Issue Date
October 16, 2006
Audit Report Number
2007-FW-1001
TO: Justin R. Ormsby
Director, Office of Public Housing, 6APH
FROM: Frank E. Baca
Regional Inspector General for Audit, Fort Worth Region, 6AGA
SUBJECT: Lubbock Housing Authority’s, Lubbock, Texas, Lack of Management Controls
Resulted in Section 8 Units Not Meeting Housing Quality Standards
HIGHLIGHTS
What We Audited and Why
We audited the Lubbock Housing Authority’s (Authority) Section 8 Housing Choice
Voucher program as part of our strategic plan. Our objective was to determine
whether the Authority’s Section 8 units met housing quality standards and if not,
determine the extent, cause, and impact of the housing quality standards unit failures
on the Authority’s Section 8 Housing Choice Voucher program.
What We Found
Of the 61 units we inspected, 47 (77 percent) failed inspections, and 30 (49 percent)
were materially noncompliant with housing quality standards. The failures occurred
because the Authority’s Section 8 program lacked effective management and controls
over the inspection process; specifically, the program had inadequate written policies
and procedures, poor inspections, no quality control system, and negative staffing
issues. As a result, the Authority housed families in units that did not meet the U.S.
Department of Housing and Urban Development’s (HUD) standards of decent, safe,
and sanitary housing. If the Authority does not implement effective management and
controls, we estimate it will spend more than $1.2 million in the next 12 months on
the estimated 266 units expected to be materially noncompliant with HUD’s housing
quality standards.
What We Recommend
We recommend that HUD require the Authority to ensure that all 47 units that failed
the Office of Inspector General’s (OIG) inspections meet housing quality standards.
Further, we recommend that HUD require the Authority’s management to implement
procedures and controls over its Section 8 inspection process to ensure that all of its
units meet housing quality 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 provided a draft to the auditee on September 20, 2006, and requested a response
by October 5, 2006. The authority provided a written response on October 5, 2006,
and did not disagree with our finding. The auditee’s response also detailed the steps
it has begun and plans to take to address the deficiencies. HUD’s Fort Worth Office
of Public Housing agreed with our finding and indicated they will submit their
management decisions after the final issuance of the report. The complete text of the
auditee’s response, along with our evaluation of that response, can be found in
appendix B of this report.
2
TABLE OF CONTENTS
Background and Objectives 4
Results of Audit
Finding: Authority’s Lack of Management Controls Results in Section 8 Units 5
Not Meeting Housing Quality Standards
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
3
BACKGROUND AND OBJECTIVES
The City of Lubbock (City) is the ninth largest city in Texas and the largest city in west Texas. The
Lubbock Housing Authority (Authority) was established in 1939 to provide decent, safe, and
sanitary housing for families of low to moderate income. The Authority is governed by a seven-
member board of commissioners appointed by the mayor for two-year terms. It administers both
public housing and Section 8 programs. Its Section 8 Housing Choice Voucher program consists of
852 vouchers. The Authority’s staff works and maintains administrative records and tenant files in
its main office at 1708 Avenue G in Lubbock, Texas, except for its maintenance staff, which works
and maintains its records at 1329 East 19th Street in Lubbock.
During January 2006, the U.S. Department of Housing and Urban Development (HUD) Office of
Public Housing in Fort Worth identified the Authority as a candidate for an Office of Inspector
General (OIG) audit. The Office of Public Housing considered the Authority troubled and placed it
under a memorandum of agreement to improve its operations. The Office of Public Housing also
questioned whether the Authority had the capacity to operate its housing programs effectively. The
previous executive director had left the Authority in November 2005. A deputy director served as
the interim executive director from November 2005 until April 2006 when the City assigned one of
its managers to be the executive director of the Authority for up to two years. The Office of Public
Housing supported the assignment. Both the Office of Public Housing and the City believe that the
new executive director will help the Authority improve its operations.
We selected the Authority’s Section 8 Housing Choice Voucher program for audit as part of our
strategic plan. Our objective was to determine whether the Authority’s Section 8 Housing
Choice Voucher units met housing quality standards and if not, to determine the extent, cause,
and impact of the housing quality standards unit failures on the Authority’s Section 8 Housing
Choice Voucher program. This is the first of three audit reports on the Authority’s Section 8
program.
4
RESULTS OF AUDIT
Finding: Authority’s Lack of Management Controls Results in Section 8
Units Not Meeting Housing Quality Standards
Of the 61 statistically selected sample units that we inspected, 47 (77 percent) failed inspection,
and 30 (49 percent) were materially noncompliant with housing quality standards. The units did
not meet standards because the Authority’s Section 8 program had ineffective management and
controls over the inspection process, including (1) ineffective or non-existent written policies and
procedures, (2) ineffective and poorly documented inspections, (3) no quality control system,
and (4) adverse staffing issues. As a result, the Authority housed families in units that did not
meet HUD’s standards of decent, safe, and sanitary housing. If the Authority does not establish
effective management and controls, we estimate that over the next year it will pay more than
$1.2 million in Section 8 housing assistance payments for units with material housing quality
standards violations.
The Authority’s Section 8 Units
Did Not Meet HUD’s Housing
Quality Standards
Our inspections found a total of 247 housing quality standards violations in the 47
units that failed inspection. Projecting the results of the overall failure rate to the
Authority’s universe of 680 units shows that at least 466 of the units or 68.6 percent
would not meet minimum housing quality standards. In addition, we determined that
30 of the 61 sample units or 49 percent were materially noncompliant with housing
quality standards. 1 Projecting the results of the 30 significant failures to the universe
of 680 units shows that a minimum of 266 of the Authority’s units would fail an
inspection with violations that are materially noncompliant with HUD’s housing
quality standards. If corrective action is not taken, we estimate that the Authority will
spend more than $1.2 million in the next 12 months on these 266 units that are
materially noncompliant. 2
1
See the Scope and Methodology section of this report for our definition of and method of determining which
units were materially noncompliant.
2
See the Scope and Methodology section of this report for our method of calculating funds to be put to better
use.
5
The Section 8 Program Lacked
Effective Management
The Authority’s Section 8 program lacked effective management because the
Authority’s prior management overrode, ignored, or failed to establish controls over
the inspection process. This led to 1) ineffective or nonexistent written policies and
procedures, 2) ineffective and inconsistent inspections, 3) no quality control system,
and 4) adverse staffing issues. These issues are discussed more fully in the following
sections. The lack of management and controls caused a number of failures in the
inspection processes, such as inspectors not:
• Performing inspections, not performing them in a timely manner, or
not following up on failures in a timely manner;
• Adequately reviewing external conditions of units;
• Noting obvious fail items on inspections;
• Identifying health and safety fail items;
• Knowing what constitutes a fail item;
• Filling out inspection forms consistently;
• Maintaining accurate and organized records of inspections, which
resulted in inspectors conducting multiple inspections of the same
units; and
• Updating HUD’s Public and Indian Housing Information Center
database system through Form HUD-50058.
As a result, the Authority housed families in units that did not meet the minimum
standards for decent, safe, and sanitary housing.
The Authority’s Written
Procedures Were Lacking or
Ineffective
The Authority did not have written procedures or policies to ensure that inspections
were performed or performed in a timely manner, failed inspections were followed up
on, or rents were abated or tenants terminated if the inspection failures were not
corrected in a timely manner. The Authority’s Section 8 administrative plan was the
only written policy the Authority had that addressed housing quality standards and the
inspection process. However, the administrative plan lacked detail, and the Authority
did not always follow the policies contained in it.
The Authority Lacked Procedures for Tracking and Monitoring Inspections
The Authority did not have documented procedures in place to ensure that it
maintained accurate and organized records of inspections. The Authority did not
6
clearly define to its staff their responsibilities for maintaining the files and performing
the inspections and what information needed to be maintained or tracked. As a result,
it was unable to locate and provide copies of the previous inspections for 11 of the 61
units selected for inspection. In addition, the former Section 8 administrator had no
log, reports, or system to track inspections to ensure that they were performed in a
timely manner, followed up on if the unit failed, and entered into HUD’s Public and
Indian Housing Information Center database system. Management and staff did not
know whether units were overdue for an inspection or reinspection. Based on a
review of the information available, the Authority had not inspected 21 of the 61
sample units annually. Further, for the 61 units inspected, the Authority had not
updated the HUD system to show the unit’s last passed inspection date for one to
three years for 29 of the units, meaning that more than a year could have passed
between annual inspections. Both the prior executive director and the Section 8
administrator received error reports for HUD system data, but it was not until the new
executive director was hired that headway was made in clearing the problems.
Authority staff also said that they found inspection reports in the office of the former
Section 8 administrator that had not been filed or entered into the Authority’s
computer system, which resulted in some inspections being duplicated. During our
inspections, one tenant confirmed that her unit had two annual inspections within the
last year.
The Authority Did Not Ensure That Failed Units Were Repaired and Reinspected
within 30 Days
In addition to not being able to track or locate inspections, the Authority lacked a
process to ensure that units which failed inspection were repaired and reinspected
within 30 days as required by the Authority’s administrative plan. Four units we
inspected had previous failed inspections, and a reinspection was either not performed
or not documented. A Section 8 inspector admitted to sometimes allowing owners to
submit written proof of repairs made to failed units rather than performing an actual
reinspection, a practice that violated the Authority’s administrative plan. The Section
8 administrator also did not have a report or other tracking process to ensure that
abatement or termination occurred for failed units if repairs were not made within 30
days of the original failed inspection as required by the Authority’s administrative
plan. Further, the Authority’s inspector admitted to being unable to meet the 30-day
reinspection requirement because the Authority was so far behind. Out of the 61
units in our sample, the Authority did not ensure that 14, which had failed a previous
Authority inspection, were corrected within the required 30-day period. Instead, the
Authority took an average of 56 days to follow up and ensure the units were repaired.
The Authority did not abate the rent or terminate the tenants for any of the 14 units
because it did not take such action if it was the Authority’s fault that the unit had not
been reinspected. In addition, the Authority could not ensure that failed units were
reinspected in a timely manner as it did not reinspect 42 of the 47 fails within 30
days.
7
Inspections Were Ineffectively
Performed and Poorly
Documented
Section 8 inspectors passed substandard units because their inspections were not
thorough and the Authority had not clearly defined what constituted a fail item. Further,
the inspectors did not adequately document the results of their inspections or
consistently complete the inspection forms.
Our inspections identified housing quality standards fail items that had obviously existed
for some time at the unit, but the Authority’s inspectors had not detected or required
correction of the issues. The Authority’s inspectors did not ensure that long-standing
conditions, like the following sewer leak, chipping paint, rotted window sills, and unsafe
air conditioning unit, were corrected.
Unit occupied by the
tenant and three
children with raw
sewage seeping from
under the foundation.
Unit occupied by the
tenant and seven
children, five of whom
were age six or
younger, with possible
lead-based paint
peeling on the front
porch posts, which
extended to the
ground. This unit had
passed inspection one
month before our
inspection.
8
Unit in which the
window sills on the
entire house’s
exterior were
deteriorated and dry
rotted.
Unit in which the
air conditioner was
improperly
supported.
One tenant we interviewed stated that the previous inspector never went outside the unit
during the inspection and the sewer leak pictured above had existed for two years.
However, the Authority’s current inspector indicated that he had sufficient time to
perform inspections, including performing a general review of the exterior conditions of
a unit.
The Authority’s administrative plan defines the inspection standards a unit must meet by
stating that a unit will meet the minimum housing quality standards as set forth in 24
CFR [Code of Federal Regulations] 982.401. These standards are quite broad.
Interviews with Authority staff, including management, showed differing opinions on
9
what constituted a fail. Thus, the inspectors might not fail a unit for something that
management or another inspector believes should fail and vice versa.
The Authority also did not ensure that its inspectors completely and consistently
documented the results of their inspections. Of the 61 units we inspected, 41 had at least
one of the following errors on the unit’s prior inspection forms. The inspection
• Was not marked pass, fail, or inconclusive;
• Failed to identify the inspector;
• Did not include the date of the inspection;
• Did not identify the type of inspection (initial, reinspection, or special); or
• Failed to note the tenant’s name.
In some cases, the only way to determine whether a unit had failed the previous
inspection was that the Authority had issued a deficiency letter to the owner.
Apparently, these errors and the inconsistencies in failures went undetected because the
Section 8 administrator did not review the inspection reports.
There Was No Quality Control
System in Place
Although its administrative plan contained steps for quality control inspections, the
Authority did not have a system in place to ensure that its Section 8 staff performed
them as required by HUD’s regulations and its administrative plan. Instead, former
Authority management overrode or ignored the controls, which were designed to
monitor the effectiveness of the Authority’s inspection process. Consequently, the
Authority did not adequately perform or document quality control inspections and
cannot support its Section 8 Management Assessment Program (SEMAP) self-
certification and score.
The former Section 8 administrator either did not perform the quality control
inspections or performed them inadequately. The former Section 8 administrator
stated that she performed quality control inspections; however, she was unable to
provide any documentation to support this statement, and other Authority staff stated
that the Section 8 administrator did not perform the inspections. If she performed the
quality control inspections, they served no useful purpose as she did not document the
results of the inspections or discuss the results with the inspectors. As a result, the
inspectors did not receive feedback as to whether they performed their inspections
properly and in compliance with HUD’s and the Authority’s requirements.
The Authority also cannot support its September 2005 Section 8 Management
Assessment Program self-certification that it had performed the required annual
sample of quality control inspections. Previous Authority management was
apparently unaware that support for the quality control reviews did not exist because
10
the former Section 8 administrator stated that management had never requested to see
the reports on quality control.
Staffing Issues Had a
Negative Impact
Ineffective management also led to high staff turnover and a lack of direction and
training. The Authority has experienced significant turnover in management in the
last 10 months. The previous executive director left in November 2005, and the City
assigned one of its employees to be executive director in April 2006. The director of
finance, who oversaw the Section 8 department, left in May 2006, and the Section 8
administrator resigned at the end of July 2006. In addition, during the last few years,
the Authority’s Section 8 department has seen both a decrease in size and a loss of
experienced staff. Within the last 12 months, 13 people have worked in the Section 8
department and, as of August 2006, the department had a staff of four. None of the
current staff has been there more than eight months.
The Authority’s operational procedures have also fluctuated over time. Originally,
the Authority had trained inspectors performing all of its inspections. At one point,
though, the Authority began requiring caseworkers to perform inspections due to
turnover. However, the Authority did not adequately train the caseworkers to
perform the inspections, and the caseworkers were reluctant to perform them, fearing
for their safety. The Authority currently has a single inspector. Training is still an
issue, as the current inspector has not received specific training on HUD’s housing
quality standards.
The Authority Has Taken
Steps to Address the Problems
The current executive director admitted that the Authority had no controls and has
changed the operations of the Section 8 program. The Authority is working with
HUD and another housing authority to improve its operations. The Authority is also
working to decrease the number of inspections that are outstanding and to ensure that
reinspections are performed in a timely manner. In addition, the Authority’s
inspector is using a handheld computer to perform and document inspections, which
should significantly reduce documentation problems. The executive director and staff
indicated that there has been a significant improvement in morale at the Authority,
and HUD staff indicated that the Authority is improving.
11
Conclusion
Since the Authority did not have effective management to establish procedures and
controls to effectively operate and monitor its Section 8 program, tenants lived in
units that were not decent, safe, and sanitary. The Authority’s new management has
taken steps to correct the problems. However, HUD needs to ensure that the
Authority’s management establishes and implements policies, procedures, and
controls that are consistently followed to prevent tenants from living in unsanitary
and unsafe units. Further, Authority management needs to monitor the controls over
the inspection quality control process to ensure that they are not overridden or
ignored. The Authority’s management also needs to revise its previous Section 8
Management Assessment Program score for quality control inspections and ensure
that future certifications concerning quality control inspections are supported by
adequate documentation.
Recommendations
We recommend that the director of HUD’s Fort Worth Office of Public Housing require
the Authority to
1A. Ensure that all 47 units that failed standards when inspected by OIG meet
standards. If the units cannot be made decent, safe, and sanitary, either abate
the unit if the fail item is owner related or terminate the tenant’s voucher if the
fail item is tenant caused.
1B. Establish and implement policies, procedures, and controls over its entire
inspection process and systems that are consistently followed to prevent tenants
from living in indecent, unsanitary, and unsafe units.
1C. Revise its previous Section 8 Management Assessment Program score for
quality control inspections and ensure that future certifications concerning
quality control inspections are supported by adequate documentation.
12
SCOPE AND METHODOLOGY
To accomplish our objective, we
• Obtained and reviewed relevant HUD regulations and the Authority’s administrative
plan.
• Selected a statistical sample of 61 of the Authority’s units to inspect from HUD’s Public
and Indian Housing Information Center system, which is documented below.
• Obtained and reviewed, if available, the Authority’s previous inspection reports and
HUD data for the sample units to determine whether the unit 1) passed its last inspection,
2) was inspected annually, and 3) had a completed inspection report.
• Inspected the 61 units with a HUD staff person and the Authority’s inspector to
determine whether the units met housing quality standards. We then compiled and
summarized the results as discussed below.
• Reviewed the 47 fails with the Authority’s staff more than 30 days after the inspections
had been completed to determine whether they had been reinspected according to the
Authority’s plan.
• Conducted interviews with Authority staff, Office of Public Housing staff, and program
tenants.
Statistical Sample Selection and
Methodology
To obtain a statistical sample, we obtained a download of all of the Authority’s
current tenants from HUD’s Public and Indian Housing Information Center system as
of March 9, 2006. We used the data although we were unable to match the data 100
percent to the Authority’s housing assistance payments register. The HUD data
download resulted in a universe that consisted of 680 current tenants. OIG’s
Information Systems Audit Division used the Statistical Toolbox software application
to select the sample size based on the following sampling criteria: a 90 percent
confidence level, a 50 percent expected error rate, and a 10 percent desired precision
rate. Statistical Toolbox established a total of 61 tenants’ units to inspect. We also
used Statistical Toolbox to generate additional units to be used as replacements units.
We inspected 61 units from June 5 to June 14, 2006, with a staff person from HUD’s
Fort Worth Office of Public Housing and the Authority’s inspector, to determine
whether the Authority’s units met HUD’s housing quality standards. We replaced
eight of the original units because either the tenants had moved or the unit was not
accessible.
13
OIG’s Information Systems Audit Division used Statistical Toolbox to project the
results of the 47 failed units to the universe of 680 units as follows:
• The lower limit is 68.6 % x 680 = 466 units not meeting housing quality
standards, and
• The upper limit is 85.5 % x 680 = 581 units not meeting housing quality
standards.
Using the same software, OIG’s Information Systems Audit Division projected the
results of the 30 units determined to be materially noncompliant with housing quality
standards to the universe of 680 units as follows:
• The lower limit is 39.13 % x 680 = 266 units materially noncompliant with
housing quality standards, and
• The upper limit is 59.23 % x 680 = 403 units materially noncompliant with
housing quality standards.
Determination of Materially
Noncompliant Units
After we conducted our inspections, we compiled the results defining a materially
noncompliant unit as one that contained
1. Health and safety failures including tripping hazards, falling hazards, exposed
wiring, carbon monoxide leaks, and water leaks and/or
2. Failure items that obviously existed during the Authority’s prior inspection that the
Authority did not note on the inspection form and that contained health and safety
failures.
Determination of Funds to Be
Put to Better Use
To calculate our estimate of funds to be put to better use, we determined the
Authority’s average housing assistance payment for all 680 units during our audit
period. We then multiplied the Authority’s average monthly payment per unit ($378)
by the lower minimum of 266 units determined to be materially noncompliant to
arrive at a monthly estimate of overpayment, which we then annualized. This
resulted in a $1,205,989 estimate of funds to be put to better use (266 units X $378
monthly average rent X 12 months =$1,205,989).
14
Inspection Data in HUD’s
System Not Reliable
We determined that the inspection data input by the Authority’s into its and HUD’s
systems were not reliable. Our testing found instances in which HUD’s information
did not match hard copy inspection information in the Authority’s files or the
Authority did not have hard copy inspections to support the information in HUD’s
system. As a result, we did not rely on the inspection data in HUD’s system unless
the Authority had no other information available concerning a unit’s inspection.
Instead, we relied on available hard copy information. Further, we only used the
HUD inspection data for determining whether units had been inspected annually, and
we qualified our statements in this report concerning that testing.
We performed our on-site work between May 22 and August 9, 2006, at the Authority’s
offices, located at 1329 East 19th Street in Lubbock, and at the various units selected for
review. Our work covered the period of January 1, 2005, through April 30, 2006. We
expanded the scope of our review as necessary. We performed our review in
accordance with generally accepted government auditing standards.
15
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:
• Effectiveness and efficiency of program operations – Policies and procedures
that management has implemented to reasonably ensure that a program meets its
objectives.
• Compliance with laws and regulations – Policies and procedures that
management has implemented to reasonably ensure that resources are used
consistent with laws and regulations.
We assessed the relevant controls identified above.
A significant weakness exists if management controls do not provide reasonable
assurance that the process for planning, organizing, directing, and controlling program
operations will meet the organization’s objectives.
Significant Weaknesses
Based on our review, we believe the following items are significant weaknesses:
• The Authority lacked effective management, controls, and written
procedures over its inspection process to ensure that its units complied
with HUD’s requirements, and
• The Authority lacked an effective quality control system that complied with
HUD’s Section 8 Management Assessment Program requirements.
16
APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
AND FUNDS TO BE PUT TO BETTER USE
Recommendation Funds to be put
number to better use 1/
1B $1,205,989
1/ Recommendations that funds be put to better use are estimates of amounts that could be used
more efficiently if an 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 program costs for units
that are not decent, safe, and sanitary and will instead expend those funds for units that meet
HUD’s standards. Once the Authority establishes and successfully implements the
recommended procedures and controls, this will be a recurring benefit. Our estimate reflects
only the initial year of these recurring benefits.
17
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1
18
19
OIG Evaluation of Auditee Comments
Comment 1: The Authority did not disagree with our finding. Their response detailed the steps
it will take to address the deficiencies.
20
Lubbock Housing Authority's, Lubbock, Texas, Lack of Management Controls Resulted in Section 8 Units Not Meeting Housing Quality Standards
Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-10-16.
Below is a raw (and likely hideous) rendition of the original report. (PDF)