to OIG Evaluation Auditee Comments 28 Ref to OIG Evaluation Auditee Comments Comment 8 29 Ref to OIG Evaluation Auditee Comments 30 OIG Evaluation of Auditee Comments Comment 1 Our appraiser did not count individual violations twice. For example, if a paint violation is listed under wall, ceiling, window, or door, the violation would still have to be listed under lead-based paint if it met the criteria—that is, built before 1978 and occupied by a child under the age of six. Comment 2 Chapter 10 of the Housing Choice Voucher Program Guidebook,” Housing Quality Standards,” page 10-2, states that not all areas of housing quality standards are exactly defined. While acceptability criteria specifically state the minimum standards necessary to meet housing quality standards, inspector judgment or tenant preference may also need to be considered in determining whether a unit meets minimum standards. Our appraiser did not cite exterior doors for having deadbolt locks. Rather, the appraiser considered it a security violation if the exterior door had an inside keyed lock since it must be accessible to the outside per form HUD-52580-A, and serve as a primary fire exit. Our appraiser also cited as a security violation bedrooms that had keyed deadbolt locks and also served as secondary fire exits. The appraiser did not cite as a violation a keyed lock on a bedroom door if it was not needed as an alternate exit. Comment 3 We agree that ground fault circuit interrupters are not required by HUD’s housing quality standards. However, if ground fault current interrupters are present in a unit, our appraiser determined if they were working properly. An improperly grounded outlet poses a potentially hazardous condition. Regarding reversed hot and neutral connections, our appraiser did not fail these items, but rather annotated them as pass with comment. Globes were not cited as violations unless the light was hanging by a wire without adequate support or there were exposed wires which pose a potential electrical hazard. We eliminated any other violations that only include a missing globe. Regarding tenant-owned items, housing quality standards do not distinguish between items belonging to a landlord or tenant, so if a violation existed, our appraiser appropriately cited it. Comment 4 The Authority had adequate controls over heads of households in terms of checking for duplicate Social Security numbers, but lacked similar controls over their dependents. Although the margin of error was very small—only 18 dependents were found to be claimed by more than one household—the condition still warrants corrective action by the Authority to prevent it from getting any worse. The Authority recognized the risk that its data contained duplicate Social Security numbers by initiating steps to identify the duplicates through the use of a computer matching technique. The Authority’s implementation of this control should eliminate or significantly reduce the risk of dependents being claimed by more than one household. 31 OIG Evaluation of Auditee Comments The Authority provided a spreadsheet of its calculation of $11,520 in total housing assistance overpayments as a result of the duplicate dependent claims. This differed from our total calculation of $22,148 in overpayments. Our audit scope was April 1, 2004, through August 31, 2005, whereas the Authority went back as much as five years for its calculation. In addition, the Authority only counted an annual overpayment of $12 for eight of the tenants reviewed since its policy provides that a household claiming a dependent for which they are not entitled must forfeit $12 in housing assistance per year. Our methodology quantified the total impact on the housing assistance payments for our audit scope. Regarding the three households who complied with the policy on family composition at the time of their renewal, we still counted them since they were not in compliance during the scope of our audit. In addition, utility allowances claimed were not duplicative. The excessive utility allowances and reimbursements were in addition to the excessive housing assistance payments made. We furnished supporting schedules to the Authority. We agree with the Authority that the household who erroneously claimed a dependent should not be entitled to reimbursement from the Authority, regardless of whether that dependent’s income caused them to pay more in rent. Therefore, we eliminated the recommendation to reimburse the household from this audit report. Comment 5 The Authority cited references that have since been rescinded or were not applicable. HUD Handbook 7420.7, “HUD’s Public Housing Agency Administrative Practices Handbook for the Section 8 Existing Housing Program”, was rescinded on November 29, 2001. In addition, the housing quality standards that the Authority referred to at 24 CFR [Code of Federal Regulations] 882.109, 882.210, and 882.211 are not applicable to the Section 8 Housing Choice Voucher program. The applicable regulations are at 24 CFR [Code of Federal Regulations] 982.401. Comment 6 As a guideline for conducting the unit inspections, our appraiser followed 24 CFR [Code of Federal Regulations] 982.401 on housing quality standards and explanations found on form HUD -52580-A, “Inspection Form, Housing Choice Voucher Program.” Although our appraiser has extensive experience, he did not use Section 8 new construction and substantial rehab program standards as suggested by the Authority. Nothing cited by our appraiser should impact the supply of housing to low and moderate income households. The Authority’s program administrative plan recognizes local code requirements when brought to the Authority’s attention by a local municipality. As a result, we instructed our appraiser not to inspect in accordance with local code requirements since we determined that only housing quality standards would be used as the minimum standards for our audit. 32 OIG Evaluation of Auditee Comments Comment 7 HUD’s Housing Choice Voucher Program Guidebook was written to advise public housing authorities regarding the administration of tenant-based subsidy programs (for example, the Section 8 program). It discusses program requirements in detail, and provides helpful operating practices. Chapter 10 addresses housing quality standards, and page 10-8 discusses illumination and electricity. 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. Other unacceptable conditions include hanging light fixtures or outlets from electric wiring, missing cover plates on switches and outlets, badly cracked outlets or cover plates, exposed fuse box connections, and overloaded circuits. One way to test for potential electrical hazards is through the use of a circuit tester. During our observations of the Authority’s inspectors, we noticed that some inspectors were using circuit testers to test if outlets were working properly. Our appraiser cited unlocked junction boxes as a violation if exposed wires were present. For the violations noted, we provided photos to HUD and the Authority to support the cited violations. HUD’s Housing Choice Voucher Program Guidebook also addresses stairs without a handrail. On page 10-10, it states that handrails are required when four or more steps (risers) are present, and protective railings are required when porches, balconies, and stoops are thirty inches off the ground. The violations cited by our appraiser for units assigned to household numbers 52287, 50711, 14195, and 43816 were consistent with this criteria. Comment 8 We agree that worn carpeting or other worn floor covering does not violate the housing quality standards as the Authority pointed out in its response. This is consistent with Section 1.8 of form HUD-52580-A. We adjusted our report to eliminate this previously cited violation. Regarding mold, we disagree with the Authority’s position, but understand that HUD has not specifically addressed this problem. Because of the potential health hazards of mold, and without knowing those hazards absent any testing, our appraiser cited conditions that showed a moderate to high instance of mold. 33 OIG Evaluation of Auditee Comments We agree with the Authority’s position that minor water leaks do not violate the housing quality standards, in accordance with section 3.11 and 3.12 of form HUD-52580-A. However, in the instance cited in our inspection report, the condition represented broken faucet controls which resulted in water flowing from the faucet that exceeded a “dripping faucet.” Regarding second bathrooms, our appraiser would normally only be looking for security and electrical conditions, as long as the primary bathroom met all the requirements of section 3 on form HUD-52580-A. We agree with the Authority’s position on broken kitchen cabinet doors and drawers not violating housing quality standards when it is minor and does not pose any risk to the occupant. In our example, there was a missing drawer and the damage was considered more than a minor defect. We agree with the Authority that smoke detectors are not required in common hallways, per housing quality standards. We did not include this as a violation in our report. We do not agree with the Authority’s position regarding exposed, insulated wires in junction boxes. In HUD’s Housing Choice Voucher Program Guidebook, Chapter 10, it states that exposed fuse box connections are unacceptable. 34 Appendix C CRITERIA Finding 1 HUD’s regulations 24 CFR [Code of Federal Regulations] 982.152(d) state that HUD may reduce or offset any administrative fee to the Authority, in the amount determined by HUD, if the Authority fails to perform its administrative responsibilities correctly or adequately under the program, such as not enforcing HUD’s housing quality standards. HUD’s regulations 24 CFR [Code of Federal Regulations] 982.401(a)(3) state all program housing must meet the housing quality standards performance requirements both at commencement of assisted occupancy and throughout the assisted tenancy. HUD’s regulations 24 CFR [Code of Federal Regulations] 982.404 require owners of program units to maintain the units in accordance with HUD’s housing quality standards. If the owner fails to maintain the dwelling unit in accordance with HUD’s housing quality standards, the Authority must take prompt and vigorous action to enforce the owner’s obligations. The Authority’s remedies for such breach of the housing quality standards include termination, suspension, or reduction of housing assistance payments and termination of the housing assistance payment contract. The Authority must not make any housing assistance payments for a dwelling unit that fails to meet the housing quality standards, unless the owner corrects the defect within the period specified by the Authority and the Authority verifies the correction. If a defect is life threatening, the owner must correct the defect within 24 hours. For other defects, the owner must correct them within 30 calendar days. HUD’s regulations 24 CFR [Code of Federal Regulations] 982.405 state the 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 the housing quality standards. The Authority must conduct supervisory quality control housing quality standards inspections. HUD’s Housing Choice Voucher Program Guidebook7420.10, chapter 10, pages 10 through 33, states that quality control inspections provide feedback on inspectors’ work, which can be used to determine whether individual performance or general housing quality standards training issues need to be addressed. The Authority should maintain a quality control tracking system for each program year, which indicates the address of the units; date of original inspection and inspector; date of the quality control inspection; and location of the unit by neighborhood, zip code, and census tract. Finding 2 HUD’s regulations 24 CFR [Code of Federal Regulations] 982.551 state that the composition of the assisted family residing in the unit must be approved by the Authority. The family must promptly inform the Authority of the birth, adoption, or court-awarded custody of a child. The family must request the Authority’s approval to add any other family member as an occupant of 35 the unit. The family must promptly notify the Authority if any family member no longer resides in the unit. A dependent can only be associated with one household. The household must be able to demonstrate the dependent lived at the unit for at least 51 percent of the year. Divorce custody paperwork is not a concern. A care provider on a part-time basis or a student at a second location is not considered dependents. The dependent can be claimed by only one head of household and that head of household must be able to demonstrate the dependent was at his or her unit more than 50 percent of the time. Finding 3 HUD’s regulations 24 CFR [Code of Federal Regulations] 982.507 state that the Authority may not approve a lease until it determines that the initial rent is reasonable. The Authority must redetermine the reasonableness of the rent before any increase in the rent if there is a 5 percent decrease in the published fair market rent in effect 60 days before the contract anniversary or if directed by HUD. At all times during the assisted tenancy, the rent may not exceed the reasonable rent as most recently determined or redetermined by the Authority. HUD’s Housing Choice Voucher Program Guidebook 7420.10, chapter 9, page 9-7, states that by updating rent reasonableness databases periodically, the Authority may be able to avoid having to conduct a more expensive, comprehensive survey. The work involved in updating the database could be spread out with some updating each month. The Authority should always indicate in its documentation the date of the data collection so that it knows how old the data are when using or updating the data. HUD’s Housing Choice Voucher Program Guidebook 7420.10, chapter 9, page 9-11, requires the Authority to provide staff with written guidance describing how the database will be maintained and how rent reasonableness determinations will be made and documented. Clear performance standards should be set and there should be monitoring and quality control performed throughout the year with training and feedback regarding both good and inadequate performance. 36 Appendix D UNITS WITH PREEXISTING VIOLATIONS Improper Housing housing Improper Household assistance Last unit assistance administrative number payment inspection From To payment fee 18388 $916 7/29/2005 9/1/2005 11/30/2005 $2,748 $178 969 7/9/2005 8/1/2005 8/31/2005 969 59 626 9/1/2005 9/30/2005 626 59 56075 483 10/1/2005 11/30/2005 966 118 714 7/14/2005 9/1/2005 9/30/2005 714 59 14484 726 10/1/2005 11/30/2005 1,452 118 44248 456 8/1/2005 9/1/2005 11/30/2005 1,368 178 300 7/12/2005 9/1/2005 9/30/2005 300 59 26937 306 10/1/2005 11/30/2005 612 118 14562 794 8/12/2005 10/1/2005 11/30/2005 1,588 118 509 7/6/2005 8/1/2005 10/31/2005 1,527 178 703113 515 11/1/2005 11/30/2005 515 59 43140 900 8/1/2005 9/1/2005 11/30/2005 2,700 178 960 7/13/2005 9/1/2005 9/30/2005 960 59 30106 979 10/1/2005 11/30/2005 1,958 118 14103 546 7/13/2005 9/1/2005 11/30/2005 1,638 178 42149 543 9/28/2005 11/1/2005 11/30/2005 543 59 14439 472 8/31/2005 10/1/2005 11/30/2005 944 118 701258 740 8/12/2005 10/1/2005 11/30/2005 1,480 118 12887 47 7/19/2005 9/1/2005 11/30/2005 141 178 52287 1020 9/6/2005 10/1/2005 11/30/2005 2,040 118 601866 614 9/14/2005 11/1/2005 11/30/2005 614 59 25264 992 9/15/2005 11/1/2005 11/30/2005 992 59 51893 789 7/13/2005 9/1/2005 11/30/2005 2,367 178 14495 529 7/25/2005 9/1/2005 11/30/2005 1,587 178 30394 687 8/18/2005 10/1/2005 11/30/2005 1,374 118 43816 818 8/8/2005 9/1/2005 11/30/2005 2,454 178 43324 928 8/24/2005 10/1/2005 11/30/2005 1,856 118 7925 727 8/3/2005 9/1/2005 11/30/2005 2,181 178 30221 562 9/23/2005 11/1/2005 11/30/2005 562 59 4420 651 9/9/2005 10/1/2005 10/31/2005 651 59 31918 103 9/15/2005 11/1/2005 11/30/2005 103 59 5365 504 9/26/2005 11/1/2005 11/30/2005 504 59 701371 409 8/31/2005 10/1/2005 11/30/2005 818 118 56149 925 8/30/2005 10/1/2005 11/30/2005 1,850 118 9178 653 8/23/2005 10/1/2005 11/30/2005 1,306 118 9023 555 9/2/2005 10/1/2005 11/30/2005 1,110 118 56123 820 7/21/2005 9/1/2005 11/30/2005 2,460 178 50617 505 9/7/2005 10/1/2005 11/30/2005 1,010 118 21555 664 9/23/2005 11/1/2005 11/30/2005 664 59 14232 658 8/30/2005 10/1/2005 11/30/2005 1,316 118 32370 486 8/1/2005 9/1/2005 11/30/2005 1,458 178 37 UNITS WITH PREEXISTING VIOLATIONS (continued) Improper Housing housing Improper Household assistance Last unit assistance administrative number payment inspection From To payment fee 14165 $554 8/18/2005 10/1/2005 10/31/2005 $554 $59 50711 920 9/29/2005 11/1/2005 11/30/2005 920 59 56205 798 9/14/2005 11/1/2005 11/30/2005 798 59 716 7/12/2005 9/1/2005 10/31/2005 1,432 118 31437 692 11/1/2005 11/30/2005 692 59 13319 645 7/14/2005 9/1/2005 11/30/2005 1,935 178 9891 950 7/7/2005 8/1/2005 11/30/2005 3,800 237 15203 489 7/6/2005 8/1/2005 11/30/2005 1,956 237 5664 764 8/18/2005 10/1/2005 11/30/2005 1,528 118 725 8/10/2005 9/1/2005 9/30/2005 725 59 32454 740 10/1/2005 11/30/2005 1,480 118 18698 1,186 9/14/2005 11/1/2005 11/30/2005 1,186 59 20987 969 9/19/2005 11/1/2005 11/30/2005 969 59 9602 601 8/23/2005 10/1/2005 11/30/2005 1,202 118 14027 576 9/13/2005 11/1/2005 11/30/2005 576 59 28119 684 7/9/2005 8/1/2005 11/30/2005 2,736 237 10712 603 9/8/2005 10/1/2005 11/30/2005 1,206 118 35760 802 8/30/2005 10/1/2005 11/30/2005 1,604 118 9913 476 9/13/2005 11/1/2005 11/30/2005 476 59 26042 1,116 8/11/2005 10/1/2005 11/30/2005 2,232 118 18951 776 8/29/2005 10/1/2005 11/30/2005 1,552 118 14195 1,040 8/4/2005 9/1/2005 11/30/2005 3,120 178 9940 308 7/29/2005 9/1/2005 11/30/2005 924 178 No inspection 971 report 8/1/2005 8/31/2005 971 59 50664 995 9/1/2005 11/30/2005 2,985 178 604967 539 7/29/2005 9/1/2005 11/30/2005 1,617 178 51691 714 7/26/2005 9/1/2005 9/30/2005 714 59 Totals $92,916 $8,054 38
The Housing Authority of the County of Cook, Chicago, Illinois, Needs to Improve Its Section 8 Housing Program Administration
Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-07-11.
Below is a raw (and likely hideous) rendition of the original report. (PDF)