Issue Date September 19, 2008 Audit Report Number 2008-PH-1013 TO: William D. Tamburrino, Director, Baltimore Public Housing Program Hub, 3BPH FROM: John P. Buck, Regional Inspector General for Audit, Philadelphia Regional Office, 3AGA SUBJECT: The Housing Authority of Baltimore City, Maryland, Did Not Ensure That Its Program Units Met Housing Quality Standards under Its Moving to Work Program HIGHLIGHTS What We Audited and Why We audited the Housing Authority of Baltimore City’s (Authority) administration of its leased housing under its Moving to Work Demonstration (Moving to Work) program based on our analysis of various risk factors relating to the housing authorities under the jurisdiction of the U.S. Department of Housing and Urban Development’s (HUD) Baltimore field office. This is the second audit report issued on the Authority’s program. The audit objective addressed in this report was to determine whether the Authority ensured that its program units met housing quality standards. What We Found The Authority failed to ensure that its program units met housing quality standards. We inspected 59 housing units and found that 57 units did not meet HUD’s housing quality standards. Moreover, 41 of the 57 units had health and safety violations that the Authority’s inspectors neglected to report during their last inspection and/or repair based on the outcome of their most recent inspection. The Authority spent $47,8621 in program and administrative funds for these 41 units. What We Recommend We recommend that HUD require the Authority to ensure that housing units inspected during the audit are repaired to meet HUD’s housing quality standards, reimburse its program for the improper use of $47,862 in program funds for units that materially failed to meet HUD’s housing quality standards, and implement adequate procedures and controls to ensure that in the future, program units meet housing quality standards to prevent an estimated $3.5 million from being spent annually on units that materially fail to meet HUD’s housing quality standards. For each recommendation without a management decision, please respond and provide status reports in accordance with HUD Handbook 2000.06, REV-3. Please furnish us copies of any correspondence or directives issued because of the audit. Auditee’s Response We provided our discussion draft audit report to the Authority’s executive director and HUD officials on July 23, 2008. We discussed the report with the Authority and HUD officials throughout the audit and an exit conference on August 13, 2008. The Authority provided written comments to our draft report on August 29, 2008. The Authority disagreed with the report. The complete text of the Authority’s response, along with our evaluation of that response, can be found in appendix B of this report. 1 $47,862 equals $44,722 in program housing assistance payments paid on units that were not decent, safe, and sanitary plus $3,140 in administrative fees paid to the Authority for units that were not decent, safe, and sanitary. 2 TABLE OF CONTENTS Background and Objectives 4 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 3 BACKGROUND AND OBJECTIVES The Housing Authority of Baltimore City (Authority) was organized in 1937 under the laws of the State of Maryland to provide federally funded public housing programs and related services for Baltimore’s low-income residents. It is the fifth largest public housing authority in the country, with more than 1,000 employees and an annual budget of approximately $200 million. The Authority currently serves more than 40,000 residents in more than 14,000 housing units. The Authority’s portfolio includes 18 family developments, 21 mixed population buildings, and scattered sites throughout the City. A five-member board of commissioners, appointed by the mayor, governs the Authority. The Housing Choice Voucher tenant-based assistance programs are federally funded and administered for the City of Baltimore by the Authority through its Housing Choice Voucher program office. The City of Baltimore’s Housing Choice Voucher program provides an additional 12,000 families with rental housing subsidies each year. In 1996, Congress authorized the Moving to Work Demonstration (Moving to Work) program as a U.S. Department of Housing and Urban Development (HUD) demonstration program. The Authority was accepted into the program on March 31, 2005, when HUD’s Assistant Secretary for Public and Indian Housing signed the Authority’s Moving to Work agreement. The signed agreement requires the Authority to abide by the statutory requirements in Section 8 of the United States Housing Act of 1937 until such time as the Authority proposes and HUD approves an alternative leased housing program with quantifiable benchmarks. At the time of this audit, the Authority had not proposed and HUD had not approved an alternative leased housing program with quantifiable benchmarks. Under the Section 8 Housing Choice Voucher program, the Authority provides leased housing assistance payments to more than 9,000 eligible households. HUD authorized the Authority the following financial assistance for housing choice vouchers: Authority fiscal year Authorized funds Disbursed funds 2005 $76,535,556 $76,535,556 2006 $83,368,789 $83,346,052 2007 $83,097,830 $83,097,830 Totals $243,002,175 $242,979,438 HUD regulations at 24 CFR [Code of Federal Regulations] 982.305(a) state that a public housing authority may not execute a housing assistance contract until it has determined that the unit has been inspected and meets HUD’s housing quality standards. HUD regulations at 24 CFR 982.405(a) require public housing authorities to perform unit inspections before the initial move-in and at least annually. The authority must inspect the unit leased to a family before the term of the lease, at least annually during assisted occupancy, and at other times as needed to determine whether the unit meets housing quality standards. 4 HUD regulations at 24 CFR 982.453(6)(b) give public housing agencies rights and remedies against the owner under the housing assistance payments contract, which include recovery of overpayments, abatement or other reduction of housing assistance payments, termination of housing assistance payments, and termination of the housing assistance payments contract. Our audit objective was to determine whether the Authority ensured that its program units met housing quality standards . 5 RESULTS OF AUDIT Finding: Controls over Housing Quality Standards Were Inadequate The Authority did not adequately enforce HUD’s housing quality standards. Of 59 housing units selected for inspection, 57 units did not meet HUD’s housing quality standards, and 41 units materially failed to meet housing quality standards. The Authority’s inspectors did not report 380 violations, which existed at the units when they performed their inspections. The Authority overlooked these violations because it did not implement adequate procedures and controls to ensure compliance with HUD regulations and its administrative plan. As a result, the Authority spent $47,862 in program and administrative funds for 41 units that materially failed to meet HUD’s housing quality standards. Unless the Authority implements controls to ensure that program units meet housing quality standards, it will pay an estimated $3.5 million in housing assistance for units that materially fail to meet housing quality standards over the next year. Housing Units Were Not in Compliance with HUD’s Housing Quality Standards We statistically selected 59 units from unit inspections passed by the Authority’s inspectors during the period September 1 to December 31, 2007. The 59 units were selected to determine whether the Authority ensured that the units in its program met housing quality standards. We inspected the selected units between January 22 and February 1, 2008. Of the 59 units inspected, 57 (97 percent) had 574 housing quality standards violations. Additionally, 41 of the 57 units (72 percent) were considered to be in material noncompliance since they had health and safety violations that predated the Authority’s last inspection and were not identified by the Authority’s inspectors and/or repaired. Of the 57 units with housing quality standards violations, 15 units had violations that were noted on the Authority’s previous inspection report, and the Authority later passed the units. However, during our inspection, it was determined that the violations had not been corrected. The 41 units had 380 violations (including the 26 violations identified by the Authority but not corrected) that existed before the Authority’s last inspection report. The Authority’s inspectors did not identify or did not report 354 violations that existed at the time of their most recent inspections. HUD regulations at 24 CFR 982.401 require that all program housing meet HUD’s housing quality standards at the beginning of the assisted occupancy and throughout the tenancy. The following table categorizes the 574 housing quality standards violations in the 57 units that failed the housing quality standards inspections. 6 Type of violation Number of Number of Percentage violations units of units Electrical 176 48 84 Security 67 37 65 Range/refrigerator 38 32 56 Floor 37 22 39 Window 31 17 30 Wall 30 21 37 Stairs, rails, and porches 28 24 42 HVAC*/ventilation/plumbing 25 16 30 Tub, shower, or sink 24 19 33 Toilet or wash basin 21 17 30 Other interior hazards 16 13 23 Interior stairs 14 16 28 Ceiling 12 9 16 Evidence of infestation 11 11 19 Smoke detectors 11 8 14 Fire exits 8 8 14 Space for preparation, storage, 8 8 14 and serving of food Site and neighborhood 8 5 9 conditions Lead-based paint 4 1 2 Exterior surface 3 3 5 Roof/gutters 2 2 4 Total 574 * heating, ventilation, and air conditioning We provided our inspection results to the Director of HUD’s Office of Public Housing, Baltimore field office, and to the Authority’s executive director during the audit. Housing Quality Standards Violations Were Identified The following pictures illustrate some of the violations we noted while conducting housing quality standards inspections at the Authority’s leased housing units. 7 Inspection #57: Exposed wiring was found in community area of unit. This violation was not identified during the Authority’s October 16, 2007, inspection. Inspection #8: Washer outlet needs grounded outlet away from faucet. This violation was not identified during the Authority’s December 24, 2007, inspection. 8 Inspection #40: Hot wire needs to be terminated in junction box and removed from conduit. This violation was not identified during the Authority’s October 30, 2007, inspection. Inspection #2: Plugs were missing on breaker box. This violation was not identified during the Authority’s December 5, 2007, inspection. 9 Inspection #19: Outlet was loose from ceiling with open ground. This violation was not identified during the Authority’s November 30, 2007, inspection. Inspection #31: Junction did not have wire nut and a cover to protect from injury. This violation was not identified during the Authority’s October 16, 2007, inspection. 10 Inspection # 7: The striker plate on the rear basement door was loose and broken out. This violation was not identified during the Authority’s November 15, 2007, inspection. Inspection #21: The basement window will not close. This violation was not identified during the Authority’s December 5, 2007, inspection. 11 The Authority Did Not Implement Procedures and Controls to Ensure Compliance with HUD’s Housing Quality Standards Although HUD regulations and the Authority’s administrative plan required the Authority to ensure that its program units met housing quality standards, it failed to do so. The Authority overlooked numerous housing quality standards violations because it did not implement adequate procedures and controls to ensure compliance with HUD regulations and its administrative plan. HUD regulations at 24 CFR 982.54(d) require the public housing authority’s administrative plan to cover policies, procedural guidelines, and performance standards for conducting required housing quality inspections. The Authority’s administrative plan sufficiently covered policies, procedural guidelines, and performance standards for conducting housing quality inspections. However, the Authority did not adequately use its quality control inspections to provide inspectors feedback on their work or to determine whether individual performance or specific housing quality standards training issues needed to be addressed. The purpose of quality control inspections is to assure that each inspector conducts accurate and complete inspections. More importantly, quality control inspections are conducted to ensure that there is consistency among the Authority’s inspections in the application of HUD’s housing quality standards requirements. We reviewed a sample of 68 quality control inspections performed by the Authority between September 1 and December 31, 2007. The Authority’s quality control inspection results differed significantly from its original inspection results. Of the 68 units, the original inspection reports showed that 54 units passed and 14 units failed; whereas, the followup quality control inspection reports showed that 9 units passed and 59 units failed. These dramatic differences in inspection results demonstrated significant problems with the Authority’s original housing quality standards inspections. However, we found insufficient evidence to show that the Authority adequately used its followup quality control inspections to provide its 17 inspectors feedback on their work or to identify training issues that they needed to address. Conclusion The Authority’s tenants 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 as required. In accordance with HUD regulations at 24 CFR 982.152(d), HUD is permitted to 12 reduce or offset any program administrative fees paid to a public housing authority if it fails to perform its administrative responsibilities correctly or adequately, such as not enforcing HUD’s housing quality standards. The Authority disbursed $44,722 in housing assistance payments to landlords for the 41 units that materially failed to meet HUD’s housing quality standards and received $3,140 in program administrative fees for these units. If the Authority implements the recommendations in this report to ensure compliance with HUD’s housing quality standards, we estimate that $3.5 million in future housing assistance payments will be spent on units that are decent, safe, and sanitary. Our methodology for this estimate is explained in the Scope and Methodology section of this report. Recommendations We recommend that the Director of HUD’s Baltimore Public Housing Program hub direct the Authority to 1A. Certify, along with the owners of the 57 units cited in this finding, that the applicable housing quality standards violations have been corrected. 1B. Reimburse its program $47,862 from nonfederal funds ($44,722 for the housing assistance payments and $3,140 in associated administrative fees) for 41 units that materially failed to meet HUD’s housing quality standards. 1C. Develop and implement controls to ensure that program units meet housing quality standards, thereby ensuring that $3,457,428 in program funds is expended only for units that are decent, safe, and sanitary. 13 SCOPE AND METHODOLOGY To accomplish our objective, we reviewed Applicable laws, regulations, the Authority’s administrative plan, HUD’s program requirements at 24 CFR Part 982, and HUD’s Housing Choice Voucher Guidebook 7420.10G. The Authority’s housing quality standards inspections and abatement files and Moving to Work program documents including the agreement, plans, and reports. HUD’s monitoring reports for the Authority. We also interviewed the Authority’s employees, HUD staff, and program households. To achieve our audit objective, we relied in part on computer-processed data in the Authority’s database. Although we did not perform a detailed assessment of the reliability of the data, we did perform a minimal level of testing and after making required adjustments to the data, found the data to be adequate for our purposes. We statistically selected 59 of the Authority’s leased housing units from a universe of 802 leased units that passed the Authority’s housing quality standards inspection between September 1 and December 31, 2007. The 59 units were selected to determine whether the Authority’s program units met housing quality standards. The 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 41 of 57 units (72 percent) materially failed to meet HUD’s housing quality standards. Materially failed units were those with at least one exigent health and safety violation that predated the Authority’s previous inspections. All units were ranked, and we used auditors’ judgment to determine the material cutoff line. Based upon the sample size of 59 from a total population of 802, an estimate of 69 percent (558 units) of the sample population materially failed housing quality standards inspections. The sampling error is plus or minus 10 percent. There is a 90 percent confidence that the frequency of occurrence of program units materially failing housing quality standards inspections lays between 60 and 79 percent of the population. This equates to an occurrence of between 481 and 633 units of the 802 units in the population. We used the most conservative numbers, which is the lower limit or 481 units. We analyzed the applicable Authority databases and estimated that the annual housing assistance payment per recipient in our sample universe was $7,188. Using the lower limit of the estimate of the number of units and the estimated annual housing assistance payment, we estimate that the Authority will spend $3,457,428 (481 units times $7,188 estimated average annual housing assistance) annually for units that are in material noncompliance with HUD’s housing quality standards. This estimate is presented solely to demonstrate the annual amount of program funds that could be put to better use on decent, safe, and sanitary housing if the Authority implements 14 our recommendations. 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 December 17, 2007, through July 15, 2008, at the Authority’s Housing Choice Voucher program office located at 1225 West Pratt Street, Baltimore, Maryland. The audit covered the period September 1 to December 31, 2007, but was expanded when necessary to include other periods. We performed our audit in accordance with generally accepted government auditing standards. 15 INTERNAL CONTROLS Internal control is an integral component of an organization’s management that provides reasonable assurance that the following objectives are being achieved: Effectiveness and efficiency of operations, Reliability of financial reporting, and Compliance with applicable laws and regulations. Internal controls relate to management’s plans, methods, and procedures used to meet its mission, goals, and objectives. Internal controls include the processes and procedures for planning, organizing, directing, and controlling program operations. They include the systems for measuring, reporting, and monitoring program performance. Relevant Internal Controls We determined the following internal controls were relevant to our objective: Program operations – Policies and procedures that management has implemented to reasonably ensure that a program meets its objectives. Validity and reliability of data – Policies and procedures that management has implemented to reasonably ensure that valid and reliable data are obtained, maintained, and fairly disclosed in reports. Compliance with laws and regulations – Policies and procedures that management has implemented to reasonably ensure that resource use is consistent with laws and regulations. Safeguarding resources – Policies and procedures that management has implemented to reasonably ensure that resources are safeguarded against waste, loss, and misuse. We assessed the relevant controls identified above. A significant weakness exists if internal controls do not provide reasonable assurance that the process for planning, organizing, directing, and controlling program operations will meet the organization’s objectives. 16 Significant Weakness Based on our audit, we believe the following item is a significant weakness: The Authority did not implement adequate procedures and controls to ensure compliance with HUD regulations regarding housing quality standards inspections of units. 17 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 $47,862 1C $3,457,428 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, instead, will expend those funds for units that meet HUD’s standards. Once the Authority successfully improves its controls, this will be a recurring benefit. Our estimate reflects only the initial year of this benefit. 18 Appendix B AUDITEE COMMENTS AND OIG’S EVALUATION Ref to OIG Evaluation Auditee Comments Comment 1 C Comment 2 Comment 3 Comment 3 19 Comment 4 20 Comment 2 Comment 2 Comment 1 Comment 5 21 Comment 5 Comment 6 Comment 7 Comment 8 Comment 9 Comment 10 Comment 11 Comment 12 22 Comment 13 Comment 14 Comment 15 Comment 16 Comment 15 Comment 17 23 Comment 18 Comment 18 Comment 18 Comment 19 24 Comment 20 Comment 2 Comment 21 25 Comment 21 Comment 6 Comment 15 Comment 16 Comment 22 Comment 5 Comment 20 Comment 2 26 Comment 3 Comment 2 Comment 23 Comment 23 Comment 23 27 Comment 23 Comment 23 Comment 23 Comment 4 28 Comment 21 Comment 5 29 Comment 5 30 Comment 5 31 Comment 5 32 Comment 5 33 Comment 19 34 OIG Evaluation of Auditee Comments Comment 1 We disagree with the Authority’s statement that a comprehensive review of the items raised during the audit was not possible due to time constraints imposed by our office. During the audit we provided the Authority with all inspections results, photographs, and narratives describing our audit results. Authority officials accompanied us when we performed the inspections and we discussed our findings with the Authority on several occasions during the audit. We provided the Authority our draft audit report on July 23, 2008, and we ultimately granted it five weeks to provide its written response. We discussed our draft audit report with the Authority’s executive director and his staff at an exit conference on August 13, 2008. At the Authority’s request, we agreed to make an exception to our established policy and granted it an extra week extension on the due date for its written comments until August 29, 2008. Comment 2 The overarching conclusions of this audit are accurate as the audit was performed in accordance with generally accepted government auditing standards. We are encouraged however that later in its response to this audit report the Authority does in fact state that it is now investigating the availability of tools and systems to enhance its inspection system and to provide better records and reports, allowing for greater levels of analysis and identification of areas requiring remediation and providing property owners with clear and complete information on the outcomes of inspections and any actions required on their part. As shown by the audit these enhancements are needed because the Authority failed to report numerous housing quality standards violations. The Authority’s own quality control inspection results provided compelling evidence to support this conclusion. We reviewed a sample of 68 quality control inspections performed by the Authority between September 1 and December 31, 2007. Of the 68 inspections we reviewed, the Authority’s original inspection reports showed that 54 units passed (79 percent) and 14 units failed (21 percent); whereas, the Authority’s followup quality control inspection reports showed that only 14 units passed (21 percent) and 54 units failed (79 percent). Regrettably, the Authority did not use its followup quality control inspections to provide its 17 inspectors feedback on their work or to identify training issues that they needed to address. Such dramatic differences in inspection results further illustrate how the Authority can improve its housing quality standards inspections. Comment 3 The Authority’s frustration with HUD procedures and forms is noted. However, the Authority should report its specific concerns regarding alleged deficiencies and its suggested changes in the procedures and forms to responsible HUD program officials for approval. We also do not believe that the Authority’s perceived problems with HUD procedures and forms are the major reasons why it has failed to substantially comply with HUD’s housing quality standards. We have in fact found similar problems and challenges at other authorities to varying degrees. Authorities do have similar challenges which they are all striving to overcome. It is important to note that in virtually every audit where we have identified similar problems, the responsible officials have agreed to take steps 35 needed to improve their programs. Lastly, there is no evidence to suggest that the process improvements implemented as a result of our audits have in any way reduced program participation as implied by the Authority. Rather these process improvements have helped merely ensure program participants live in decent, safe, and sanitary housing. Comment 4 Although we understand the many challenges the Authority faces with making suitable housing available due to its aging housing stock, this condition should not allow for the Authority to haphazardly pass units that may not be decent, safe, and sanitary. Further, there is no evidence to suggest that the process improvements implemented as a result of our audits have in any way reduced program participation as implied by the Authority. Rather these process improvements have simply helped ensure program participants live in decent, safe, and sanitary housing. Comment 5 While we applaud the Authority for reexamining these violations, we believe it did not adequately categorize the conditions at each of the specific units that we determined were in material noncompliance. The Authority asserts that of the 229 preexisting violations it reviewed for its purpose of contesting our audit, only 54 (24 percent) are true and accurate violations that existed at the time of its last inspection. We reviewed the contested violations again and did note that 16 of the 175 violations should not have been included. We have adjusted the report to correct this discrepancy. However, we also noticed that many of the violations contested by the Authority represented the same items which caused the units to fail in its own quality control inspections. For example, the Authority suggests that items such as defective treads, defective windows and locks, open ground outlets, missing handles on stoves, lack of handrails, etc., are not housing quality standards violations but these items did in fact cause it to fail units in its most recent quality control inspections. The Authority chose to categorize its various objections to individual violations in broad terms which we have evaluated and addressed in comments 6 through 12. Comment 6 We performed our inspections accurately and appropriately applied HUD’s housing quality standards. In no instance did we apply a higher standard than is required by HUD’s housing quality standards. As such, the number of items we identified as violations is not overstated. As we discussed in comment 2, the Authority’s own quality control inspection results provided further evidence to collaborate our audit conclusions. Comment 7 We disagree with the Authority’s contention that second handrails are never required because 24 CFR [Code of Federal Regulations] 982.401(g)(2)(iv) requires that the condition and equipment of interior stairs must not present a danger to tripping or falling. Additionally, section 10.3 of HUD’s Housing Choice Voucher Guidebook, 7420.10G states that handrails are required when four or more steps (risers) are present when porches, balconies, and stoops are 30 inches off the ground. In the situations the audit cited as violations, health and safety hazards existed because the items noted met the aforementioned conditions. 36 Further, the Authority’s own inspectors failed units because of a missing second handrail. For example in one inspection, the inspector’s report required that the landlord of the property “add a handrail to the other side of the wall leading to the basement.” Comment 8 We disagree with the Authority’s contention that the cracked window panes we reported are not housing quality standards violations. In consultation with our housing inspector, we used auditor judgment and concluded that the cracked window panes we reported as violations during our audit were in fact severe enough to be a threat to the health and safety of tenants. Further, in previous inspection reports the Authority’s own inspectors also noted cracked window panes as violations causing units to fail housing quality standards. Comment 9 In order to be as conservative as possible in our estimate we removed interior doors that had problems such as broken door knobs on closets, and loose knobs that may not have necessarily been a threat to the health and safety of the tenants. Comment 10 The Authority’s reply did not adequately describe the conditions of the specific refrigerators to which it is referring. However, when we determined that a specific refrigerator door seal was substantially cracked and deteriorated we reasonably concluded the refrigerator was unable to maintain the proper interior temperature. HUD's Housing Choice Voucher Guidebook, 7420.10G, section 10.3, states that the refrigerator must be of adequate size for the family and capable of maintaining a temperature low enough to keep food from spoiling. The guidebook includes the following example for clarification: What temperature must a refrigerator maintain to keep food from spoiling? Above 32° F, but generally below 40° F. Consider how often the refrigerator will be opened. Proper temperatures are difficult to maintain if the refrigerator is frequently opened during warm weather, door seals are removed or broken, or the door sits open. Comment 11 We disagree with the Authority’s contention because housing quality standards at 24 CFR 982.401(k) require that a building must provide an alternate means of exit in case of fire (such as fire stairs or egress through windows). Double-keyed locks are housing quality standards violations because regulations at 24 CFR 982.404(A)(3) require that if a defect is life-threatening the owner must correct the defect. Double keyed locks present life-threatening issues for the tenant because they impeded egress from the unit or building. Comment 12 We disagree with the Authority’s contention because the non-unit items violations we reported were located in areas such as a community laundry room, on the building of an apartment, and the basement of the building in which a unit was 37 located. Regulations at 24 CFR 982 require that the building the unit is in must be structurally sound and the neighborhood must be reasonably free from dangers to the health, safety, and general welfare of the occupants. Since the items we reported are located in the site and close proximity of the unit, the items could cause danger to the health, safety and general welfare of the occupants. Comment 13 We understand that housing quality standards violations may occur after the last annual inspection conducted by the Authority, but federal regulations require that all program housing must meet housing quality standards performance requirements at commencement of assisted occupancy and throughout the assisted tenancy. Therefore, we reported all violations identified at the time of our inspection so that the Authority could ensure they were corrected. We used our professional knowledge, tenant interviews, and the Authority’s latest inspection reports in determining whether a housing quality standards violation existed prior to the last passed inspection conducted by the Authority or if it was on the last passed inspection conducted by the Authority and was not corrected. Comment 14 At the request of the National Leased Housing Association, the Philadelphia Regional Inspector General for Audit was a guest speaker at its conference held in Washington, DC, in April 2008. In his 20-minute presentation he provided a broad overview of the mission and functions of the Office of the Inspector General – Office of Audit, and briefly highlighted some recent audits performed of various HUD programs to include the Housing Choice Voucher program. He did conduct a brief question and answer session after his presentation but we are unaware of the specific questions which the Authority is referring to in its reply. We are also unaware of how the Authority employee attending the conference could obtain these incorrect perceptions from this presentation. Comment 15 Our inspector who performed the inspections has over 33 years of experience in appraising residential and commercial properties. The inspector is a Licensed Certified General Real Estate Appraiser and maintains an Appraisal Designation from the National Association of Master Appraisers. To ensure consistency, the inspector did in fact receive “on-the-job” training from another experienced appraiser throughout the audit who has been performing housing quality standards inspections since 1994. Lastly, the overall results of the audit were not solely based on the inspector’s professional judgment. Rather, the audit results were analyzed in-depth by the audit team members who have been formally trained in HUD program areas to include the Housing Choice Voucher program and from another appraiser. In addition, the audit team members solicited information from HUD program officials in obtaining their agreement on the results of the housing quality standards inspections. We appropriately applied HUD’s housing quality standards in the same manner as we have done in audits throughout the country. In no instances did we apply a higher standard than is required by HUD’s housing quality standards. Comment 16 We are unsure of why the Authority’s staff would have no recollection of us questioning tenants as it is naturally a routine part of our inspection process. As 38 documented in our audit workpapers and as we explained during the audit, we used our professional knowledge, tenant interviews, and the Authority’s latest inspection reports in determining whether a housing quality standards violation existed prior to the last passed inspection conducted by the Authority or if it was on the last passed inspection conducted by the Authority and was not corrected. During our inspections, the auditor and the housing inspector questioned the tenants about the violations identified during the inspections in order to determine whether the violations were preexisting or not. Our housing inspector documented the preexisting conditions on the inspection report and took pictures of the violations, as needed. We provided copies of all our inspection reports and the corresponding photographs to the Authority during the audit. Representatives from the Authority accompanied us on all of our inspections. The representatives intermittently made comments pertaining to violations that we identified. We considered the comments in making our determinations. Comment 17 We reviewed the reports for accuracy and found that four were not marked failed, but were in fact marked “inconclusive” thus the total number of violations in this report was reduced by four. Comment 18 We disagree with the Authority’s assertion that the electrical violations are at best inconclusive. We also disagree with the Authority’s assertion that the open ground outlet is not a violation of HUD’s housing quality standards because the outlet is functional. The regulations at 24 CFR 982.401(f)(2), when referring to outlets in both sections (ii) and (iii), specifically state that outlets must be in proper operating condition. While the Authority asserts that the ungrounded outlet is not a violation because the “outlet is functional per HQS,” the Authority’s inspectors cited an open ground as a violation in their inspection reports. Although we understand the challenges the Authority faces with making suitable housing available due to its aging housing stock, this condition should not allow for the Authority to haphazardly pass units that may not be decent, safe, and sanitary. The Authority suggests that many of the electrical items listed were found in areas of the units that were inaccessible, and in many cases hidden from view. However, the majority of the electrical issues were found in common areas such as living rooms, dining rooms, bedrooms and other rooms frequently occupied by tenants. Furthermore, during the Authority’s most recent inspections performed in 2007, its quality control inspector noted housing quality standards violations such as outlets with open grounds, hot/neutral ground, and open neutral. These violations were found in bedrooms and other rooms of the units. The Authority’s inspector failed the units because of the electrical violations. Thus, it is unclear why the Authority would now disagree with some of the exact violations found by its own inspector. Comment 19 We disagree with the Authority’s assertion. We went back and again reviewed the inspection reports of the 5 of the 15 units noted in the audit report as having violations that were noted on the Authority’s previous inspection report, and the Authority later passed the units even though the violations had not been corrected. We found that our analysis was correct. 39 Comment 20 HUD regulations at 24 CFR 982.401 require that all program housing meet HUD’s housing quality standards at the beginning of the assisted occupancy and throughout the tenancy. HUD compensates the Authority for the cost of administering the program through administrative fees. In accordance with 24 CFR 982.152(d), HUD is permitted to reduce or offset any program administrative fees paid to a public housing authority if it fails to perform its administrative responsibilities correctly or adequately, such as not enforcing HUD’s housing quality standards. We determined that calculating the offset or reduction amount on a per-unit basis was reasonable. Comment 21 While improvement in guidance and forms is always possible and should be encouraged, we disagree with the Authority’s assertion that housing quality standards guidance and forms are sorely lacking making uniform enforcement of those standards problematic. While it is true that our inspector used form HUD- 52580 A when performing the inspections, we also used the performance and acceptability criteria laid forth within 24 CFR 982. While the Authority contests that inspection form HUD-52580 A would not lead one to identify many of the violations found by our inspector, audit results showed that the Authority’s own quality control inspector used form HUD-52580 A during its own inspections and identified similar violations. We did not base audit results solely on guidance provided through HUD’s Housing Choice Voucher Guidebook. We relied on the federal regulations and guidelines laid forth in 24 CFR 982. Comment 22 We are encouraged that the Authority will be notifying the landlords of the materially failed units and that they are expected to maintain their units at housing quality standards at all times. Comment 23 Based on the Authority’s comments, we recalculated the abatement amounts and the audit results showed that the Authority did not always follow its own procedures regarding abatement of housing assistance payments. However, due to the relatively low dollar value of the discrepancies we removed the finding from this report and are reporting the issue in a letter of minor finding addressed to the Authority. 40
Housing Authority of Baltimore City, Maryland, Did Not Ensure That Its Program Units Met Housing Quality Standards under Its Moving to Work Program
Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-09-12.
Below is a raw (and likely hideous) rendition of the original report. (PDF)