oversight

Union County, Elizabeth, New Jersey, Had Weaknesses in Its Housing Choice Voucher Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-06-30.

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

                                                             Issue Date

                                                             June 30, 2008
                                                             Audit Report Number
                                                             2008-NY-1009




TO:         Edward De Paula, Director, Office of Public Housing, 2FPH


FROM:       Edgar Moore, Regional Inspector General for Audit, 2AGA

SUBJECT: Union County, Elizabeth, New Jersey, Had Weaknesses in Its Housing
         Choice Voucher Program


                               HIGHLIGHTS

 What We Audited and Why

             We audited Union County’s (County) Housing Choice Voucher program,
             which is administered by its Division of Planning and Community
             Development. We selected the County because the Newark field office’s
             risk rating classified the County as a below standard performer due to
             inadequate administration and technical knowledge of staff, tenant
             complaints, and the County contracted out the administration of its
             Housing Choice Voucher program to a consultant without U.S.
             Department of Housing and Urban Development (HUD) approval.

             Our audit objectives were to determine whether the County’s (1) Housing
             Choice Voucher program units met housing quality standards; (2) costs
             charged to the Housing Choice Voucher program were supported and
             eligible; and (3) controls over the Housing Choice Voucher program,
             including monitoring of the consultant administering the program, were
             adequate.

 What We Found

             Our inspection of 58 Section 8 units found that 42 units (72 percent) did
             not meet minimum housing quality standards. Of the 42 units, 21 were in
           material noncompliance with standards. As a result HUD made housing
           assistance payments for units that did not meet housing quality standards.
           We estimate that over the next year, HUD will make housing assistance
           payments of $762,000 for units in material noncompliance with the
           standards.
           The County’s financial and program controls over its Housing Choice
           Voucher program were inadequate. Specifically, voucher funds that were
           transferred to other programs, and salary cost that was charged to the
           program were unsupported and/or ineligible. As a result, $83,476 in
           transfers of funds and salary costs charged are questioned pending an
           eligibility determination by HUD, while another $21,862 in transfers and
           salary costs are ineligible. In addition, the County did not document
           whether it monitored its consultant that administered its Housing Choice
           Voucher program. Accordingly, the County could not ensure that voucher
           funds were used efficiently and effectively or met program objectives.

What We Recommend

           We recommend that the Director of HUD’s New Jersey Office of Public
           Housing instruct the County to develop and implement procedures (1) to
           ensure that units meet housing quality standards to prevent an estimated
           $762,000 from being spent on units that are in material noncompliance,
           (2) for allocating and charging costs to the Housing Choice Voucher
           program to include developing a cost allocation plan for salaries, (3) to
           ensure that transfers from the Housing Choice Voucher program to other
           programs are in accordance with regulations, and (4) to ensure that
           monitoring of the consultant that administers the program is conducted
           and documented.
           For each recommendation without a management decision, please respond
           and provide status reports in accordance with HUD Handbook 2000.06,
           REV-3. Please furnish us copies of any correspondence or directives
           issued because of the audit.

Auditee Response

           We provided a draft report to County officials on June 12, 2008, and
           requested their responses by June 20, 2008. We discussed the results of
           our review during the audit and at an exit conference on June 20, 2008.
           County officials provided written comments on June 20, 2008. They
           generally concurred with the draft report findings but had some concerns
           about language. The complete text of the County’s response, along with
           our evaluation of that response, can be found in appendix B of this report.




                                        2
                    TABLE OF CONTENTS



Background and Objectives                                                       4

Results of Audit
    Finding 1: Some Housing Choice Voucher Program Units Did Not Meet Housing   5
               Quality Standards
     Finding 2: Financial and Program Controls Were Inadequate                  12


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




                                         3
                 BACKGROUND AND OBJECTIVES

Union County’s (County) Division of Planning and Community Development is located
at 10 Elizabethtown Plaza, Elizabeth, New Jersey. The Division of Planning and
Community Development consists of four bureaus, which include the Bureaus of
Housing, Community Development, Transportation Planning, and Land and Facilities
Planning. The Bureau of Housing is responsible for the Housing Choice Voucher
program. However, the administration of the Housing Choice Voucher program has been
contracted out to a consultant, Development Directions, LLC (Development Directions).

As of March 2008, the U.S. Department of Housing and Urban Development’s (HUD)
Public Housing Information Center (PIC) system showed that the County was issued 371
Section 8 vouchers and received more than $2.9 million and $3 million in Section 8
funding for fiscal years 2006 and 2007, respectively. The County’s Housing Choice
Voucher program’s fiscal year runs from January 1 through December 31.

Our audit objectives were to determine whether the County’s (1) Housing Choice
Voucher program units met housing quality standards; (2) costs charged to the Housing
Choice Voucher program were supported and eligible; and (3) controls over the Housing
Choice Voucher program, including monitoring of the consultant administering the
program, were adequate.




                                          4
                              RESULTS OF AUDIT


Finding 1: Some Housing Choice Voucher Program Units Did Not
           Meet Housing Quality Standards
Our inspection of 58 units showed that 42 units (72 percent) did not meet minimum
housing quality standards. Of the 42 units, 21 were in material noncompliance.
Projecting the results of the statistical sample to the population indicates that at least 239
units did not meet minimum housing quality standards, and at least 100 units were in
material noncompliance with the standards. This noncompliance occurred because
management did not always follow its administrative plan and HUD regulations to ensure
that units met minimum housing quality standards. As a result, housing assistance
payments were made for units that did not meet HUD’s standards.



 Some Units Not in Compliance
 with HUD Standards


               County officials did not implement an effective administrative plan to
               ensure that its consultant who administers the Section 8 Housing Choice
               Voucher Program (Development Directions) complied with HUD
               requirements at all times. As a result, the County made housing assistance
               payments for units that did not meet the standards. We estimate that over
               the next year, HUD will pay $762,000 in housing assistance for units in
               material noncompliance with housing quality standards if the County’s
               consultant does not implement adequate procedures.

               We inspected a statistical sample of 58 units accompanied by a HUD
               appraiser and a Development Directions inspector or other staff member
               when the inspector was not available. Our inspection of 58 units found
               that 42 units (72 percent) did not meet minimum housing quality
               standards, and we identified 241 deficiencies. Of the 42 units, 21 were in
               material noncompliance with the standards. They contained 83
               deficiencies that were significant enough to materially fail the units.

               We ranked all units according to severity from worst to best. We
               determined that materially noncompliant units are those units above the
               cut off line that, at a minimum, included deficiencies that existed at the
               Authority's last inspection. Other factors that we used to determine the
               severity of the units' conditions included whether children, elderly, or
               disabled tenants lived in the unit and whether the tenants caused the
               damage.


                                              5
The deficiencies noted were not identified by the Development Directions
inspectors during their last inspections and some appear to have resulted
from faulty maintenance. Further, the noncompliance occurred because
the inspector failed to follow the County’s administrative plan to ensure
that all units met minimum housing quality standards and all inspections
complied with HUD requirements.

Regulations at 24 CFR [Code of Federal Regulations] 982.401 provide
performance and acceptability standards that assisted units must meet to
comply with HUD housing quality standards. In addition, Section 982.54
provides that the authority must adopt a written administrative plan that
establishes local policies for the administration of the program in
accordance with HUD requirements. The plan should include procedural
guidelines and performance standards for conducting required housing
quality standard inspections. Section 982.405 provides that the authority
must inspect the unit leased to a family prior to the initial term of the
lease, at least annually during assisted occupancy, and at other times as
needed, to determine if the unit meets the housing quality standards (HQS)
and further provides that the authority must conduct supervisory quality
control inspections.

Although the required number of supervisory quality control inspections
had been performed, they were not effective in ensuring that all
inspections were conducted in a manner that ensured that all units met
housing quality standards. For example the consultant’s quality control
inspections were conducted at the end of the year instead of periodically
throughout the year. By doing this, if errors were noted with how
inspectors conduct their inspections, these errors would not be timely
identified or corrected until years end, when the supervisory inspections
are performed. The following table lists the most frequently occurring
deficiencies for all 58 units inspected.


              Deficiencies            # of deficiencies   # of units affected
        Walls, ceilings, floors              35                   15
        Doors                                28                   16
        Electrical hazards                   13                   11
        Windows                              12                   10

The deficiencies noted the most were those concerning the units’ walls,
ceilings, and floors. Other deficiencies included door security issues,
electrical hazards, and window problems.




                                  6
Walls, Ceilings, and Floors

              Fifteen of the units inspected had at total of 35 deficiencies related to the
              walls, ceilings, and floors. The deficiencies noted included walls that
              contained cracks, holes, and peeling paint; ceilings that were bulging and
              contained holes; and floors that were unlevel and uneven and contained
              holes, tears, cracked tiles, and lifted linoleum. The following pictures
              provide examples of some of the deficiencies.




              During an inspection of sample unit #8 conducted on January 30, 2008,
              this unit’s bathroom had a buckling and bulging ceiling.




              During an inspection of sample unit # 29 conducted on February 4, 2008,
              this unit’s bathroom had what appears to be faulty ceiling repair work in


                                            7
            the shower area as evidenced by the striped stick placed in the hole.




            During an inspection of sample unit #51 conducted on February 12, 2008,
            the rear center bedroom of this unit had several cracks in the ceiling.

Unsecure Doors/Windows

            Twenty-six units inspected had 40 deficiencies related to the doors and
            windows. Some examples of the deficiencies noted were that doors had
            missing notch pins, split doorframes, dead bolts (with an interior key) and
            some entrance doors were hollow. Windows contained fixed bars and
            were blocked; and window frames needed repair. Many of these
            deficiencies impacted the security and/or safety of the tenants.

            The following pictures provide examples of these deficiencies.




                                         8
             During an inspection of sample unit #34 conducted on February 5, 2008,
             this unit’s main entry door had the hinges and hinge pins on the exterior of
             the door, and a split frame, all of which compromised the security of the
             unit.




             During an inspection of sample unit #11 conducted on January 30, 2008,
             this unit’s main entry door was split, and it had a double key lock, which
             could become a safety issue during a fire.
Electrical Hazards

             Eleven of the units inspected had 13 deficiencies related to electrical
             hazards. The deficiencies noted included inoperative GFI outlets, exposed
             wiring, hot or reverse outlets, and faulty electrical sockets. The following
             pictures provide examples of these deficiencies.




                                          9
             During an inspection of sample unit #29 conducted on February 4, 2008,
             this unit’s bedroom had an electrical outlet with a missing face plate,
             which can be hazardous.




             During an inspection of sample unit # 26 conducted on February 04, 2008,
             this unit’s living room contain a socket with faulty electrical problems for
             which the tenant states caused sparks when an item is plugged into it.


Conclusion

             The County lacked adequate procedures and controls to ensure that all of
             its Housing Choice Voucher program units met HUD’s and its housing
             quality standard requirements. As a result, 42 out of 58 units inspected
             failed minimum housing quality standards, and 21 of the 42 units
             materially failed standards thus tenants lived in units that materially did
             not meet housing quality standards. This was caused because the
             consultant’s inspectors did not always follow its administrative plan and
             HUD regulations to ensure that units met minimum housing quality
             standards. Accordingly, management must place greater emphasis on the
             importance of housing quality standards and strengthen policies and
             procedures to ensure that it complies with HUD requirements to give
             tenants the opportunity to live in decent, safe, and sanitary housing. By
             making the necessary improvements, the County will ensure that an
             estimated $762,000 in housing choice voucher funds will not be spent on
             housing units that materially do not meet housing quality standards.




                                          10
Recommendations

          We recommend that the Director of HUD’s New Jersey Office of Public
          Housing require the County to

          1A. Inspect the 42 units that did not meet minimum housing quality
              standards to verify that landlords took appropriate corrective actions
              so that units meet the standards. If appropriate action was not taken,
              the County should abate the rents or terminate the housing assistance
              payments to the landlords.

          1B. Develop procedures to ensure that quality control inspections are
              performed periodically throughout the year to ensure that HQS
              inspections are conducted in accordance with regulations and the
              administrative plan.

          1C. Develop and implement procedures to ensure that units meet housing
              quality standards to prevent an estimated $762,000 from being spent
              on units that are in material noncompliance with HUD standards.




                                      11
Finding 2: Financial and Program Controls Were Inadequate

The County’s financial and program controls over its Housing Choice Voucher program
were inadequate. Specifically, voucher funds that were transferred to other programs,
and salary cost that was charged to the program were unsupported and/or ineligible. As a
result, $83,476 in transfers of funds and salary costs charged are questioned pending an
eligibility determination by HUD, while another $21,862 in transfers and salary costs are
ineligible. We attribute these conditions to the County’s unfamiliarity with regulations
and its failure to ensure that adequate documentation is maintained to support the
reasonableness and validity of all expenses. In addition, the County did not document
whether it monitored its consultant that administered its Housing Choice Voucher
program. Accordingly, the County could not ensure that voucher funds were used
efficiently and effectively or met program objectives.


 Unsupported and Ineligible
 Transfers of Funds

              In May 2006, approximately $58,438 was transferred from the Housing
              Choice Voucher program to the CDBG program for the cost of
              administering the Housing Choice Voucher program in 2005. A County
              official believed that the County was entitled to the funds as a profit for
              administering the Housing Choice Voucher program. However, there was
              inadequate documentation to support that the County’s CDBG staff was
              involved with the administration of the voucher program in 2005.
              Especially since the administration of the program was contracted out to a
              consultant.

              In addition, in May 2006, a total of $20,601 in “Section 8 recapture fraud
              money” was transferred from the rental assistance account to the
              Community Development Block Grant (CDBG) program. According to
              Public and Indian Housing (PIH) Notice 2006-03, Section 8 recapture
              funds can only be used for activities related to providing assistance under
              the Housing Choice Voucher program. Since, the County did not maintain
              documentation to show that these funds were used for activities related to
              providing assistance under the Housing Choice Voucher program; these
              funds are ineligible and should be reimbursed to the Housing Choice
              Voucher program.

  Unsupported and Ineligible
  Salary Costs


              Costs charged to the Housing Choice Voucher program were not always
              properly supported or eligible. From January 2006 to June 2007, the


                                           12
            salaries for two County employees were charged to the Housing Choice
            Voucher program based on estimated time spent on the program. From
            January to December 2006, the amount charged to the Housing Choice
            Voucher program was $16,343. From January 2007 to June 2007, the
            amount charged to the Housing Choice Voucher program was $8,695.
            However, the County did not maintain supporting documentation for the
            methodology used to charge the two employees’ salaries to the Housing
            Choice Voucher program. County officials believed that budgeted costs
            could be used to allocate the costs to the program. However, since most of
            the administration of the Housing Choice Voucher program is done by the
            consultant and the two County employees worked on other programs
            besides the Housing Choice Voucher program we could not determine if
            these costs were reasonable without documentation of the time these
            employees spent on the program.

            The consolidated annual contributions contract states that “program
            receipts may only be used to pay program expenditures.” In addition,
            regulations at 24 CFR 85.20 require the costs to be supported by source
            documents such as cancelled checks, paid bills, payrolls, and time and
            attendance records. These items were not provided to support costs
            related to the voucher program. Therefore, the County could not ensure
            that salary costs were allowable and supported. In addition to maintaining
            time distribution record, the County should develop a cost allocation plan
            and update it at least annually to ensure that the costs charged the Housing
            Choice Voucher Program are reasonable. Therefore, $25,038 in salaries is
            considered unsupported pending a determination as to the reasonableness
            of the costs by HUD.

            In addition, a duplicate charge of $1,261 for salary costs was made in
            March 2007. These costs were for partial salaries for December 2006 that
            had already been charged to the program. Therefore, the $1,261 was
            ineligible because it had already been charged to the program and should
            therefore be repaid to the Housing Choice Voucher program.

Monitoring of the Consultant
was Not Documented

            From January 2006 to June 2007, the County did not document monitoring
            of its consultant that administered its Housing Choice Voucher program,
            Development Directions. According to the County’s “Internal Control
            Procedures for the Section 8 Program,” the Division of Planning and
            Community Development is required to “monitor the consultant on a
            monthly basis for programmatic and financial review, to enable the
            County to have better control over the consultant and the program.”
            Accordingly, by not documenting the monitoring of its consultant, the
            County could not assure HUD that voucher funds were used efficiently


                                         13
             and effectively or met Housing Choice Voucher program objectives. This
             lack of monitoring may have contributed to the units not meeting housing
             quality standards, as discussed in finding 1.

Conclusion

             Inadequate financial and program controls led to the County transferring
             voucher funds to other programs, and charging salary costs to the voucher
             program that were unsupported and/or ineligible. As a result, $83,476 in
             transfers of funds and salary costs charged are questioned pending an
             eligibility determination by HUD, while another $21,862 in transfers and
             salary costs are ineligible. We attribute these conditions to the County’s
             unfamiliarity with regulations and its failure to ensure that adequate
             documentation is maintained to support the reasonableness and validity of
             all expenses. Also, the County could not assure HUD that its consultant
             efficiently and effectively administered the Housing Choice Voucher
             program since there was no documented monitoring of the consultant from
             January 2006 to June 2007.

Recommendations


             We recommend that the Director of HUD’s New Jersey Office of Public
             Housing require the County to

             2A.    Provide documentation to support the eligibility of $58,438
                    transferred to the CDBG program and repay any amount
                    determined to be ineligible to the Housing Choice Voucher
                    program.

             2B.    Repay $20,601 to the Housing Choice Voucher program related to
                    Section 8 fraud recovery funds ineligibly transferred to the
                    Community Development Block Grant (CDBG) program

             2C.    Establish controls to ensure that transfers of funds from the
                    Housing Choice Voucher program to other programs are in
                    accordance with regulations.

             2D.    Provide documentation to support the eligibility of the $25,038 in
                    unsupported salary costs charged to the Housing Choice Voucher
                    program and repay any amount determined to be ineligible

             2E.    Develop procedures that will ensure the use of time distribution
                    records when employees work on more than one program or
                    activity.



                                         14
2F.   Develop a cost allocation plan and update it at least annually to
      ensure that the costs charged to the Housing Choice Voucher
      Program are reasonable.

2G.   Reimburse the Housing Choice Voucher program for $1,261 in
      ineligible duplicate salary charges from nonfederal funds.

2H.   Develop and implement procedures to ensure that monitoring of its
      consultant is conducted and documented.




                           15
                           SCOPE AND METHODOLOGY

To accomplish our audit objectives, we reviewed applicable laws, regulations, and other
HUD program requirements. We analyzed the County’s administrative plan, contract
agreements between the County and Development Directions, and procurement policies
related to selecting the consultant. We also reviewed independent public accountant
reports, board minutes and resolutions, and interviewed HUD, County, and Development
Directions staff. We reviewed disbursements and transfers of funds from January 1, 2006,
through June 30, 2007 to determine if the costs charged to the Housing Choice Voucher
program were reasonable and supported. We also reviewed the County’s procedures and
related documentation for monitoring its consultant.

We performed limited tests of the reliability of the data in the December 2007 housing
assistance payment register. We used computer-assisted audit techniques to validate the
data by identifying and investigating duplicate payments, tenants, and landlords and
verifying units having $0 subsidy payments. We also verified that the housing assistance
payment register was accurate, including the number of recipients and the housing
assistance provided. We then selected a statistical sample of units and conducted
inspections with a HUD appraiser and the Development Directions inspector or other
staff member when the inspector was not available.

We used a statistical software program to select a random sample of 58 of 377 units
based on the December 2007 housing assistance payment register. Our sampling criteria
used a 90 percent confidence level, 50 percent estimated error rate, and precision of plus
or minus approximately 10 percent. We performed unit inspections from January 29 to
February 13, 2008.

Our sample results determined that 21 of the 58 units (36 percent) materially failed to
meet HUD’s housing quality standards.

Projecting the results of the 21 units that were in material noncompliance with housing
quality standards to the population yields the following:

The most conservative statistical projection or lower limit is that 100 units were in
material noncompliance with housing quality standards (26.66 percent x 377 1 units).

The December 2007 housing assistance payment register showed that the average
monthly housing assistance payment was $635.




1
    There were 384 units (369 units plus 15 port-ins) with active tenants. Of the 384 units, we excluded
    seven units because they were ported out to other housing authorities. The remaining 377 units
    represented the total current population of housing choice voucher units.



                                                      16
Using the lower limit of the estimate of the number of units and the average monthly
housing assistance payment, we estimate that the County will annually spend at least
$762,000 (100 units x $635 average payment x 12 months) for units that are in material
noncompliance with housing quality standards. This estimate is presented solely to
demonstrate the annual amount of program funds that could be saved or put to better use
on units that will now meet the standards if the County implements our
recommendations. While these benefits would recur indefinitely, we were conservative
in our approach and only included the initial year in our estimate.

Units were in material noncompliance with housing quality standards if deficiencies were
in existence at the time of the last inspection and/or children, elderly, and/or disabled
tenants were living in the units. Other significant deficiencies were those that (1) had
existed for an extended period, (2) were not noted in a prior inspection report, and/or (3)
resulted from deferred maintenance that caused the unit to fail. Another factor
considered was whether tenants caused the deficiencies.

We conducted our audit work from September 2007 through March 2008 at the following
locations: Development Directions, Rahway, New Jersey, and the County’s Division of
Planning and Community Development, Elizabeth, New Jersey. Our audit covered the
period January 1, 2006, through June 30, 2007.

We performed our review in accordance with generally accepted government auditing
standards and included tests of management controls that we considered necessary.




                                            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, and
   •   Compliance with applicable laws and regulations.

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



 Relevant Internal Controls

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

               •   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 of assets – 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 an organization’s objectives.




                                             18
Significant Weaknesses


       Based on our review, the following items are significant weaknesses:

       (1) The County did not have adequate controls over program operations to
           ensure that all units met minimum housing quality standards (see
           finding 1).

       (2) The County did not have adequate controls over compliance with laws
           and regulations and safeguarding assets to ensure that all costs charged
           to the Housing Choice Voucher program were supported and eligible.
           Also, the County did not document whether it had followed its
           established procedures to monitor the contractor that administered its
           Housing Choice Voucher program to ensure that the program was
           administered efficiently and effectively (see finding 2).




                                    19
                                APPENDIXES

Appendix A

           SCHEDULE OF QUESTIONED COSTS
          AND FUNDS TO BE PUT TO BETTER USE
         Recommendation                          Unsupported Funds to be put
         number                Ineligible 1/              2/ to better use 3/
         ______________         _________       ___________ ______________
                1B                                               $762,000
                2A                                $58,438
                2B               $20,601
                2D                                $25,038
                2E                $1,261         ________         _________
                   Total         $21,862          $83,476          $762,000

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/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured
     program or activity when we cannot determine eligibility at the time of audit.
     Unsupported costs require a decision by HUD program officials. This decision, in
     addition to obtaining supporting documentation, might involve a legal
     interpretation or clarification of departmental policies and procedures.

3/   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 County implements our
     recommendations, it will cease to incur Section 8 costs for units that are in
     material non-compliance with housing quality standards and will expend those
     funds for units that meet HUD’s housing quality standards. Once the County
     successfully implements its controls, this will be a recurring benefit. Our estimate
     reflects only the initial year of this benefit. The reported amount does not reflect
     any offsetting costs to implement the recommendation, but we do not believe
     these costs to be material.




                                           20
Appendix B
     AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation    Auditee Comments




Comment 1



Comment 2




                        21
Appendix B
     AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation    Auditee Comments




Comment 2




Comment 2




Comment 2



Comment 2




Comment 3




                        22
Appendix B
     AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation    Auditee Comments




Comment 3




Comment 4




                        23
Appendix B
     AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation    Auditee Comments




Comment 5




                        24
Appendix B
     AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation    Auditee Comments




Comment 5




Comment 5




Comment 5




                        25
Appendix B
     AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation    Auditee Comments




Comment 5




                        26
Appendix B
     AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation    Auditee Comments




Comment 6




                        27
              OIG Evaluation of Auditee Comments
Comment 1   County officials indicated that during the entrance conference we had
            informed them that they were not being audited but that we were
            conducting a survey. The County was not aware of its risk score because it
            had a standard rating for SEMAP and was not aware of any tenant
            complaints. Finally, the County was not aware of any requirement for
            HUD approval of the consultant; therefore they request that the first
            paragraph of the highlights section of the report be changed to reflect this.
            During our entrance conference we explained to County officials that
            depending on our survey results we would determine if an audit is needed.
            On December 19, and 20, 2007, we informed the County officials that we
            would complete an audit and we provided them with the list of the units
            selected for the HQS inspections.

            The HUD risk rating was a local analysis conducted by the Newark Office
            of Public Housing, which indicated that Union County had above average
            risk due to tenant complaints and because administration of the Housing
            Choice Voucher Program had been contracted to a consultant without
            HUD approval. We subsequently determined that HUD approval was not
            required for the procurement of the consultant and that the procurement
            had been conducted properly. Nevertheless, since this was the reason we
            selected the County for audit we did not change the highlights section of
            the report.

Comment 2   County officials disagreed with the characterization of the units that did
            not meet housing quality standards as not being decent, safe and sanitary.
            As such, we reviewed our inspection results and have revised the report to
            state the units did not materially meet housing quality standards.

Comment 3   County officials disputed that an estimated $762,000 would be spent on
            units that are in material non-compliance with HUD standards because it
            is inconsistent to assume that additional units will have similar
            deficiencies since the units are owned by individual landlords and the
            housing stock is aging and in constant need of renovation and repair.
            Thus, County officials suggest that instead of placing an estimated dollar
            amount it would be appropriate to state that a percentage of the Section 8
            vouchers were spent on units that had HQS deficiencies. Officials also
            would like the language in recommendation 1C to be changed. However,
            since the audit results are based on a statistical sample and were based on
            the most conservative projection, the $762,000 is a reasonable number that
            would reflect the effect of not implementing our recommendations to
            ensure that units meet the standards. Further, since the scope and
            methodology section of the report states that 21 of 58 units (36 percent)
            materially failed to meet HUD's housing quality standards, and also


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            computes, using the most conservative statistical projection, that (26.66
            percent) or 100 of the 377 units may be in material noncompliance with
            housing quality standards; we did not change the language in the finding
            or in recommendation 1C.

Comment 4   County officials disagreed that the sums identified in recommendation 2B
            should be treated as ineligible expenditures and stated that the sums
            should be treated as unsupported expenditures because they were used to
            reimburse the County for expenses related to the administration of the
            Section 8 program. $20,601 in funds was transferred from Section 8
            recaptured money to the CDBG program to pay for CDBG administrative
            salaries. According to PIH Notice 2006-03, Section 8 recaptured funds
            can only be used for activities related to the Housing Choice Voucher
            program, therefore the use of these funds for CDBG expenditures are
            ineligible and should be reimbursed to the Housing Choice Voucher
            program.

Comment 5   The County’s actions are responsive to the findings, therefore once the
            actions are confirmed and accepted by HUD during the audit resolution
            process, it will result in a management decision and closure of the
            recommendations.

Comment 6   The County provided a cost allocation plan for the Housing Choice
            Voucher program. The Newark Office of Public Housing will need to
            verify if the cost allocation plan is adequately supported as part of the
            audit resolution process.




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