oversight

The Highland Park Housing Commission, Highland Park, Michigan, Lacked Adequate Controls Over Unit Conditions and Maintenance Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-09-24.

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

                                                                Issue Date
                                                                         September 24, 2008
                                                                Audit Report Number
                                                                         2008-CH-1013




TO:        Robert E. Nelson, Director of Public Housing Hub, 5FPH


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

SUBJECT: The Highland Park Housing Commission, Highland Park, Michigan, Lacked
           Adequate Controls Over Unit Conditions and Maintenance Program

                                   HIGHLIGHTS

 What We Audited and Why

            We audited the Highland Park Housing Commission’s (Commission) Public
            Housing program (program). The audit was part of the activities in our annual
            audit plan. We selected the Commission based upon its fiscal year 2005
            independent auditor’s report that identified it as having a high-risk program. Our
            objectives were to determine whether the Commission effectively maintained its
            program units in accordance with the U.S. Department of Housing and Urban
            Development’s (HUD) requirements and appropriately used its program operating
            subsidies. This is the second of two audit reports on the Commission’s program.

 What We Found

            The Commission did not maintain 45 of 46 program units statistically selected for
            inspection in good repair, order, and condition. There were 705 deficiencies in
            the 45 units (average of 14.69 deficiencies per unit) including 43 hazards that
            HUD requires to be corrected within 24 hours. Based on our statistical sample,
            we estimate that HUD will pay more than $283,000 in program operating
            subsidies over the next year for the Commission’s units that are not maintained in
            good repair, order, and condition.

            The Commission lacked an effective maintenance process to ensure that program
            unit deficiencies were identified and repaired in a timely manner. It did not have
           an approved maintenance policy, failed to implement a preventive maintenance
           program, did not complete work orders in accordance with HUD’s requirements
           and or/its maintenance policy, and failed to turn around program units in a timely
           manner. In addition, the Commission inappropriately received more than $29,000
           in excess program operating subsidies for seven units that were vacant for more
           than 12 months. We estimate that the Commission will not receive nearly
           $116,000 in household payments over the next year due to program units being
           vacant for more than 30 days.

What We Recommend

           We recommend that the Director of HUD’s Detroit Office of Public Housing
           require the Commission to reimburse its program from nonfederal funds for the
           improper use of funds, provide support or reimburse its program from nonfederal
           funds for the unsupported payments, and implement adequate procedures and
           controls to address the findings cited in this audit report. These procedures and
           controls should help to ensure that nearly $400,000 in program funds is spent
           according to HUD’s requirements.

           For each recommendation without a management decision, please respond and
           provide status reports in accordance with HUD Handbook 2000.06, REV-3.
           Please furnish us copies of any correspondence issued because of the audit.


Auditee’s Response

           We provided our inspection review results and supporting schedules to the Director
           of HUD’s Detroit Office of Public Housing and the Commission’s executive
           director during the audit. We also provided our discussion draft audit report to the
           Commission’s executive director, its board chairperson, and HUD’s staff during the
           audit. We held an exit conference with the Commission’s executive director on
           August 28, 2008.

           We asked the Authority’s executive director to provide comments on our
           discussion draft audit report by September 15, 2008. The executive director
           provided written comments, dated September 15, 2008. The executive director
           generally agreed with our findings and recommendations. The complete text of
           the written comments, along with our evaluation of that response, can be found in
           appendix B of this report except for 37 pages of documentation that was not
           necessary for understanding the Authority’s comments. To ensure compliance
           with the Privacy Act, we redacted the addresses of tenants cited in the Authority’s
           comments prior to including the comments in this audit report. A complete copy
           of the Authority’s comments plus the documentation was provided to the Director
           of HUD’s Detroit Office of Public Housing.




                                             2
                            TABLE OF CONTENTS

Background and Objectives                                                          4

Results of Audit
      Finding 1: The Commission’s Program Units Were Not in Good Repair, Order,
                 and Condition                                                     5

      Finding 2: The Commission Lacked an Effective Maintenance Program           11

Scope and Methodology                                                             16

Internal Controls                                                                 18

Appendixes
   A. Schedule of Questioned Costs and Funds to Be Put to Better Use              20
   B. Auditee Comments and OIG’s Evaluation                                       21
   C. Federal Requirements                                                        27




                                            3
                       BACKGROUND AND OBJECTIVES

The Highland Park Housing Commission (Commission) is a public housing agency established by
the City of Highland Park, Michigan (City), on March 16, 1970. The Commission is a division of
the City’s Community Development Department and is governed by a five-member board of
commissioners (board) appointed by the City’s mayor to five-year staggered terms. The board’s
responsibilities include overseeing the Commission’s operations as well as the review and approval
of its policies. The board appoints the Commission’s executive director, who serves as the board’s
secretary. The executive director is responsible for fulfilling the goals and objectives established by
the board.

The Commission administers a Public Housing program (program) funded by the U.S. Department
of Housing and Urban Development (HUD) through program operating subsidies. The
Commission provides assistance to low-income individuals seeking decent, safe, and sanitary
housing. It manages 198 federally assisted program units in one complex and scattered sites. It
received more than $1.1 million in program operating subsidies from February 2006 through
December 2007.

HUD issued the results of its Public Housing Assessment System management operations
certifications on September 10, 2007, scoring the Commission’s program as substandard at less
than 60. On November 16, 2007, HUD issued the results of its initial assessment review. The
assessment was to determine the conditions of the Commission’s operations for fiscal year 2006
and serve as a basis for developing a memorandum of agreement. As a result, HUD executed a
memorandum of agreement with the Commission, effective October 1, 2007, requiring the
Commission to improve its program performance. HUD and the Commission executed an
amended memorandum of agreement in February 2008. The amended agreement addresses the
Commission’s unit conditions and its maintenance program. On March 13, 2008, HUD released
the Commission’s program performance for fiscal year 2007, scoring the Commission as 14 and
maintaining the Commission’s status as a troubled housing authority.

Our objectives were to determine whether the Commission effectively maintained its program
units in accordance with applicable requirements and appropriately used its program operating
subsidies. This is the second of two audit reports on the Commission’s program.




                                                   4
                                RESULTS OF AUDIT

Finding 1: The Commission’s Program Units Were Not in Good Repair,
                      Order, and Condition
The Commission did not maintain its program units in good repair, order, and condition. Of the
46 program units statistically selected for inspection, 45 were not in good repair, order, and
condition. We identified 705 deficiencies, including 43 hazards that HUD requires to be
corrected within 24 hours, in 26 units. The deficiencies existed because the Commission 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 uniform physical
condition standards (standards). As a result, more than $46,000 in program operating subsidies
was not used efficiently and effectively, and program households lived in units that were not in
good repair, order, and condition. Based on our statistical sample, we estimate that over the next
year, HUD will pay more than $283,000 in subsidies for program units that are not maintained in
good repair, order, and condition.



 The Commission Did Not
 Maintain Program Units in
 Good Repair, Order, and
 Condition

               From the 139 program units occupied as of January 16, 2008, we statistically
               selected 46 program units for inspection using data mining software. We
               inspected the 46 units from January 25 through February 5, 2008, to determine
               whether the Commission ensured that its units met HUD’s standards.

               Of the 46 program units inspected, 45 (98 percent) had 705 deficiencies, including
               43 hazards which HUD requires to be corrected within 24 hours, indicating that the
               units were not in good repair, order, and condition. Of the 45 program units with
               deficiencies, 34 had 269 deficiencies that had existed since the Commission’s
               previous inspections. The Commission noted 58 of the 269 deficiencies in its
               previous work orders. All of the 34 units were considered to be in material
               noncompliance since they had multiple preexisting deficiencies and/or previous
               work orders that outlined the deficiencies/hazards but had not been corrected. The
               following table categorizes the 705 deficiencies in the 45 units.




                                                5
                                                               Number of
                               Types of deficiencies           deficiencies
                     Cabinets, doors, closets, and hardware        167
                     Electrical fixtures and systems               104
                     Walls and ceilings                             64
                     Doors, windows and screens                     62
                     Floors, carpets, and tiles                     36
                     Stairs, walkways, and community spaces         31
                     Refrigerators and ranges                       30
                     Fences, exterior walls, and gates              21
                     Gutters, downspouts, and splash blocks         20
                     Roofs, flashing, and vents                     18
                     Exterior lighting                             18
                     Plumbing fixtures and systems                 18
                     Smoke detectors                               18
                     Exterior walls and foundations                15
                     Hot water system and boiler room              12
                     Storm doors and windows                       11
                     Garbage disposal and exhaust fans              6
                     Fire extinguishers                             6
                     Porches, balconies, and fire escapes           5
                     Lawns and plantings                            5
                     Heating and air conditioning                   5
                     Storage/utility buildings                      5
                     Walks, steps, and guardrails                   4
                     Sprinkler and drainage system                  4
                     Painting                                       4
                     Drives, parking lots, paving, and curbs        3
                     Exterminating                                  3
                     Underground gas, water, and sewage             2
                     Caulking and weather-stripping                 2
                     Curtains and shades                            2
                     Laundry rooms                                  2
                     Electric meter                                 1
                     Insulation                                     1
                                        Total                      705

           We provided our inspection results to the Director of HUD’s Detroit Office of
           Public Housing and the Commission’s executive director on April 29, 2008.

Units Had Cabinet, Door,
Closet, and Hardware
Deficiencies

           One hundred sixty-seven cabinet, door, closet, and hardware deficiencies were
           present in 42 of the Commission’s 46 program units inspected. The following items
           are examples of deficiencies listed in the table: loose doorframes, broken doorjambs,
           closet doors off hinges and leaning against openings, holes in bedroom and
           bathroom doors, missing door latches and strike plates, deteriorated doors and fronts
           of sink cabinets, broken and missing kitchen cabinet drawers, and failed hinges on
           cabinet doors. The following pictures are examples of cabinet, door, closet, and
           hardware deficiencies identified in the Commission’s program units inspected.

                                              6
Unit 02-729: Bathroom
cabinet is missing doors
and shelf.




Unit #01-106: Bathroom
linen closet door is
missing hardware.




 Units Had Electrical Fixture
 and System Deficiencies

                 One hundred and four electrical fixture and system deficiencies were present in 30
                 of the Commission’s 46 program units inspected. The following items are examples
                 of electrical deficiencies listed in the table: outlets with open grounds, ground fault
                 circuit interrupter outlets not tripping, light fixtures hanging by wires, light fixtures
                 missing protective globes, missing light switch plates, broken and missing electrical
                 outlet cover plates, loose electrical outlets, missing circuit breaker covers exposing
                 electrical contacts, and missing knockout plugs exposing electrical contacts. The
                 following pictures are examples of the electrical deficiencies identified in the
                 Commission’s program units inspected.


                                                    7
Unit #02-404: Bedroom
outlet is missing cover
plate.




Unit #01-103: Bedroom
ceiling light fixture is
hanging from wires.




 Units Had Wall and Ceiling
 Deficiencies


                  Sixty-four wall and ceiling deficiencies were present in 26 of the Commission’s 46
                  units inspected. The following items are examples of deficiencies listed in the table:
                  missing window wall trim and holes in walls. The following pictures are examples
                  of the wall and ceiling deficiencies identified in the Commission’s program units
                  inspected.




                                                    8
Unit #02-501: Wall trim
around window is missing
and there are multiple
holes in the wall.




Unit #02-729: Clothing
used to seal holes in
bedroom walls.




 Deficiencies Were Caused by
 Procedures and Control
 Weaknesses

                The deficiencies existed because the Commission 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 standards. The
                Commission did not have qualified housing inspectors to conduct inspections of its
                program units. While the Commission’s housing inspector received training on
                HUD’s standards, they were not applied when inspections were performed. In
                addition, supervisors did not perform quality control reviews of inspections.
                Although the Commission contracted out the annual housing inspections of its


                                                 9
             program units, it did not prepare work orders for the deficiencies identified by the
             contractor. Further, the Commission did not have an effective maintenance program
             (see finding 2).

             HUD’s 2007 management review, issued to the Commission in November 2007,
             revealed that the Commission’s inspection records did not show evidence that it
             applied HUD’s standards when inspecting dwelling units. The Commission did not
             have an up-to-date maintenance plan detailing the compliance requirements for
             inspecting dwelling units. It also had not conducted a comparison between HUD’s
             standards and local code requirements to assess whether it should rely solely on
             HUD’s standards or local code when applying the most stringent standards to unit
             inspections.

Conclusion

             The Commission’s households were subjected to hazards that HUD requires to be
             corrected within 24 hours, and the Commission did not properly use its program
             operating subsidies when it failed to ensure that program units complied with
             HUD’s standards. The Commission received $46,478 in operating subsidies from
             HUD for the 34 units that were in material noncompliance.

             Unless the Commission implements adequate procedures and controls regarding its
             program unit inspections to ensure compliance with HUD’s requirements, we
             estimate that it will receive more than $283,000 in future program operating
             subsidies for units that are not in good repair, order, and condition. Our
             methodology for this estimate is explained in the Scope and Methodology section of
             this audit report.

Recommendations

             We recommend that the Director of HUD’s Detroit Office of Public Housing
             require the Commission to

             1A.    Reimburse its program $46,478 from nonfederal funds for the 34 units
                    cited in this finding that were in material noncompliance.

             1B.    Implement adequate procedures and controls regarding its inspection
                    process to ensure that all units meet HUD’s standards to prevent HUD
                    from providing the Commission $283,560 in program operating subsidies
                    for units that are not in good repair, order, and condition for the next 12
                    months.

             1C.    Repair and certify that it repaired the standards deficiencies for the 45
                    program units cited in this finding.




                                              10
Finding 2: The Commission Lacked an Effective Maintenance
                            Program
The Commission did not have an effective maintenance program to ensure that program unit
deficiencies were repaired in a timely manner. It did not have a board-approved maintenance
policy, implement a preventive maintenance program, complete work orders in accordance with
HUD’s requirements, and turn around program units in a timely manner. In addition, the
Commission inappropriately received full program operating subsidies for units that were vacant
for more than 12 months. The problems occurred because the Commission lacked adequate
procedures and controls regarding its maintenance program. As a result, HUD lacked assurance
that the Commission used program operating subsidies to maintain its program units in good
repair, order, and condition, and the Commission inappropriately received more than $29,000 in
exccess program operating subsidies for seven units that were vacant for more than 12 months.
We estimate that over the next year, the Commission will not receive nearly $116,000 in total
household payments due to program units being vacant for more than 30 days.



 The Commission Did Not
 Implement Its Preventive
 Maintenance Program

              Although the Commission had a maintenance work plan that referred to a preventive
              maintenance program, the work plan was incomplete, and the Commission’s board
              had not approved the maintenance plan as of May 2008. In addition, the
              Commission’s annual and five-year plans stated that the Commission did not have a
              maintenance policy.

              The Commission could not provide documentation showing how the preventive
              maintenance program was implemented. The preventive maintenance program
              included a planned maintenance program. The goal of the planned maintenance
              program was to maintain the Commission’s property in good repair and appreciably
              extend its useful life by ensuring that repairs were made before breakdown. If
              implemented, the program would minimize damage and repair costs and result in
              lower operating expenses based on a system of uniformly performed maintenance
              inspections. The plan further stated that preventive maintenance activities would be
              scheduled and performed on a regular basis to maintain the units and development
              site in optimal condition.


 The Commission Needed to
 Improve Its Work Order
 Process

              The Commission did not prepare work orders in accordance with HUD’s
              requirements. The Commission’s contractor, U.S. Inspection Group, Inc., conducted
              inspections of all of its program units between September 24 and September 27,


                                               11
2007. The contractor identified 478 deficiencies and 45 hazards, totaling 523, for
the 46 units statistically selected. As of February 8, 2008, the Commission had not
completed work orders for 430 of the 478 (90 percent) deficiencies and 16 of the 45
(36 percent) hazards identified by the contractor.

We reviewed the Commission’s 51 work orders generated from September 24,
2007, through January 31, 2008, for the 46 units selected to determine whether the
Commission completed work orders appropriately and completed repairs in a
timely manner. The Commission did not properly complete and/or include the
required information for 42 (82 percent) of the work orders reviewed. The
following table lists the number of work orders with improperly completed and/or
missing required information.

                                            Number of
              Required information          work orders
             Detail of materials used           35
             Detail of work performed           16
             Cost of the repairs                14
             Worker signature                   12
             Resident signature                  5

For example, the description of the work requested and performed in work order
number 08176, dated September 26, 2007, for unit 03-222, stated that the unit
needed a battery for the smoke detector and the tenant needed to move furniture that
was in front of the window. The work order did not indicate that the work was
completed or the costs of repairs and did not include the worker and resident
signatures. In addition, this work order was for the wrong unit. The work that
should have been completed for this unit was noted on work order 08177, requiring
the installation of a missing breaker in the fuse box. Work order 08177 showed that
the work was completed, but it was missing the same information as work order
number 08176. Therefore, the Authority could not be determined whether the
correct repairs were made in the right unit.

The Commission did not correct 41 of the 45 hazards by its contractor within 24
hours. In addition, it did not prepare 14 work orders for the 41 hazards. Further, the
average completion time for 27 of the 41 work orders was 10 days. The work orders
were for missing and/or inoperable smoke detectors, missing electric meter covers,
misaligned chimneys on water heaters, and blocked fire exits. Moreover, the
Commission did not correct 13 of 25 emergency work orders for hazards identified
during our inspections of the 46 units within 24 hours. The average completion time
for the 13 work orders was eight days. The work orders were for missing and/or
inoperable smoke detectors, missing electric meter covers, and blocked fire exits.

HUD’s 2007 management review evaluated the Commission’s logs for work
orders generated from October 2005 through September 2006. The Commission
reported that there were 159 emergency work orders in the Management
Assessment Subsystem (system). Its records showed that it recorded 185


                                  12
           emergency work orders and 18 were void. The voided work orders were not
           converted to other types of work orders such as routine. In addition, the
           Commission reported in the system that 100 percent of the emergency work
           orders were abated within 24 hours. However, HUD could not confirm this.
           Further, the Commission reported 548 nonemergency work orders, but its records
           showed that there were 590 work orders and 63 were void. The voided work
           orders should have been converted to regular nonemergency work orders.

           HUD noted that the work orders did not always contain accurate information on
           the form. Work orders lacked the tenant signature and date and the cost of repairs
           and were completed with just the computer-generated name on the form. In
           addition, the Commission was not consistent in identifying the type of work order.
           For units with no heat, work order number 06587 was marked as “U” for urgent,
           while work order number 06588 was marked as “E” for emergency. Work order
           number 06824 for a smoke detector was marked as “U” for urgent, which should
           have been marked as “E” for emergency.

The Commission’s Units Were
Vacant for More Than 30 days

           The Commission’s lack of an effective maintenance program and the condition of
           its program units (see finding 1) resulted in 45 program units being vacant for
           more than 30 days. The units were vacant for an average of 333 days, or more
           than 11 months.

The Commission Received Full
Subsidies for Units That Were
Vacant for More Than 12
Months

           The Commission inappropriately received full operating subsidies for seven units
           that were vacant for more than 12 months. Long-term vacant units are only eligible
           to receive 20 percent of the total subsidy. However, the Commission included seven
           long-term vacant units in its subsidy calculations and received excess subsidies
           totaling $29,148 for the units from August 2003 through December 2006.

The Commission Lacked
Adequate Procedures and
Controls

           The Commission lacked adequate procedures and controls regarding its
           maintenance program. It did not have direction from its board, and maintenance
           staff lacked guidance and monitoring from management. In addition, the
           Commission did not provide training to its maintenance staff to ensure that they
           had the skills needed to maintain major systems in good operating condition,

                                           13
             complete work orders in accordance with HUD’s requirements and turn around its
             program units in a timely manner.

             The Commission’s inspector said that the problems occurred because the
             Commission lacked a quality control plan for addressing its contractor’s
             inspection results and it did not receive its contractor’s inspection results in a
             timely manner to provide staff time to complete the work orders in accordance
             with its maintenance policy.

Conclusion

             The Commission’s maintenance program placed its program units at risk. HUD
             lacked assurance that the Commission used program operating subsidies to
             maintain its program units in good repair, order, and condition. The Commission
             did not receive total household payments for the 45 program units that were
             vacant for more than 30 days. In addition, it inappropriately received $29,148 in
             program operating subsidies for seven units that were vacant for more than 12
             months when it calculated its subsidy.

             If the Commission implements adequate procedures and controls regarding its
             maintenance program and ensures that its program units are turned around within
             30 days, we estimate that it will receive an additional $115,560 in future total
             household payments. We determined this amount by multiplying 45 units (the
             average number of units vacant for more than 30 days from June 2005 through
             December 2007) by $214 (the monthly total household payment) by 12 months.

Recommendations

             We recommend that the Director of HUD’s Detroit Office of Public Housing
             require the Commission to

             2A.    Reimburse its program $29,148 from nonfederal funds for the seven long-
                    term vacant units it inappropriately included in its program operating
                    subsidy calculations.

             2B.    Obtain board approval for its maintenance policy and implement a
                    preventive maintenance program for units and systems.

             2C.    Ensure that its maintenance staff receives training to improve their
                    maintenance skills in order to address the deficiencies cited in this finding.

             2D.    Implement adequate procedures and controls regarding its maintenance
                    program to ensure that work orders are completed in accordance with
                    federal requirements and program units are turned around in a timely
                    manner. By implementing adequate procedures and controls, the



                                              14
Commission should help to ensure that it receives at least $115,560 in
additional total household payments over the next year.




                        15
                         SCOPE AND METHODOLOGY

To accomplish our objectives, we reviewed

            •   Applicable laws; HUD’s regulations at 24 CFR [Code of Regulations] Parts 5,
                901, and 990; public and Indian housing notices; HUD form 52728; HUD
                Uniform Physical Condition Standards Inspection Program; and section 125 of the
                Michigan Compiled Laws.

            •   The Commission’s accounting records, maintenance work plan, inspection
                documentation for its program units, five-year and 2006 annual plans, invoices,
                work orders, vacancy reports, data from HUD’s Line of Credit Control system,
                program household files, by-laws, policies and procedures, operating fund
                calculation of operating subsidy reports, organizational chart, and program
                consolidated annual contributions contract.

            •   HUD’s files for the Commission.

We also interviewed the Commission’s employees, HUD staff, and U.S. Inspection Group, Inc.’s
staff.

Finding 1

We statistically selected 46 of the Commission’s program units for inspection using data mining
software from the 139 occupied units as of January 16, 2008. The 46 units were selected to
determine whether the Commission ensured that its program units were in good repair, order, and
condition. Our sampling criteria used a 90 percent confidence level, 50 percent error rate, and
precision of plus or minus 10 percent.

Our sampling results determined that 45 of the 46 units (98 percent) were not maintained in good
repair, order, and condition and 34 units were in material noncompliance with HUD’s standards.
A unit was considered in material noncompliance when it contained multiple preexisting
deficiencies and/or the deficiencies were noted in the Commission’s previous inspections and/or
work orders but not corrected.

HUD calculated a per unit month program operating subsidy of $340 for 2007. We estimated
that the Commission would annually receive $283,560 (139 program units times a $340 per unit
month subsidy times a 50 percent error rate times 12 months) for units that were not in good
repair, order, and condition. This estimate is presented solely to demonstrate the annual amount
of program subsidies that could be put to better use on program units if the Commission
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 from January through March 2008 at the Commission’s
office located at 13725 John R, Highland Park, Michigan. The audit covered the period January
2006 through December 2007 and was expanded as determined necessary.


                                                16
We performed our audit in accordance with generally accepted government auditing standards.




                                             17
                             INTERNAL CONTROLS

Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following objectives are being achieved:

   •   Effectiveness and efficiency of operations,
   •   Reliability of financial reporting,
   •   Compliance with applicable laws and regulations, and
   •   Safeguarding resources.

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance.



 Relevant Internal Controls

              We determined the following internal controls were relevant to our audit objectives:

              •       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:


                                               18
•   The Commission lacked adequate procedures and controls to ensure
    compliance with federal requirements regarding unit conditions and
    maintenance operations (see finding 1 and 2).




                               19
                                   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                  $46,478
                         1B                                   $283,560
                         2A                   29,148
                         2D                                    115,560
                        Totals               $75,626          $399,120


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
     polices 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
     reduction 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 that are specifically
     identified. In these instances, if the Commission implements our recommendations it will
     cease to receive program operating subsidies for units that are not in good repair, order,
     and condition and will receive additional total household payments. Once the
     Commission successfully improves its procedures and controls, this will be a recurring
     benefit. Our estimate reflects only the initial year of this benefit.




                                             20
Appendix B

        AUDITEE COMMENTS AND OIG’s EVALUATION

Ref to OIG Evaluation   Auditee Comments




                         21
Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 1




Comment 1




                         22
Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 1




Comment 2




                         23
Ref to OIG Evaluation   Auditee Comments




Comment 2




Comment 3




Comment 4




Comment 2




                         24
Ref to OIG Evaluation   Auditee Comments




                         25
                        OIG’s Evaluation of Auditee Comments

Comment 1   The Commission’s proposed actions should substantially improve its procedures
            and controls regarding its inspection process to ensure that all units meet HUD’s
            standards, if fully implemented. The Commission will have further opportunity to
            provide supporting documentation to HUD’s staff, who will work with the
            Commission, to address the recommendation.

Comment 2   The Commission’s proposed actions should greatly improve its procedures and
            controls regarding its maintenance program to ensure that work orders are
            completed in accordance with federal requirements, if fully implemented. The
            Commission will have further opportunity to provide supporting documentation to
            HUD’s staff, who will work with the Commission, to address the
            recommendation.

Comment 3   The Commission’s proposed actions should greatly improve its procedures and
            controls regarding its program units being turned around in a timely manner, if
            fully implemented. The Commission will have further opportunity to provide
            supporting documentation to HUD’s staff, who will work with the Commission,
            to address the recommendation.

Comment 4   The Commission did not provide any documentation with its written comments to
            support its removal of the seven units that were vacant for more than 12 months
            from its subsidy calculations. The Commission will have further opportunity to
            provide supporting documentation to HUD’s staff, who will work with the
            Commission, to address the recommendation.




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Appendix C

                           FEDERAL REQUIREMENTS

Finding 1
HUD’s regulations at 24 CFR 5.703 state that HUD housing must be decent, safe, sanitary, and
in good repair. A public housing authority (authority) must maintain housing in a manner that
meets HUD’s standards to be considered decent, safe, sanitary, and in good repair. Section
5.703(g) states that the standards do not supersede or preempt state and local codes for building
and maintenance with which HUD housing must comply. HUD housing must continue to follow
the state and local codes.

HUD’s regulations at 24 CFR 990.140 state that an authority is eligible to receive program-
operating subsidies for program units for each unit month that the units are under a contract and
occupied by a program-eligible family under lease.

Section 209 of the Commission’s program annual contributions contract with HUD requires that
the Commission at all times maintain each project in good repair, order, and condition.

Finding 2
HUD’s regulations at 24 CFR 901.5 state that a maintenance plan is defined as a comprehensive
annual plan of an authority’s maintenance operation that contains the fiscal year’s estimated
schedule and is supported by a staffing plan, contract schedule, materials and procurement plan,
training, and approved budget. The plan should establish a strategy for meeting the goals and
timeframes of facilities management planning and execution, capital improvements, utilities, and
energy conservation activities.

HUD’s regulations at 24 CFR 901.5 state that a preventive maintenance program is a program
under which certain maintenance procedures are systematically performed at regular intervals to
prevent premature deterioration of buildings and systems. The program is developed and
regularly updated by the authority and fully documents what work is to be performed and at what
intervals. The program includes a system for tracking the performance of preventive
maintenance work.

HUD’s regulations at 24 CFR 901.5 state that a work order is a directive, containing one or more
tasks issued to an authority employee or contractor to perform one or more tasks on authority
property. This directive describes the location and the type of work to be performed, the date
and time of receipt, the date and time issued to the person or entity performing the work, the date
and time the work is satisfactorily completed, the parts used to complete the repairs and the cost
of the parts, whether the damage was caused by the resident, and the charges to the resident for
resident-caused damage. The work order is entered into a log which indicates at all times the
status of all work orders as to type (emergency, nonemergency), when issued, and when
completed.



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HUD’s regulations at 24 CFR 901.25(a) state that emergency work orders are to be completed
within 24 hours or less and all emergency work orders should be tracked.

HUD’s regulations at 24 CFR 990.109(b)(6)(iii)(B) state that if the recalculated vacancy
percentage is greater than 3 percent or more than five vacant units, an authority will adjust its
requested budget year occupancy percentage by excluding from its calculation of unit months
available those unit months attributable to units that have been vacant for longer than 12 months
that are not vacant units undergoing modernization or are not units vacant due to circumstances
and actions beyond an authority’s control. These are considered long-term vacant units. Section
(b)(6)(iv)(A) states that long-term vacant units removed from the unit month available
calculation are eligible to receive 20 percent of the authority’s allowable expense level.




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