oversight

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)

                                                                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

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              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.

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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.




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