Issue Date
September 29, 2008
Audit Report Number
2008-CH-1016
TO: Steven E. Meiss, Director of Public Housing Hub, 5APH
FROM: Heath Wolfe, Regional Inspector General for Audit, 5AGA
SUBJECT: The Springfield Housing Authority, Springfield, Illinois, Did Not Always Ensure
That Section 8 Units Met HUD’s Housing Quality Standards
HIGHLIGHTS
What We Audited and Why
We audited the Springfield 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 the U.S. Department of Housing and Urban Development’s
(HUD) requirements. This is the first of two audit reports on the Authority’s
program.
What We Found
The Authority’s program administration regarding housing unit conditions and
timeliness of annual housing unit inspections was inadequate. Of the 55 housing
units statistically selected for inspection, 43 did not meet HUD’s housing quality
standards, and 18 had exigent health and safety violations that existed at the time
of the Authority’s previous inspections. In addition, 10 housing units had 55
health and safety violations that existed at the time of the Authority’s previous
inspections. Based on our statistical sample, we estimate that over the next year,
HUD will pay nearly $500,000 in housing assistance for units with housing
quality standards violations.
The Authority failed to ensure that its housing unit inspections were conducted in
a timely manner. Of the 65 household files statistically selected for review, 25
(38 percent) had inspections that were not conducted within the required one year
of the previous inspections. The number of days late ranged from 16 to 373.
Based on our statistical sample, we estimate that over the next year, HUD will pay
more than $92,000 in program administrative fees for units with untimely unit
inspections.
What We Recommend
We recommend that the Director of HUD’s Chicago Office of Public Housing
require the Authority to reimburse its program from nonfederal funds for the
improper use of more than $50,000 in program funds and implement adequate
procedures and controls to address the finding cited in this audit report. These
procedures and controls should help ensure that nearly $600,000 in program funds
is spent on housing units that meet HUD’s requirements.
For each recommendation without a management decision, please respond and
provide status reports in accordance with HUD Handbook 2000.06, REV-3.
Please furnish us copies of any correspondence issued because of the audit.
Auditee’s Response
We provided our inspection review results and supporting schedules to the
Director of HUD’s Chicago Office of Public Housing and the Authority’s
executive director during the audit. We also 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 Authority’s executive
director on September 11, 2008.
We asked the Authority’s executive director to provide comments on our
discussion draft audit report by September 23, 2008. The Authority’s executive
director provided written comments, dated September 23, 2008. The executive
director generally agreed with our findings and recommendations with the
exception of withholding program administrative fees until the Authority
implements adequate procedures and controls to ensure that program units are
inspected at least annually. The complete text of the written comments, except
for seven attachments consisting of 192 pages of documentation that were not
necessary to understand the Authority’s comments, along with our evaluation of
that response can be found in appendix B of this report. A complete copy of the
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Authority’s comments plus the documentation was provided to the Director of
HUD’s Chicago Office of Public Housing.
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TABLE OF CONTENTS
Background and Objective 5
Results of Audit
Finding: Controls over Housing Quality Standards Were Inadequate 6
Scope and Methodology 14
Internal Controls 16
Appendixes
A. Schedule of Questioned Costs and Funds to Be Put to Better Use 18
B. Auditee Comments and OIG’s Evaluation 19
C. HUD’s Regulations and the Authority’s Program Administrative Plan 25
4
BACKGROUND AND OBJECTIVE
The Springfield Housing Authority (Authority) was established by the State Housing Board of
Illinois in November 1937 under the laws of the State of Illinois to provide decent, safe, and
sanitary housing. The Authority is governed by a five-member board of commissioners (board)
appointed by the mayor of the City of Springfield, Illinois, to five-year staggered terms. The
board’s responsibilities include overseeing the administration of the Authority and approving
policies. The board appoints the Authority’s executive director. The executive director is
responsible for ensuring that policies are followed and providing oversight of the Authority’s
programs.
The Authority administers a Section 8 Housing Choice Voucher program (program) funded by the
U.S. Department of Housing and Urban Development (HUD). It 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 August 15, 2008, the Authority had 1,823 units under
contract with annual housing assistance payments totaling more than $7.3 million in program funds.
Our objective was to determine whether the Authority administered its program in accordance with
HUD’s requirements to include determining whether (1) the Authority’s inspections were sufficient
to detect housing quality standards violations and provide decent, safe, and sanitary housing to its
residents and (2) the Authority complied with HUD’s regulations and its program administrative
plan regarding annual housing unit inspections. This is the first of two audit reports on the
Authority’s program.
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RESULTS OF AUDIT
Finding: Controls over Housing Quality Standards Were Inadequate
The Authority did not adequately enforce HUD’s housing quality standards. Of the 55 program
units statistically selected for inspection, 43 did not meet minimum housing quality standards,
and 28 had material violations that existed before the Authority’s previous inspections. The
violations occurred because the Authority lacked adequate procedures and controls to ensure that
housing units met HUD’s housing quality standards. It also failed to exercise proper supervision
and oversight of its program units to ensure that annual housing quality standards inspections
were performed in a timely manner. As a result, more than $50,000 in program funds was spent
on units that were not decent, safe, and sanitary. We estimate that over the next year, the
Authority will pay nearly $500,000 in housing assistance for units with housing quality standards
violations and/or untimely annual inspections.
HUD’s Housing Quality
Standards Not Met
From the 278 program units that passed the Authority’s inspections between
February and May 2008, we statistically selected 55 units for inspection by using
data mining software. The 55 units were inspected to determine whether the
Authority ensured that its program units met HUD’s housing quality standards. Our
appraiser inspected the 55 units between July 28 and August 6, 2008.
Of the 55 units inspected, 43 (78 percent) had a total of 409 housing quality
standards violations. In addition, 28 units were considered to be in material
noncompliance since they had one or more exigent health and safety violations that
predated the Authority’s previous inspections or four or more health and safety
violations that predated the Authority’s previous inspections. The following table
categorizes the 409 housing quality standards violations in the 43 units.
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Number of Number of
Category of violations violations units
Electrical 116 33
Window 52 24
Wall 32 21
Exterior surface 21 15
Range/refrigerator 19 18
Security 18 14
Floor 18 14
Paint 17 11
Stairs, rails, and porches 13 9
Smoke/carbon monoxide detectors 13 8
Roof/gutters 12 10
Toilet/wash basin 10 10
Interior air quality 8 7
Ceiling 8 8
Tub or shower in unit 7 7
Water heater 6 5
Heating equipment 6 6
Site and neighborhood conditions 5 5
Sinks 4 4
Evidence of infestation 4 4
Food preparation/storage 3 3
Plumbing/sewer/water supply 3 3
Other hazards 3 2
Interior stairs and common halls 3 3
Ventilation 2 2
Foundation 2 2
Other interior hazards 1 1
Manufactured homes’ tie-downs 1 1
Garbage/debris/refuse disposal 1 1
Chimney 1 1
Total 409
We provided our inspection results to the Director of HUD’s Chicago Office of
Public Housing on August 22, 2008, and the Authority’s executive director on
August 25, 2008.
Electrical Violations
One hundred sixteen electrical violations were present in 33 of the Authority’s
program units inspected. The following items are examples of electrical
violations listed in the table: exposed fuse box connections, exposed electrical
contacts, and missing outlet cover plates. The following pictures are examples of
the electrical-related violations.
7
Unit #1: Exterior wall
lamp next to the laundry
room door hanging from
its wires.
Unit #7: Improperly
wired switch in the den
to control a ceiling light
in the adjacent corridor.
Window Violations
Fifty-two window violations were present in 24 of the Authority’s program units
inspected. The following items are examples of window violations listed in the
table: windows that do not open or stay up properly, cracked or broken panes,
and windows that do not lock or close properly. The following pictures are
examples of the window-related violations.
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Unit #13: Broken glass
pane on a rear bedroom
window. A child
between the ages of 6
and 18 resides in this
unit.
Unit #41: Knife used in
lieu of broken lock to
keep the kitchen window
secure. Children under
the age of six reside in
this unit.
Wall Violations
Thirty-two wall violations were present in 21 of the Authority’s program units
inspected. The following items are examples of wall violations listed in the table:
large holes, air infiltration, and mold. The following pictures are examples of the
wall-related violations.
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Unit #15: Mold on
basement wall due to
water seepage. Children
under the age of six
reside in this unit.
Unit #50: Incomplete
repairs to a hole in the
living room wall.
Children under the age of
six reside in this unit.
Annual Inspections Not
Performed in a Timely Manner
Of the 1,817 households on the Authority’s program as of April 2, 2008, we
statistically selected 65 household files for review using data mining software.
The 65 household files were reviewed to determine whether the Authority
performed its annual inspections within one year in accordance with HUD’s
regulations. Of the 65 household files reviewed, 25 (38 percent) had a total of 31
inspections conducted between January 1, 2006, and February 29, 2008, that were
not conducted in accordance with the annual requirement. Of the 31 late annual
inspections, 25 were more than 30 days late; 10 of the 25 were more than six
10
months late. The Authority received $4,723 in program administrative fees for
the 25 households residing in units that were more than 30 days past due for
housing quality standards inspections. Based on our statistical sample, we were
able to estimate that between 571 and 875 of the Authority’s 1,817 program units
were not inspected timely. We considered this significant and requiring
immediate attention.
The Authority’s program manager said that the Authority did not have controls
over the process of scheduling inspections. The program manager also said that
the Authority held weekly staff meetings to review the process and made changes
as necessary to resolve the problem.
Adequate Procedures and
Control Lacking
The Authority lacked adequate procedures and controls to ensure that program
units met HUD’s requirements. It also failed to exercise proper supervision and
oversight of its program units and housing inspections. When we observed the
Authority’s inspection process, the inspectors did not always conduct accurate
and complete inspections. Specifically, the Authority’s inspectors did not always
inspect items such as windows and appliances to determine whether they worked
properly to avoid exposing the households to a potential risk. Therefore, the
Authority did not determine during its inspections whether program units
complied with HUD’s housing quality standards.
In addition, the Authority did not perform its required supervisory quality control
inspections in accordance with its program administrative plan. According to the
Authority’s program administrative plan, at least 5 percent of the total number of
units under lease during the previous fiscal year was required to have a
supervisory quality control inspection. For fiscal years 2006 and 2007, the
Authority conducted 17 and 40 quality control inspections, respectively.
However, for fiscal years 2005 and 2006, there was an average of 1,499 and 1,366
units under contract, respectively. Therefore, the Authority should have
conducted 75 and 69 quality control inspections during 2006 and 2007,
respectively, to comply with its administrative plan. The Authority did not verify
that the inspectors conducted accurate and complete inspections and ensure that
there was consistency among inspectors in the application of HUD’s housing
quality standards.
Conclusion
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 and perform
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timely annual inspections of its program units. 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 $50,356 in program
housing assistance payments for the 28 units that materially failed to meet HUD’s
housing quality standards and received $4,691 in program administrative fees. In
addition, the Authority received $4,723 in program administrative fees for the 25
households residing in units that were more than 30 days past due for housing
quality standards inspections.
If the Authority implements adequate procedures and controls over its unit
inspections to ensure compliance with HUD’s housing quality standards, we
estimate that nearly $500,000 in future housing assistance payments will be spent
for units that are decent, safe, and sanitary over the next year. In addition, if the
Authority implements adequate procedures and controls regarding its process of
scheduling inspections, we estimate that it will properly receive more than
$92,000 in future administrative fees for ensuring that its program units are
inspected annually in accordance with HUD’s regulation. Our methodology for
these estimates is explained in the Scope and Methodology section of this audit
report.
Recommendations
We recommend that the Director of HUD’s Chicago Office of Public Housing
require the Authority to
1A. Certify, along with the owners of the 43 program units cited in this finding,
that the applicable housing quality standards violations have been repaired.
1B. Reimburse its program $55,047 from nonfederal funds ($50,356 for housing
assistance payments and $4,691 in associated administrative fees) for the 28
units that materially failed to meet HUD’s housing quality standards.
1C. Implement adequate procedures and controls to ensure that all units meet
HUD’s housing quality standards to prevent $499,008 in program funds from
being spent over the next year on units that are in material noncompliance with
the standards.
1D. Ensure that all inspectors are properly trained and are familiar with the housing
quality standards and can apply them appropriately.
1E. Implement controls to ensure that it performs required supervisory quality
control inspections in accordance with the Authority’s program administrative
plan to verify that its inspectors conduct accurate and complete inspections and
consistently apply HUD’s housing quality standards.
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1F. Reimburse its program $4,723 from nonfederal funds in associated
administrative fees for the 25 households residing in units that were more
than 30 days late in receiving their annual inspection.
We also recommend that the Director of HUD’s Chicago Office of Public Housing
1G. Withhold 10 percent, or a percentage acceptable to the Office of Public
Housing, of the program administrative fees, which could total as much as
$92,807 over one year, until the Authority implements adequate procedures
and controls to ensure that program units are inspected at least annually to
meet HUD’s requirements.
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SCOPE AND METHODOLOGY
To accomplish our objective, we reviewed
• Applicable laws, regulations, the Authority’s program administrative plan, HUD’s
program requirements at 24 CFR Parts 5 and 982, and HUD’s Housing Choice Voucher
Guidebook 7420.10.
• The Authority’s accounting records; annual audited financial statements for 2004, 2005,
and 2006; bank statements; household files; policies and procedures; board meeting
minutes for January 2006 through February 2008; organizational chart; and program
annual contributions contract with HUD.
• HUD’s files for the Authority.
We also interviewed the Authority’s employees and board chairman, HUD staff, and program
households.
We statistically selected 55 of the Authority’s program units to inspect using data mining software
from the 278 units that passed inspections by the Authority from February through May 2008. The
55 units were selected to determine whether the Authority’s program units met HUD’s housing
quality standards. Our sampling criteria used a 90 percent confidence level, 50 percent estimated
error rate, and precision of plus or minus 10 percent.
Our sampling results determined that 28 of the 55 units (51 percent) materially failed to meet
HUD’s housing quality standards. Materially failed units were those units (1) that had one or more
exigent health and safety violations that predated the Authority’s previous inspections or (2) that
had four or more health and safety violations that predated the Authority’s previous inspections.
The Authority’s January through December 2007 housing assistance disbursements listing showed
that the average monthly housing assistance payment was $368. Projecting our sampling results of
the 28 units that materially failed to meet HUD’s housing quality standards to the population
indicates that 142 units or 50.91 percent of the population contains the attributes tested (would
materially fail to meet HUD’s housing quality standards). The sampling error is plus or minus 9.93
percent. In other words, we are 90 percent confident that the frequency of occurrence of the
attributes tested lies between 40.98 and 60.84 percent of the population. This equates to an
occurrence of between 113 and 169 units of the 278 units in the population.
• The lower limit is 40.98 percent X 278 units = 113 units that materially failed to meet
HUD’s housing quality standards.
• The point estimate is 50.91 percent X 278 units = 142 units that materially failed to meet
HUD’s housing quality standards.
• The upper limit is 60.84 percent X 278 units = 169 units that materially failed to meet
HUD’s housing quality standards.
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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 $499,008 (113 units X $368 average
payment X 12 months) for units that materially fail to meet HUD’s housing quality standards. This
estimate is presented solely to demonstrate the annual amount of program funds that will be
correctly paid over the next year 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 statistically selected 65 of the Authority’s program households to review using data mining
software from the 1,817 active program households as of April 2, 2008. The 65 household files
were selected to determine whether the Authority inspected all units annually to assure that they met
HUD’s housing quality standards. Our sampling criteria used a 90 percent confidence level, 50
percent estimated error rate, and precision of plus or minus 10 percent.
Out sampling results determined that 25 of 65 households (38.46 percent) had 31 late housing
quality standards inspections between January 1, 2006, and February 29, 2008. As of January 2008,
the Authority received total monthly administrative fees of $77,339. An estimated 10 percent of the
administrative fees are paid to ensure that inspections are performed in a timely manner in
accordance with HUD’s requirement. Therefore, the Authority will improperly receive $92,807
($77,339 X 10 percent X 12 months) in administrative fees over the next year for the ineffective
enforcement of annual inspections. This estimate is presented solely to demonstrate the annual
amount of administrative fees that will be properly received over the next year 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 August 2008 at the Authority’s offices
located at 200 North 11th Street, Springfield, Illinois. The audit covered the period January 1, 2006,
through February 29, 2008, but was expanded as determined necessary.
We performed our review in accordance with generally accepted government auditing standards.
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INTERNAL CONTROLS
Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following objectives are being achieved:
• Effectiveness and efficiency of operations,
• Reliability of financial reporting,
• Compliance with applicable laws and regulations, and
• Safeguarding of assets and resources.
Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance.
Relevant Internal Controls
We determined the following internal controls were relevant to our audit objective:
• Program operations – Policies and procedures that management has
implemented to reasonably ensure that a program meets its objectives.
• Relevance and reliability of data – Policies, procedures, and practices that
management has implemented to provide reasonable assurance that
operational and financial information used for decision making and reporting
externally is relevant and reliable and fairly disclosed in reports.
• Compliance with laws and regulations – Policies and procedures that
management has implemented to provide reasonable assurance that program
implementation is in accordance with laws, regulations, and provisions of
contracts or grant agreements.
• Safeguarding of assets and resources – Policies and procedures that
management has implemented to prevent or promptly detect unauthorized
acquisition, use, or disposition of assets and resources.
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.
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Significant Weakness
Based on our review, we believe the following item is a significant weakness:
• The Authority lacked adequate procedures and controls to ensure compliance
with HUD’s requirements and/or its program administrative plan regarding
housing quality standards inspections and timeliness of annual unit
inspections (see finding).
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APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
AND FUNDS TO BE PUT TO BETTER USE
Recommendation Funds to be put
number Ineligible 1/ to better use 2/
1B $55,047
1C $499,008
1F 4,723
1G 92,807
Totals $59,770 $591,815
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 Office of Inspector General (OIG) recommendation is
implemented. This includes reductions in outlays, deobligation of funds, withdrawal of
interest subsidy costs not incurred by implementing recommended improvements,
avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
which are specifically identified. In this instance, if the Authority implements our
recommendations, it will cease to incur program costs for units that are not decent, safe,
and sanitary and not inspected annually 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.
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Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
19
Ref to OIG Evaluation Auditee Comments
Comment 1
20
Ref to OIG Evaluation Auditee Comments
Comment 2
Comment 3
Comment 4
21
Ref to OIG Evaluation Auditee Comments
Comment 5
22
Ref to OIG Evaluation Auditee Comments
Comment 6
23
OIG Evaluation of Auditee Comments
Comment 1 The Authority should provide supporting documentation to HUD’s staff showing
that all of the housing quality standards violations noted in its program units were
repaired. HUD’s staff will work with the Authority to resolve the
recommendation.
Comment 2 The Authority’s actions should improve its procedures and controls regarding its
inspection process to ensure that all units meet HUD’s housing quality standards,
if fully implemented. The Authority should provide supporting documentation to
HUD’s staff, who will work with the Authority, to resolve the recommendation.
Comment 3 The Authority’s plan to provide its inspectors with additional and on-going
housing quality standards training should improve its inspection process to ensure
that all units meet HUD’s housing quality standards, if fully implemented. The
Authority should provide additional supporting documentation to HUD’s staff,
who will work with the Authority, to resolve the recommendation.
Comment 4 The Authority’s actions should improve its procedures and controls regarding its
inspection process to ensure that all units meet HUD’s housing quality standards,
if fully implemented. The Authority should provide additional supporting
documentation to HUD’s staff, who will work with the Authority, to resolve the
recommendation.
Comment 5 The Authority’s proposed actions do not ensure that its program units will be
inspected at least annually. The Authority should provide supporting
documentation to HUD’s staff, who will work with the Authority, to resolve the
recommendation.
Comment 6 The Authority’s corrective action plan with HUD does not require the Authority
to implement adequate procedures and controls to ensure that its program units
will be inspected at least annually. The action plan only requires the Authority to
upload inspections into HUD’s Public and Indian Housing Information Center
system within two months of completion. The Authority should provide
supporting documentation that its procedures and controls have been implemented
to HUD’s staff, who will work with the Authority, to resolve the
recommendation.
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Appendix C
HUD’S REGULATIONS AND THE AUTHORITY’S
PROGRAM ADMINISTRATIVE PLAN
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 982.404 require that owners of program units maintain the units in
accordance with HUD’s housing quality standards. If the owner fails to maintain the dwelling
unit in accordance with HUD’s housing quality standards, the authority must take prompt and
vigorous action to enforce the owner’s obligations. The authority’s remedies for such breach of
the housing quality standards include termination, suspension, or reduction in housing assistance
payments and 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. For other defects, the owner must correct them within 30 calendar days.
HUD’s regulations at 24 CFR 982.405(a) require that public housing authorities 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.
HUD’s regulations at 24 CFR 982.153 state that that the public housing authority must comply
with the consolidated annual contributions contract, the application, HUD regulations and other
requirements, and its program administrative plan.
Section 8, part J, of the Authority’s program administrative plan states that the Authority
performs supervisor inspections on at least 5 percent of the total number of units that were under
lease during the Authority’s previous fiscal year. These inspections are completed to ensure
housing quality standards compliance and consistent inspection determinations.
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The Springfield Housing Authority, Springfield, Illinois, Did Not Always Ensure That Section 8 Units Met HUD's Housing Quality Standards
Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-09-29.
Below is a raw (and likely hideous) rendition of the original report. (PDF)