Issue Date
October 25, 2006
Audit Report Number
2007-AT-1001
TO: R. Edmond Sprayberry, Director, Office of Public Housing, Birmingham,
Alabama, 4CPH
FROM:
James D. McKay
Regional Inspector General for Audit, 4AGA
SUBJECT: The Housing Authority of the Birmingham, Alabama District Did Not Ensure
That Section 8 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 Housing
Authority of the Birmingham District’s (Authority) Section 8 Housing Choice
Voucher program. We selected the Authority for review based on a Section 8 risk
assessment we conducted. Our audit objective was to determine whether the
Authority’s Section 8 units met housing quality standards in accordance with
HUD requirements.
What We Found
The Authority failed to ensure that its Section 8 housing stock met housing
quality standards. We determined that 88 percent, or 58 of 66 units, did not meet
housing quality standards. Of the 58 units, 38 were in material noncompliance.
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This condition occurred because the Authority’s management did not implement
adequate internal controls over its inspection process and did not have adequate
procedures for conducting inspections. 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 pay housing assistance payments of more than $10.4
million for units in material noncompliance with housing quality standards if it
does not implement adequate controls.
What We Recommend
We recommend that the director of the Office of Public and Indian Housing require
the Authority to inspect the 58 units that did not meet housing quality standards to
verify that the owners took appropriate corrective action 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. The director should
also require the Authority to implement internal controls, policies, and procedures
that ensure units meet housing quality standards and inspections meet HUD
requirements to prevent more than $10.4 million from being spent on units that
are in material noncompliance with standards. In addition, the director should
require the Authority to develop and implement quality control inspection
procedures.
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 Authority and HUD officials during the audit. We
provided a copy of the draft report to Authority officials on September 12, 2006,
for their comments and discussed the report with the officials at the exit
conference on September 18, 2006. The Authority provided its written comments
to our draft report on September 18, 2006.
The Authority disagreed with certain statements, but stated it has begun
implementing the recommendations. The complete text of the Authority’s
response, along with our evaluation of that response, can be found in appendix B
of this report. The Authority also provided attachments with its response that are
available for review upon request.
Table of Contents 2
TABLE OF CONTENTS
Background and Objective 4
Results of Audit
Finding 1: The Authority’s Section 8 Units Did Not Meet Housing Quality 5
Standards
Scope and Methodology 12
Internal Controls 14
Appendixes
A. Schedule of Questioned Costs and Funds to Be Put to Better Use 15
B. Auditee Comments and OIG’s Evaluation 16
C. Schedule of Units in Material Noncompliance with Housing Quality Standards 24
3
BACKGROUND AND OBJECTIVE
The Housing Authority of the Birmingham District (Authority) was incorporated in 1935 and in
1937 began participation under the provisions of the United States Housing Act of 1937. Its
primary objective is to provide subsidized public and leased housing within the city of
Birmingham, Alabama, in compliance with its annual contributions contract with the U.S.
Department of Housing and Urban Development (HUD).
A five-member board of commissioners governs the Authority, with members appointed by the
mayor of Birmingham, Alabama. Members are appointed for staggered terms. Bob Friedman is
the board chairman, and Ralph Ruggs is the executive director.
The Authority administers about 4,000 housing choice vouchers. The annual housing assistance
payments and administrative fees approved were $22.6 million for fiscal year 2004, $23.6
million for fiscal year 2005, and $24.2 million for fiscal year 2006.
HUD’s Alabama State Office of Public Housing in Birmingham, Alabama, is responsible for
overseeing the Authority. HUD designated the Authority as a standard performing Section 8
Public Housing Authority for fiscal years 2004 and 2005.
Our audit objective was to determine whether the Authority’s Section 8 units met housing quality
standards in accordance with HUD requirements.
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RESULTS OF AUDIT
Finding 1: The Authority’s Section 8 Units Did Not Meet Housing
Quality Standards
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, 38 were in material noncompliance. Projecting
the results of the statistical sample to the population indicates that at least 1,818 of the Authority’s
3,816 units would not meet standards. This condition occurred because the Authority’s
management did not implement adequate internal controls over its inspection process and did not
have adequate procedures for conducting inspections. As a result, Section 8 tenants lived in units
that were not decent, safe, and/or sanitary. The Authority made housing assistance payments for
units that did not meet housing quality standards. Based on the sample, we estimate that over the
next year, the Authority will pay housing assistance payments of more than $10.4 million for units
that are in material noncompliance with housing quality standards.
Units Contained Numerous
Health and Safety Violations
The Authority’s Section 8 units contained numerous health and safety violations.
We found 309 standards violations in 58 of the 66 units inspected. The following
table lists the most frequently occurring violations for the 58 units.
Type of Number of Number Percentage
deficiency deficiencies of units of units
Electrical 91 45 78
hazards
Plumbing 40 25 43
Building 38 22 38
exterior
Doors 30 22 38
Additionally, 38 of the 58 failed units were in material noncompliance with
housing quality standards. Appendix C provides details on the 38 units.
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The most prevalent deficiencies were electrical hazards, including ungrounded
electrical outlets and exposed wiring.
An active water leak from roof in light fixture with visible
water damage to ceiling and fixture.
Light switch cover missing in the bathroom of unit
where children live.
We also identified hazards such as water leaks, open sewer pipe, deteriorating
exterior structures, unsafe stairs, and unsecured/damaged doors.
Pipe under sink actively leaking with visible
mildew stains.
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Broken and open sewer line on front of unit.
Roof collapsing on exterior storage building in
the backyard where children play.
Stairs on deck not properly secured. The piling on
the exterior deck was not set in concrete.
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Damaged door on exterior laundry room used by
the tenant poses a safety danger to the family and
unauthorized access to the home.
In addition, we identified conditions such as broken or missing window locks and
insect infestation problems.
Window lock is missing.
Federal regulations at 24 CFR [Code of Federal Regulations] 982.401(a)(3)
require that all program housing meet housing quality standards performance
requirements, both at commencement of assisted occupancy and throughout the
assisted tenancy.
Authority officials stated that the inspectors either overlooked the housing
deficiencies or were not aware to identify items based on housing quality standards
requirements, which resulted in the inspectors passing units with housing quality
violations. Authority officials also stated that the inspections were made at a time
when there were only four inspectors to perform the inspections. They stated that
although an independent inspection firm provided inspection assistance to the
Authority, the workload for the four inspectors had dramatically increased.
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The Inspection Process
Was Inadequate
The Authority’s management did not implement an effective internal control
process that ensured units met minimum housing quality standards and quality
control inspections complied with requirements. The Authority’s internal control
process did not include adequate policies and procedures that ensured compliance
with HUD requirements.
The inspectors did not identify all violations and passed units with housing quality
violations. Several deficiencies existed at the time of the Authority’s most recent
inspection, but the inspectors did not report them. In one unit, there were 15
preexisting conditions that the Authority inspected and did not identify. In
another unit, there were three preexisting conditions that the Authority inspected
and passed 22 days before our inspection. Additionally, in 10 of 66 instances,
inspectors identified deficiencies but improperly passed the units.
The Authority’s procedures for performing quality control inspections were
inadequate. The Authority’s quality control inspection procedures did not require
a random selection from the universe of inspections performed. The Authority
selected the units for quality control inspections based on the days the quality
control reviewers were available. The Authority also did not require that
unannounced quality control inspections be performed. The Section 8 and Leased
Housing Manager or an independent contractor performed the quality control
inspections. The Authority’s inspectors were told in advance which inspections
would be selected. When the Section 8 and Leased Housing Manager performed
the quality control inspections, he accompanied the Authority’s inspector and
performed the quality control review at the same time the inspector was
performing his review. The independent contractor may or may not accompany
the Authority’s inspector, and in some cases would perform the quality control
inspection before the inspector performed the initial inspection. In addition, the
quality control reviewers did not prepare a written review of the quality of the
inspector’s work. In addition, the performance appraisals used by the Authority
did not address the quality of the inspector’s work.
Authority officials stated that the procedures were established so the residents
would not have to be available another day to have their unit reinspected and so
that repairs noted during the two inspections could be presented to the owner in
one document.
Federal regulations at 24 CFR [Code of Federal Regulations] 985.2(b) state that
the public housing authority’s quality control sample means an annual sample of
files or records drawn in an unbiased manner and reviewed by a supervisor or
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other qualified person to determine whether the work documented in the files and
records conforms to the program standards.
In addition, 24 CFR [Code of Federal Regulations] 985.3(e) states that for
housing quality control inspections, the reinspected sample is to be drawn from
recently completed housing quality standards inspections and are to be drawn to
represent a cross section of neighborhoods and inspectors.
In addition, 24 CFR [Code of Federal Regulations] 982.54(a) requires the public
housing authority to adopt a written administrative plan that establishes local
policies for administration of the program in accordance with HUD requirements.
Finally, 24 CFR [Code of Federal Regulations] 982.54(d)(22) states that the
public housing authority administrative plan must cover policies, procedural
guidelines, and performance standards for conducting required housing quality
standards inspections.
After our audit, the Authority began taking actions to address the problems with the
unit inspections and quality control inspections. Authority officials have developed
additional procedures regarding the Authority’s unit inspections and quality control
inspection processes. They are also notifying the landlords of the housing quality
standards deficiencies identified in our review and will inspect the units to verify
that repairs were completed.
Because the Authority did not have adequate internal controls, it made housing
assistance payments for units that did not meet housing quality standards. While
the Authority has developed new procedures for performing unit inspections and
quality control inspections, the Authority has to complete all inspections under an
improved inspection process. The Authority must emphasize the importance of
housing quality standards and implement policies and procedures that ensure it
complies with HUD requirements and gives the tenants the opportunity to live in
decent, safe, and sanitary conditions. By continuing to make necessary
improvements, the Authority will ensure that at least $10.4 million in Section 8
funds will be used on units that meet housing quality standards.
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Recommendations
We recommend that the director, Office of Public and Indian Housing,
1A. Require the Authority to inspect the 58 units that did not meet 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
and policies and procedures, to include retraining the Authority inspectors
and monitoring the inspectors’ workload to ensure that units meet housing
quality standards and inspections meet HUD requirements to prevent an
estimated $10.4 million from being spent on units that are in material
noncompliance with standards.
1C. Require the Authority to develop and implement quality control inspection
procedures for selecting and reinspecting units, and evaluating the
inspectors’ work.
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SCOPE AND METHODOLOGY
Our audit objective was to determine whether the Authority’s Section 8 units met housing quality
standards in accordance with HUD requirements.
To accomplish our audit objectives, we reviewed the following:
• Applicable laws, regulations, and other HUD program requirements;
• The Authority’s Section 8 policies, procedures, and administrative plan;
• Minutes from the board of commissioners meetings;
• The Authority’s previous inspection reports; and
• The Authority’s latest independent public accountant report and HUD program
monitoring reviews.
We interviewed the Birmingham, Alabama, Office of Public Housing program officials and
Authority management and staff. We inspected a sample of 66 units with the HUD Birmingham
Office of Public Housing staff and the Authority’s inspectors. We performed the inspections
April 3 through April 25, 2006.
We obtained a download of the Authority’s active units from the housing assistance payment
register for February 2006 1 . There were 3,816 active units as of February 1, 2006. We used a
statistical software program to select a random statistical sample of the 3,816 tenants. 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 with a random selection start. We
used the software to generate 66 additional sample units to be used as replacements if needed.
Projecting the results of the 58 failed units in our statistical sample to the population indicates
The lower limit is 81.33 percent x 3,816 units = 3,103 units not meeting housing quality
standards.
The point estimate is 87.88 percent x 3,816 units = 3,354 units not meeting housing quality
standards.
The upper limit is 94.43 percent x 3,816 units = 3,603 units not meeting housing quality
standards.
We evaluated the 58 units that did not meet housing quality standards to identify those that were
in material noncompliance. Based on our judgment, we determined 38 units were in material
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.
12
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noncompliance with housing quality standards because of the overall poor condition of the unit.
Therefore, one of the failed conditions was a preexisting condition that was not reported at the
time of the Authority’s last inspection, and/or the unit had inadequate repairs, and/or one of the
failed conditions was caused by deferred maintenance. (See appendix C)
Projecting the results of the 38 units that were in material noncompliance with housing quality
standards to the population indicates
The lower limit is 47.66 percent x 3,816 units = 1,818 units in noncompliance with minimum
housing quality standards.
The point estimate is 57.58 percent x 3,816 units = 2,198 units in noncompliance with minimum
housing quality standards.
The upper limit is 67.50 percent x 3,816 units = 2,575 units in noncompliance with minimum
housing quality standards.
Using the lower limit and the average annual housing assistance payments for the population
based on the Authority’s February 2006 housing assistance payment register, we estimated the
Authority spent at least $10,428,048 (1,818 units x $478 average monthly housing assistance
payment x 12 months) for units that were in material noncompliance with housing quality
standards. The 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.
Our audit generally covered the period July 1, 2004, through February 28, 2006. We expanded
our audit period as needed to accomplish our objectives. We performed our on-site work from
February through May 2006 at the Authority’s offices in Birmingham, Alabama, and the
Birmingham field office.
We performed our review in accordance with generally accepted government auditing standards.
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INTERNAL CONTROLS
Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following objectives are being achieved:
• Effectiveness and efficiency of operations,
• Reliability of financial reporting, and
• Compliance with applicable laws and regulations.
Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance.
Relevant Internal Controls
We determined the following internal controls were relevant to our audit objectives:
• Compliance with laws, regulations, policies, and procedures that management
has implemented to reasonably assure that resource use is consistent with laws
and regulations.
• Policies and procedures that management has implemented to reasonably
assure that 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 $ 10,428,048
_________
Total $ 10,428,048
1/ Recommendations that funds 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 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. This action will instead 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.
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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 1
Comment 2
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Comment 3
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Comment 4
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OIG Evaluation of Auditee Comments
Comment 1 We maintain that the Authority did not have adequate controls over the inspection
and quality control inspection processes. We agree that some of the items
identified may have occurred after the inspectors performed their inspections.
However, the units we cited as failing was based on a combination of
deficiencies. We found the inspectors improperly passed units with housing
quality standards violations. We also found the inspectors passed units with
inadequate repairs and deferred maintenance. The deficiencies were cited
because they pose potential fire hazards (e.g., lawn mower located near gas and
fire sources), unsanitary conditions (e.g., stopped up commode and sink), and an
electrical hazard (e.g., thermostat had exposed electrical wiring) to the family.
Comment 2 We found that the Authority had procedures but they were inadequate. The
Authority should have also addressed the Code of Federal Regulations
requirements in their procedures because they include quality control inspection
sampling methodology and performance standards for conducting housing quality
standards inspections. In addition, the most objective way of reviewing an
inspector's everyday work is to inspect the unit after the inspector has completed
the inspection and does not think it will be inspected. Following behind an
inspector without his knowledge will give the Authority the best indicator of the
seasoned inspector's work product.
Comment 3 We agree that the HUD Inspection Form states that the outlets must be working,
but it also states that outlets must be properly installed and that improper types of
wiring and connections could pose electrical hazards. We also found similar
requirements cited in Section 3 of the Inspection Manual. The Code of Federal
Regulations 982.401(f) states that electrical outlets must be in proper operating
condition. It also states that fixtures and wiring must ensure safety from fire.
In addition, Chapter 10 of the Housing Choice Voucher Program Guidebook
states that electrical fixtures and wiring must not pose a fire hazard, the PHA 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.
Based on the regulations, the electrical outlets have to be safe. When a landlord
replaces an ungrounded outlet with a grounding type outlet, but that outlet is not
connected to a ground that makes the outlet unsafe. As a result, the electrical
outlets were not properly installed and pose a hazardous condition for the family.
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Comment 4 Interior doors - We agree the conditions of some interior doors cited during our
inspections should not be included as housing quality standards violations. We
adjusted our report to eliminate the cited violations for some of the interior doors.
However, the remaining interior doors cited are not safe (i.e. falling off the
hinges, splinting, and peeling) and could cause harm to the family.
Circuit breaker box door - We agree the circuit breaker box door not closing is not
a housing quality standards violation, since there were no exposed electrical
contacts. We adjusted our report to eliminate this previously cited violation.
Light over bathroom shower not working - We agree that since there was a
working light fixture in the bathroom, we adjusted our report to eliminate the
previously cited violation.
Smoke detector not working - We agree there were working smoke detectors on
the same level for five units cited. We adjusted our report to eliminate the
previously cited violations.
Peeling paint - The units cited for lead based paint hazard did have children under
age six living in the units. Also, the deteriorated paint was cited because the
scaling, peeling, chipping, or loose paint was caused by water damage, or in an
area where the family could be harmed by falling plaster.
TV cable blocking door and wire scattered - The television cable and wires
scattered about the apartment pose a tripping hazard for the family.
Operation of bathroom vanity drawer - The Authority previously cited the missing
bathroom vanity drawer as a deficiency in its prior inspection. We found the
drawer had been replaced but it did not work properly. As a result, the tenant
could not fully close the vanity drawer, which could cause bodily harm to the
tenant.
Dryer not vented to outside - The dryer should be properly ventilated to prevent
moisture and dust from building up in the unit.
Fascia needs paint - The deteriorated paint was cited because of scaling, peeling,
chipping, or loose paint caused by water damage. The units we cited for lead
based paint hazard were for units where children under age six resided.
Crawl space door broken - The unsecured/damaged crawl space door could allow
small children, animals, and unauthorized persons access to the area underneath
the home.
Flies in the basement - The item was cited as a violation because the flies in the
basement pose an unsanitary condition for the family.
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HW discharge not piped to outside - The hot water discharge pipe was cited
because its location presents a hazard to the family. The pipe was not installed in
such a manner as to protect the family from potential scalding.
Improper front door lock - We agree the condition of the front door lock is not a
housing quality standards violation. We adjusted our report to eliminate this
previously cited violation.
Exterior windowsills - The exterior windowsills were cited as a violation because
of the rust and deterioration caused by water damage that did not protect the unit’s
interior. The HUD Inspection Form states that all windows should be free of
signs of severe deterioration. The Housing Choice Voucher Guidebook also
states that the windows must adequately protect the unit's interior from the
weather.
Outbuildings - The outbuilding was cited as a violation because the damaged door
to the exterior laundry room could cause bodily harm to the family. In addition,
the deficiency is a violation of site and neighborhood standards. The door is
splintering and falling off the hinges. The damaged door also could pose a
security threat to the family. The HUD inspector noted that the lock was broken
which could allow unauthorized access to the home.
All windows in house covered by plastic - We cited the windows as a violation
because they do not adequately protect the unit’s interior from the weather.
Although we made the appropriate adjustments, the adjustments did not have an
overall effect on the 38 failed units in material noncompliance with housing
quality standards.
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Appendix C
SCHEDULE OF UNITS IN MATERIAL NONCOMPLIANCE
WITH HOUSING QUALITY STANDARDS
Item Preexisting Inadequate Deferred
number conditions repairs maintenance
1 X X
2 X X
3 X X X
4 X X X
5 X X
6 X X
7 X X
8 X X
9 X X
10 X X
11 X X
12 X X X
13 X X
14 X X
15 X X X
16 X X
17 X X
18 X X X
19 X X
20 X X
21 X X
22 X X X
23 X X
24 X X
25 X X
26 X X
27 X X
28 X X
29 X X
30 X X
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Item Preexisting Inadequate Deferred
number conditions repairs maintenance
31 X X X
32 X X
33 X X
34 X X
35 X X
36 X X
37 X X
38 X X
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The Housing Authority of the Birmingham, Alabama District Did Not Ensure That Section 8 Units Were Decent, Safe, and Sanitary
Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-10-25.
Below is a raw (and likely hideous) rendition of the original report. (PDF)