oversight

The Cincinnati Metropolitan Housing Authority Cincinnati, Ohio did not Effectively Operate its Section 8 Housing Quality Standards Inspection Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-09-23.

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

                                                                 Issue Date
                                                                         September 23, 2008
                                                                 Audit Report Number
                                                                         2008-CH-1012




TO:         Thomas S. Marshall, Director of Public Housing Hub, 5DPH


FROM:       Heath Wolfe, Regional Inspector General for Audit, 5AGA

SUBJECT: The Cincinnati Metropolitan Housing Authority, Cincinnati, Ohio, Did Not
           Effectively Operate Its Section 8 Housing Quality Standards Inspection
           Program

                                    HIGHLIGHTS

 What We Audited and Why

             We audited the Cincinnati Metropolitan Housing Authority’s (Authority) Section
             8 Housing Choice Voucher program (program). The audit was part of the
             activities in our fiscal year 2008 annual audit plan. We selected the Authority
             based upon our analysis of risk factors relating to the housing agencies in Region
             V’s jurisdiction. Our objective was to determine whether the Authority
             administered its program in accordance with U.S. Department of Housing and
             Urban Development’s (HUD) requirements. This is the first of two audit reports
             planned on the Authority’s program.

 What We Found

             The Authority’s program administration regarding housing unit conditions was
             inadequate. Of the 65 housing units statistically selected for inspection, 56 did
             not meet HUD’s housing quality standards and 50 had 284 violations that existed
             at the time of the Authority’s previous inspections. The 50 units had between 1
             and 15 preexisting violations per unit. Based on our statistical sample, we
             estimate that over the next year, HUD will pay more than $5.8 million in housing
             assistance for units with material housing quality standards violations.
           We informed the Authority’s executive director and the Director of HUD’s
           Cleveland Office of Public Housing of a minor deficiency through a
           memorandum, dated September 17, 2008.

What We Recommend

           We recommend that the Director of HUD’s Cleveland Office of Public Housing
           require the Authority to reimburse its program from nonfederal funds for the
           improper use of more than $35,000 in program funds and implement adequate
           procedures and controls to address the finding cited in this audit report to prevent
           more than $5.8 million from being spent on units with material housing quality
           standards violations over the next year.

           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 issued because of the audit.

Auditee’s Response

           We provided our review results and supporting schedules to the Director of
           HUD’s Cleveland Office of Public Housing and the Authority’s executive director
           during the audit. We provided our discussion draft audit report to the Authority’s
           executive director, its board chairman, and HUD’s staff during the audit. We held
           an exit conference with the executive director on August 25, 2008.

           We asked the executive director to provide comments on our discussion draft
           audit report by September 12, 2008. The executive director provided written
           comments, dated September 11, 2008. The executive director disagreed with our
           finding. The complete text of the written comments, along with our evaluation of
           those comments, can be found in appendix B of this report except for 10 pages of
           documentation that was not necessary for understanding the Authority’s
           comments. A complete copy of the Authority’s comments plus the
           documentation was provided to the Director of HUD’s Cleveland Office of Public
           Housing.




                                             2
                            TABLE OF CONTENTS

Background and Objective                                                      4

Results of Audit
      Finding: Controls over Housing Unit Inspections Were Inadequate         5

Scope and Methodology                                                        12

Internal Controls                                                            14

Appendixes
   A. Schedule of Questioned Costs and Funds to Be Put to Better Use         16
   B. Auditee Comments and OIG’s Evaluation                                  17
   C. Federal Requirements and the Authority’s Program Administrative Plan   27




                                            3
                      BACKGROUND AND OBJECTIVE

The Cincinnati Metropolitan Housing Authority (Authority) was established in 1933 under
Section 3735.27 of the Ohio Revised Code to provide decent, safe, and sanitary housing. In
2006, the Authority merged with the Hamilton County, Ohio Housing Authority’s Section 8
Housing Choice Voucher program. The Authority serves households in neighborhoods
throughout the City of Cincinnati, Ohio and Hamilton County. A five-member board of
commissioners governs the Authority. Board members are appointed for five-year terms. The
positions are appointed by the Probate Court (one appointment), the city manager (two
appointments, one of which must be a public housing resident), Hamilton County Board of
Commissioners (one appointment), and the Court of Common Pleas (one appointment). The
board makes operational and budgetary decisions regarding the use of federal funds allocated for
housing. The Authority’s executive director is appointed by the board of commissioners and is
responsible for coordinating established policy and carrying out the Authority’s day-to-day
operations.

The Authority administers a Section 8 Housing Choice Voucher program (program) funded by
the U.S. Department of Housing and Urban Development (HUD). 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 April 2008, the Authority
had 10,819 units under contract with annual housing assistance payments totaling more than $55
million in program funds.

Our objective was to determine whether the Authority administered its program in accordance
with HUD’s requirements. This is the first of two audit reports planned on the Authority’s
program.




                                               4
                                 RESULTS OF AUDIT

Finding: Controls over Housing Unit Inspections Were Inadequate
The Authority did not adequately enforce HUD’s housing quality standards. Of the 65 program
units statistically selected for inspection, 56 did not meet minimum housing quality standards
and 50 had material violations that existed at the time of the Authority’s previous inspections.
The violations existed because the Authority failed to exercise proper supervision and oversight
of its program unit inspections. It also lacked adequate procedures and controls to ensure that its
program units met HUD’s housing quality standards. As a result, more than $35,000 in program
funds was spent on units that were not decent, safe, and sanitary. Based on our statistical
sample, we estimate that over the next year, HUD will pay more than $5.8 million in housing
assistance on units with material housing quality standards violations.


 HUD’s Housing Quality
 Standards and the Authority’s
 Housing Standards Not Met

               From the 1,507 program units that were inspected by the Authority between
               March 1 and May 15, 2008, we statistically selected 65 units for inspection by
               using data mining software. The 65 units were inspected to determine whether
               the Authority ensured that its program units met HUD’s housing quality
               standards. We inspected the 65 units between June 9 and July 15, 2008.

               Of the 65 units inspected, 56 (86 percent) had 395 housing quality standard
               violations including 284 violations that predated the Authority’s previous
               inspections. In addition, 50 units containing 284 violations were considered to be
               in material noncompliance since they had health and safety violations and/or
               multiple violations that predated the Authority’s previous inspections or had a
               violation that was noted in the Authority’s previous inspections but was not
               corrected. The following table categorizes the 395 violations in the 56 units.




                                                 5
                                                               Number of
                                 Category of violations        violations
                          Electrical                             136
                          Windows                                  48
                          Interior walls/surfaces                  31
                          Floor                                    23
                          Ceiling                                  19
                          Security                                 18
                          Smoke detectors                          18
                          Other potential hazardous features       15
                          Range/refrigerator                       13
                          Exterior stairs                          12
                          Lead-based paint                         12
                          Tub/shower unit                          7
                          Flush toilet in enclosed room            7
                          Exterior surfaces                        7
                          Interior air quality                     6
                          Roof                                     5
                          Infestation                              5
                          Site and neighborhood                    4
                          Sink                                     3
                          Chimney                                  3
                          Foundation                               3
                                           Total                  395

             We provided our inspection results to the Director of HUD’s Cleveland Office of
             Public Housing and the Authority’s executive director on August 1, 2008.

Electrical Violations


             One hundred thirty-six electrical violations were present in 44 of the Authority’s
             units inspected. The following items are examples of the electrical violations
             listed in the table: outlets with open ground, disconnect boxes with exposed
             electrical contacts, ground fault circuit interrupters that did not turn off once
             tripped, exposed electrical outlets, unacceptable repairs, and holes or gaps in a
             breaker box. The following pictures are examples of the electrical-related
             violations.




                                                 6
 Household 66860: Ad
 hoc repair to a
 damaged electric
 panel cover plate that
 needs to be replaced.




 Household 65378:
 Outlet box pulls out
 of a living room wall.




Window Violations


              Forty-eight window violations were present in 24 of the Authority’s units
              inspected. The following items are examples of window violations listed in the
              table: rotted sashes and frames, peeling paint, mold, broken panes, and windows
              that did not stay up. The following pictures are examples of the exterior window
              violations identified.




                                              7
  Household 102311:
  Rotten sash frame on a
  2nd floor (rear) front
  bedroom window.




  Household 63416:
  Mold on the bathroom
  window.




Interior Wall Violations


              Thirty-one interior wall violations were present in 22 of the Authority’s units
              inspected. The following items are examples of the interior wall violations listed
              in the table: handrails too short, holes in walls, and missing wall trim. The
              following pictures are examples of interior walls/surface-related violations.




                                               8
 Household 102311:
 The handrail on the
 stairway to the
 basement stops short
 of the top of the
 stairway.




 Household 5296:
 Holes and missing
 wall base trim
 covering bathroom
 walls.




Adequate Procedures and
Controls Lacking


              The Authority lacked adequate procedures and controls to ensure that its program
              units met HUD’s and its requirements. It also failed to exercise proper
              supervision and oversight of its program unit inspections. The Authority
              conducted adequate quality control inspections and adequate training, and
              turnover of inspectors was low. The inspectors stated that they used electrical
              testers. According to the Authority’s documentation, it appears that the Authority
              had adequate procedures and controls in place. However, it failed to conduct
              inspections that ensured its program units met HUD’s housing quality standards.




                                               9
Landlords and Tenants Subject
To Unapproved Inspections

             Landlords and households were subject to inspections that exceeded housing
             quality standards, were not approved by HUD, and placed units in abatement
             proceedings for violations with reduced time to correct the violations. The
             Authority had been conducting its “clean sweep” inspections since 2003. The
             inspections’ intent was to ensure that program units curb appeal was within the
             local neighborhoods’ appearance standards. Units were cited for uncut grass,
             abandoned and unregistered cars, clutter on porches, over grown bushes, and
             other violations concerning appearance of the property. These violations required
             correction within 15 days, as opposed to other inspections, which allowed 30 days
             for violations to be corrected before abatement procedures began. Some of the
             violations went beyond housing quality standards and local code, which requires
             HUD approval. The Authority had not received HUD approval to conduct these
             inspections as required when exceeding housing quality standards. The
             Authority’s previous Section 8 director stated that the Authority was beginning to
             work with HUD for approval of these inspections. As of September 23, 2008, the
             clean sweep inspections were not approved by HUD.

Conclusion


             The housing quality standards violations existed because the Authority failed to
             exercise proper supervision and oversight of its program unit inspections. It also
             lacked adequate procedures and controls to ensure that its program units met
             HUD’s housing quality standards. The Authority’s households were subjected to
             health- and safety-related violations, and the Authority did not properly use its
             program funds when it failed to ensure that units complied with HUD’s housing
             quality standards. In accordance with 24 CFR [Code of Federal Regulations]
             982.152(d), HUD is permitted to reduce or offset any program administrative fees
             paid to a public housing authority if it fails to enforce HUD’s housing quality
             standards. The Authority disbursed $32,558 in housing assistance payments for
             the 50 units that materially failed to meet HUD’s housing quality standards and
             received $3,036 in program administrative fees.

             If the Authority implements adequate procedures and controls over its unit
             inspections to ensure compliance with HUD’s housing quality standards, we
             estimate that the Authority can avoid spending more than $5.8 million in future
             housing assistance payments on units that are not decent, safe, and sanitary over
             the next year. Our methodology for this estimate is explained in the Scope and
             Methodology section of this audit report.




                                             10
Recommendations

          We recommend that the Director of HUD’s Cleveland Office of Public Housing
          require the Authority to

             1A. Reimburse its program $35,594 from nonfederal funds ($32,558 for
                 program housing assistance payments plus $3,036 in associated
                 administrative fees) for the 50 units that materially failed to meet HUD’s
                 housing quality standards.

             1B. Implement adequate procedures and controls to ensure that all units meet
                 HUD’s housing quality standards to prevent $5,870,016 in program
                 funds from being spent on units that do not comply with HUD’s and the
                 its requirements over the next year.

             1C. Certify, along with the owners of the 56 units cited in this finding, that
                 the applicable housing quality standards violations have been repaired.

             1D. Remove the requirement for clean sweep inspections from its
                 administrative plan and stop conducting clean sweep inspections until
                 the Authority receives approval from HUD.




                                          11
                         SCOPE AND METHODOLOGY

To accomplish our objective, we reviewed

               •   Applicable laws, the Authority’s program administrative plans effective April
                   2006 and April 2007, HUD’s program requirements at 24 CFR Part 982, and
                   HUD’s Housing Choice Voucher Guidebook 7420.10.

               •   The Authority’s accounting records; annual audited financial statements for
                   2005, 2006, and 2007; program household files; computerized databases;
                   policies and procedures; board meeting minutes for 2006, 2007, and 2008;
                   organizational chart; and program annual contributions contract.

               •   HUD’s files for the Authority.

We also interviewed the Authority’s employees, HUD staff, and program households.

We statistically selected 65 of the Authority’s program units to inspect from the 1,507 units that
were inspected by the Authority and passed from March 1 through May 15, 2008, using data
mining software. The 65 units were selected to determine whether the Authority ensured that its
program units met HUD’s housing quality standards. Our sampling criteria used a 90 percent
confidence level with a 50 percent estimated error rate and precision level of plus or minus 10
percent.

Our sampling results determined that 50 of the 65 units (77 percent) materially failed to meet
HUD’s housing quality standards. Materially failed units were those considered to have health
and safety violations and/or multiple violations that predated the Authority’s previous
inspections or those units that had a violation that was noted in the Authority’s’s previous
inspections but was not corrected.

The Authority’s Voucher Management System reports for the 12-month period January to
December 2007 showed that the average monthly housing assistance payment was $474
[($55,398,794 divided by 9,746) divided by12 months]. Projecting our sampling results of the
50 units that materially failed to meet HUD’s housing quality standards to the population
indicates that 1,032 units or 68.51 percent of the population contains the attributes tested (would
materially fail to meet HUD’s housing quality standards). The sampling error was plus or minus
8.2 percent. In other words, we are 90 percent confident that the frequency of occurrence of the
attributes tested lies between 68.51 and 85.33 percent of the population. This equates to an
occurrence of between 1,032 and 1,285 of the 1,507 units in the population.

   ¾ The lower limit is 68.51 percent X 1,507 units equals 1,032 units that materially failed to
     meet HUD’s housing quality standards.
   ¾ The point estimate is 76.92 percent X 1,507 units equals 1,160 units that materially failed
     to meet HUD’s housing quality standards.
   ¾ The upper limit is 85.33 percent X 1,507 units equals 1,285 units that materially failed to
     meet HUD’s housing quality standards.

                                                12
Using the lower limit of the estimate of the number of units and the average housing assistance
payment, we estimate that the Authority will annually spend $5,870,016 (1,032 units X $474
monthly average payment X 12 months) for units that materially failed to meet 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 performed our on-site audit work between April and July 2008 at the Authority’s office
located at 1044 West Liberty Road, Cincinnati, Ohio. The audit covered the period January 1,
2006, through March 31, 2008, but was expanded when necessary to include other periods.

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




                                               13
                             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 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 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 Weakness

              Based on our review, we believe the following item is a significant weakness:
                                               14
           •      The Authority lacked adequate procedures and controls to ensure
                  compliance with HUD’s requirements regarding unit inspections (see
                  finding).

Separate Communication of a
Minor Deficiency

           We informed the Authority’s executive director and the Director of HUD’s
           Cleveland Office of Public Housing of a minor deficiency through a
           memorandum, dated September 17, 2008.




                                          15
                                    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/
                           1A                   $35,594
                           1B                                  $5,870,016
                          Totals                $35,594        $5,870,016


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/   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 recommendation, it will
     cease to incur program costs for units that are not decent, safe, and sanitary and, instead,
     will expend those funds in accordance with HUD’s requirements. Once the Authority
     successfully improves its controls, this will be a recurring benefit. Our estimate reflects
     only the initial year of this benefit.




                                              16
Appendix B

        AUDITEE COMMENTS AND OIG’s EVALUATION

Ref to OIG Evaluation   Auditee Comments




Comment 1




                         17
Ref to OIG Evaluation   Auditee Comments




Comment 2




Comment 3



Comment 4




                         18
Ref to OIG Evaluation   Auditee Comments




Comment 5




Comment 6




                         19
Ref to OIG Evaluation   Auditee Comments




Comment 7




Comment 8




                         20
Ref to OIG Evaluation   Auditee Comments




Comment 9




Comment 10



Comment 11




Comment 12




Comment 13




                         21
Ref to OIG Evaluation   Auditee Comments




Comment 14




Comment 15




                         22
Ref to OIG Evaluation   Auditee Comments




Comment 16

Comment 17




Comment 18




                         23
                         OIG’s Evaluation of Auditee Comments

Comment 1   While the Authority disagrees that it inadequately administered any part of its
            program, it agrees that we correctly identified 245 housing quality standard
            violations that existed prior to its previous inspections. HUD’s regulations at 24
            CFR 982.401 require that all program housing meet HUD’s housing quality
            standards performance requirements, both at commencement of assisted
            occupancy and throughout the tenancy. The Authority’s agreement regarding the
            pre-existing violations substantiates that it inadequately administered its program.

Comment 2   We agree that eight of the failed items mentioned in the Authority’s response are
            not housing quality standards violations. As a result, we adjusted the total
            housing quality standards violations to 395 and the pre-existing violations to 284.
            We used the information contained on the Authority’s previous inspection reports,
            information received from applicable households, and our appraiser’s experience
            in determining whether a violation was pre-existing. The households were
            specifically asked if the identified conditions existed at the time of the Authority’s
            previous inspections.

Comment 3   As previously mentioned in Comment 2, we used the information contained on
            the Authority’s previous inspection reports, information received from applicable
            households, and our appraiser’s experience in determining whether a violation
            was pre-existing. The households were specifically asked if the identified
            conditions existed at the time of the Authority’s previous inspections.

Comment 4   Page 10-8 of HUD’s Housing Choice Voucher Guidebook states acceptable
            criteria for illumination and electricity as the electrical system is free of hazardous
            conditions including: exposed wires, improper connections, and improperly
            grounding of any component of the system. This supports that open grounds and
            improper functioning ground fault circuit interrupters are housing quality standard
            violations creating health and safety hazards to the unit’s occupants. The
            Authority needs HUD approval prior to disregarding housing quality standards.

Comment 5   We used the information contained on the Authority’s previous inspection reports,
            information received from applicable households, and our appraiser’s experience
            in determining whether a violation was pre-existing. The households were
            specifically asked if the identified conditions existed at the time of the Authority’s
            previous inspections.

Comment 6   We used the information contained on the Authority’s previous inspection reports,
            information received from applicable households, and our appraiser’s experience
            in determining whether a violation was pre-existing. The households were
            specifically asked if the identified conditions existed at the time of the Authority’s
            previous inspections.

Comment 7   We commend the Authority for conducting quality control inspections that exceed
            the annual requirement and meeting monthly with its inspectors. The Authority’s
            agreement that 245 housing quality standard violations existed prior to its

                                              24
              previous inspections supports our conclusion that the Authority lacked adequate
              procedures and controls to ensure that its program units met HUD’s housing
              quality standards. Our inspections were conducted between 28 days and 109 days
              after the Authority’s previous inspections.

Comment 8     HUD did not approve the clean sweep inspections included in the Authority’s
              program administrative plan. The Authority included the clean sweep inspections
              as an attachment to its annual plan submission to HUD and it was not included in
              HUD’s annual plan approval process. The administrative plan was not submitted
              with the Authority’s annual plan. We confirmed this with the Director of Section
              for HUD’s Cleveland Office of Public Housing.

Comment 9     Page 10-8 of HUD’s Housing Choice Voucher Guidebook states that the site and
              neighborhood must be reasonably free from dangers to the health, safety, and
              general welfare of the occupants. We cited the vacant house that was securely
              boarded up due to the presence of raccoons.

Comment 10 We agree that a secondary handrail was not required by HUD’s housing quality
           standards.

Comment 11 We agree with the Authority and adjusted our finding.

Comment 12 We agree with the Authority and adjusted our finding.

Comment 13 We used the information contained on the Authority’s previous inspection reports,
           information received from applicable households, and our appraiser’s experience
           in determining whether a violation was pre-existing. The households were
           specifically asked if the identified conditions existed at the time of the Authority’s
           previous inspections.

Comment 14 Chapter 10 of the Authority’s administrative plan states that all units must meet
           minimum standards set forth in the local building codes. In case of
           inconsistencies between the local building codes and housing quality standards,
           the stricter of the two shall prevail. Therefore, just because the local building
           codes contradicted HUD’s requirements does not mean the violation was not a
           housing quality standards violation. We adjusted the total housing quality
           standards violations to 395 and the pre-existing violations to 284. We used the
           information contained on the Authority’s previous inspection reports, information
           received from applicable households, and our appraiser’s experience in
           determining whether a violation was pre-existing. The adjustments did not affect
           the number of units that materially failed to meet HUD’s housing quality
           standards.

Comment 15 We commend the Authority for taking steps to improve its inspection procedures
           and controls. HUD will need to review the improvements and determine if they
           are sufficient.



                                               25
Comment 16 We believe the Authority should also include periodic refresher courses for local
           building codes since its administrative plan includes them. Only one of the
           Authority’s 11 inspectors knew that local building codes were included as
           standards by which to conduct housing inspections.

Comment 17 The Authority did not provide documentation to support that the housing
           violations were corrected by the owners.

Comment 18 We cannot remove this recommendation. As previously mentioned in comment
           8, HUD did not approve the Authority’s clean sweep inspections.




                                             26
Appendix C

      FEDERAL REQUIREMENTS AND THE AUTHORITY’S
            PROGRAM ADMINISTRATIVE PLAN

In accordance with 24 CFR 982.152(d), HUD may reduce or offset any administrative fee to a
public housing Authority in the amount determined by HUD if the public housing authority fails
to perform its administrative responsibilities correctly or adequately under the program.

HUD’s regulations at 24 CFR 982.305(a) state that the public housing Authority may not give
approval for the family of the assisted tenancy or approve a housing assistance contract until the
Authority has determined that the following meet program requirements: (1) the unit is eligible,
(2) the unit has been inspected by the housing authority and passes HUD’s housing quality
standards, and (3) the rent to the owner is reasonable.

HUD’s regulations at 24 CFR 982.401 require that all program housing meet HUD’s housing
quality standards performance requirements, both at commencement of assisted occupancy and
throughout the tenancy.

HUD’s regulations at 24 CFR 982.401(a)(4)(ii) state that HUD may approve acceptability
criteria variations for variations which apply standards in local housing codes or other codes
adopted by the public housing authority.

HUD’s regulations at 24 CFR 982.404(a) state that the owner must maintain the unit 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. Remedies for such breach of the housing
quality standards include termination, suspension, or reduction of housing assistance payments
and the termination of the housing assistance payments 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.

HUD’s regulations at 24 CFR 982.405(a) require public housing agencies to perform unit
inspections before the initial move-in and at least annually. The authority must inspect the unit
leased to a family before the term of the lease, at least annually during assisted occupancy, and at
other times as needed to determine whether the unit meets housing quality standards.

The Authority’s program administrative plan states:

Clean Sweep Inspections: this type of inspection addresses the exterior appearance of the
property and premises. This inspection usually takes place when an inspector drives by a
property subsidized by the program and this property is not kept up to our standards. Some items
that will cause a unit to fail this type of inspection would include trash and debris, overgrown
lawns and bushes, and non-working or unregistered vehicles on the property.

                                                 27