oversight

The Jonesboro Housing Authority Generally Complied with Housing Quality Standards Inspections Requirements although Certain Weaknesses Existed

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-04-23.

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

                                                               Issue Date
                                                                   April 23, 2009
                                                               Audit Report Number
                                                                   2009-AT-1006




TO:        Ada Holloway, Director, Office of Public Housing, 4APH


           //signed//
FROM:      James D. McKay, Regional Inspector General for Audit, Atlanta Region, 4AGA

SUBJECT:   The Jonesboro Housing Authority Generally Complied with Housing Quality
             Standards Inspections Requirements although Certain Weaknesses Existed


                                 HIGHLIGHTS

 What We Audited and Why


           We conducted an audit of the Jonesboro Housing Authority’s (Authority) Section
           8 Housing Choice Voucher program as part of the U.S. Department of Housing
           and Urban Development (HUD) Office of Inspector General’s (OIG) annual audit
           plan. We selected the Authority for audit based on a Section 8 risk assessment
           that we conducted. Our objective was to determine whether the Authority’s
           Section 8 housing choice voucher units met HUD standards.

 What We Found


           The Authority’s Section 8 units generally met housing quality standards. Our
           inspection of 16 Section 8 units resulted in 11 that did not meet minimum housing
           quality standards, but only one unit was in material noncompliance. However, the
           Authority needed to improve (1) enforcement of certain housing quality standards
           requirements, (2) tracking and timely performance of annual inspections, and (3)
           abatement notification and timely follow-up inspections of units that fail their
           initial inspections. The violations resulted in the payment of more than $6,000 in
           ineligible housing assistance. The violations occurred because the Authority’s
           oversight of the program and procedures for conducting, tracking, and following
           up on housing quality standards inspections had weaknesses.

 What We Recommend

           We recommend that the Director of the Office of Public Housing require the
           Authority to repay $6,663 from nonfederal funds for inappropriate housing
           assistance payments. We also recommend that the Director require the Authority
           to establish and implement adequate controls and procedures for conducting,
           tracking, and following up on future housing quality standards inspections.

           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 discussed the finding with the Authority and HUD officials during the audit.
           On March 23, 2009, we provided a copy of the draft report to Authority officials
           for their comments and discussed the report with them at the exit conference on
           March 31, 2009. The Authority provided its written comments to our draft report
           on April 1, 2009. It generally agreed with the facts presented in the finding but
           believed it should not be required to repay the amount questioned by the audit.
           The complete text of the Authority’s response, along with our evaluation of that
           response, can be found in appendix B of this report.




                                            2
                            TABLE OF CONTENTS


Background and Objectives                                                            4
Results of Audit
      Finding 1: The Authority’s Controls and Procedures for Conducting, Tracking,   5
                 and Following Up on Housing Quality Standards Inspections Had
                 Weaknesses

Scope and Methodology                                                                10

Internal Controls                                                                    11

Appendixes
                                                                                     13
A. Schedule of Questioned Costs
                                                                                     14
B. Auditee Comments and OIG’s Evaluation




                                             3
                       BACKGROUND AND OBJECTIVES

The U.S Department of Housing and Urban Development’s (HUD) Atlanta, Georgia, Office of
Public Housing is responsible for overseeing the Jonesboro Housing Authority (Authority). The
Authority is a public body and a body corporate and politic organized under the laws of the State of
Georgia by the City of Jonesboro (City) for the purpose of providing adequate housing for low-
income individuals. The City provides no financial support to the Authority and is not responsible
for the Authority’s debts, nor is it entitled to surpluses generated by the Authority’s operations. As
of September 2008, the Authority administered 1,795 Section 8 housing choice vouchers.

We started the audit in October 2008, and in November 2008, the Authority informed us that it
planned to terminate its inspections department and to contract with a private contractor to perform
the inspection work. The Authority terminated the inspection department in December 2008.
Effective January 23, 2009, the Authority contracted with a private firm to track housing quality
standards inspection due dates, conduct all inspections, and provide abatement notification for units
that fail to meet housing quality standards.

Our objective was to determine whether the Authority’s Section 8 housing choice voucher units met
HUD standards.




                                                  4
                                RESULTS OF AUDIT


Finding 1: The Authority’s Controls and Procedures for Conducting,
Tracking, and Following Up on Housing Quality Standards Inspections
Had Weaknesses
The Authority generally complied with HUD standards and we identified only one unit that was
in material noncompliance with HUD’s housing quality standards. However, we found
weaknesses related to the Authority’s (1) enforcement of certain housing quality standards
requirements, (2) tracking and timely performance of annual inspections, and (3) abatement
notification and timely follow-up inspections of units that fail their initial inspections. The
weaknesses noted above resulted in the payment of more than $6,000 in ineligible housing
assistance. The violations occurred because the Authority’s oversight of the program and
procedures for conducting, tracking, and following up on its in-house housing quality standards
inspections needed improvement.

The actions needed to resolve the weaknesses apply to the Authority and its recently hired
contractor. In January 2009, the Authority contracted out its housing quality standard inspection
process and will no longer perform that function using its staff. However, the agreement did not
contain adequate provisions to ensure resolution of the above weaknesses and the Authority had
not established and implemented adequate procedures to correct them. We did not audit the
contractor’s performance because the contract was recently executed, and it had not been in
effect long enough to audit.


 Weaknesses in the Enforcement of
 Certain Requirements


               Generally, our inspections showed that the Authority’s Section 8 housing units
               were in sound condition. This finding reflects the positive impact of the
               Authority’s past in-house inspections which, based on the inspection log, failed
               38 percent of the units inspected. However, based on our inspections, the
               Authority needs to improve its enforcement of certain housing quality standards
               requirements. For instance, we inspected 16 units, 11 of which failed, but only
               one failed unit contained significant violations. The significant violations were
               caused by conditions such as (1) deficiencies that had existed for an extended
               period, (2) deficiencies noted in prior inspections but not corrected, and (3)
               deferred maintenance.




                                                5
Our inspection identified eight violations for the unit, five of which we considered
significant and involved more than $5,000 in inappropriate housing assistance
payments over a seven-month period.


              Significant violations
                                               Violations not
 Structural       Vermin          Security      classified as      Total
  damage        infestation                      significant    deficiencies
     2                1                2              3               8




                  Deterioration caused by boring insects

The Authority’s inspectors noted the structural damage and possible infestation
and had failed the unit on two prior inspections. However, the Authority passed
the unit on its third inspection, although the owner had not corrected the
violations. The Authority’s inspection report also did not note a preexisting
broken deadbolt lockset on an exterior door.

The above unit and the 10 other failed units had 49 violations that we did not
consider to be significant but which required corrective action. The identified
items generally involved low-cost and easily fixable housing quality standards
violations. They included 14 violations for four units that existed at the time the
Authority conducted its inspection, but the inspectors had not identified them and
failed the units. For instance, several of the violations involved open ground
outlets, which Authority inspectors did not identify, although the executive
director stated that the inspectors had the test equipment needed to identify the
violations. We provided Authority officials with copies of our inspection reports
for each of the failed units, and they agreed to ensure that the owners completed
the required repairs.

Federal regulations at 24 CFR [Code of Federal Regulations] 982.401(a)(3)
require that all program housing must meet housing quality standards

                                           6
           performance requirements, both at commencement of assisted occupancy and
           throughout the assisted tenancy.

Inadequate Inspection Tracking
System and Untimely Annual
Inspections

           The Authority’s housing quality standards tracking system often did not contain
           lease dates needed to determine when inspections were due, coupled with more
           than 260 instances in which the inspections were performed late. Regulations at
           24 CFR 982.405(a) provide that an Authority must inspect leased units at least
           annually during occupancy to determine whether they meet housing quality
           standards. We assessed the Authority’s November 2008 inspection log and
           identified 266 units (about 14 percent of the total authorized Section 8 units) that
           were inspected after the tenants’ annual lease termination dates.

              Days past due      Units that failed    Units that passed       Total
               61 to 159                 14                    27               41
                31 to 60                 24                    30               54
                 1 to 30                 79                    92              171
                  Total                 117                   149              266


           The late, failed inspections indicate that tenants were allowed to stay in
           substandard units longer than should have been the case if the inspections had
           been performed on a timely basis. Due to incomplete data, we could not readily
           determine whether the Authority had missed performing any required annual
           inspections. The executive director stated that the overdue annual inspections
           resulted from an increased workload due to disaster housing assistance programs.
           In January 2009, the Authority contracted with a private firm to perform its
           inspection work. The executive director stated that the contractor will use six
           inspectors to conduct unit inspections, compared with four staff inspectors
           employed by the Authority.

           In late February 2009, an Authority representative told us that the Authority had
           implemented a new inspection tracking system. The representative stated that the
           new system was maintained by the contractor that the Authority selected in
           January 2009 to handle its housing quality standards inspection process. We did
           not assess the new system, but we reviewed the contract to determine the
           Authority’s oversight role. The contract mentioned that the Authority would
           monitor the contractor’s performance, but it did not state what procedures the
           contractor should follow in maintaining the tracking system, how the Authority
           would monitor the contractor’s tracking system, and how frequently it would
           perform such reviews.




                                               7
Inadequate Procedures for
Communicating Inspection
Results, Reinspections, and
Abatements

           Regulations at 24 CFR 982.404(a)(3) provide that owners must correct life-
           threatening violations within 24 hours and other violations within 30 calendar
           days or any public housing authority-approved extension. The Authority’s
           administrative plan provided that owners would be given time to correct noted
           violations. If failed items endangered a family’s health and safety, the owner
           would be given 24 hours to correct the violations; and for less serious failures, the
           owner would be given up to 30 calendar days. According to Authority staff, the
           administrative plan was the only set of written procedures they had with which to
           govern the Section 8 program. However, the administrative plan did not clearly
           state when and what type of written notification Authority staff should use to
           notify owners and tenants concerning inspection results. The plan also did not
           specify the date by which housing quality standards violations should be
           corrected, and it did not specify the type and due dates for abatement
           notifications.

           The Authority’s procedures did not provide adequate instructions for notifying
           owners and tenants of inspection results. The Authority followed an informal
           practice that called for inspectors to mail a copy of the inspection report to the
           owners at the end of the day following the inspections. The inspection report
           contained a section that showed the date by which the repairs were to be
           completed but made no mention of abatement. HUD’s Housing Choice Voucher
           Guidebook (7420.10G) provides that “except in the case of life-threatening
           violations requiring corrections within 24 hours, the owner must receive 30-day
           notification of abatement. Therefore, it is important that PHAs include the 30-day
           notice to abate in the original violations notice”. According to Authority staff,
           their practice only called for abatement notification after the second failed
           inspection. Our audit confirmed that practice and identified one instance in which
           the practice resulted in the payment of a $692 subsidy for a unit during a month in
           which the subsidy should have been abated.

           The Authority’s November 2008 inspection log showed 47 instances in which
           follow-up inspections were conducted more than 30 days after the initial failed
           inspection. This figure included more than 20 cases in which the follow-up
           inspections were conducted 40 to 70 days after the initial failed inspections. In
           January 2009, the Authority contracted for its housing quality standards
           inspection. An Authority official stated that the contractor’s online system allows
           the Authority to review when owners are notified of inspection results and
           abatements. However, the Authority had not amended its administrative plan to
           include specific due dates and notification methods for inspection results and
           abatement notifications. We did not audit the new system, because it had not
           been in operation long enough to assess.

                                             8
Conclusion

             The above violations relate to the Authority’s in-house performance which it has
             now contracted out to a private firm. However, the violations were caused by
             weak management oversight or a lack of adequate procedures in areas that also
             apply to its oversight of the contractor’s performance. This includes making
             appropriate amendments to its administrative plan, also applicable to its contract
             inspector, related to (1) identifying and reporting all housing quality standards
             violations, (2) tracking inspection due dates, (3) ensuring that inspections are
             performed on time, (4) ensuring that owners and tenants are properly notified of
             inspection results on a timely basis, (5) ensuring that follow-up inspections are
             conducted in a timely manner, and (6) ensuring that owners and tenants are
             properly notified of abatement action. Also, the Authority should reimburse the
             program $6,663 paid for inappropriate subsidies identified during our audit.

Recommendations

             We recommend that the Director of HUD’s Atlanta Office of Public Housing
             require the Authority to

             1A.    Ensure that the owners complete the repairs noted for the 11 failed units or
                    abate the Section 8 subsidies for units in which the owner does not
                    complete the repairs.

             1B.    Reimburse $6,663 to its program from nonfederal funds for housing
                    assistance payments made for the unit with significant violations ($5,971)
                    and for one unit during a month when the subsidy should have been abated
                    ($692).

             1C.    Verify that the tracking system for annual inspections, implemented in
                    February by the Authority’s contractor, is working properly and that
                    inspections are performed in a timely manner.

             1D     Establish and implement adequate procedures governing the methods for
                    notifying owners and tenants of inspection results, conduct timely follow-
                    up inspections for failed units, and provide timely abatement notifications
                    to owners. This includes verification that the Authority communicates the
                    new procedures to its contractor.

             1E.    Establish and implement specific procedures for monitoring the
                    performance of its contract inspector’s compliance with housing quality
                    standards requirements and the contractor’s maintenance of proper and
                    complete records.

                                              9
                         SCOPE AND METHODOLOGY

To achieve the audit objective, we

       Reviewed applicable laws, regulations, and other HUD program requirements;

       Reviewed the Authority’s procedures and controls used to administer its Section 8
       housing quality standards inspections;

       Reviewed files and documents from HUD and the Authority, including files related to
       past HUD reviews of the Authority’s operations and the Authority’s completed and/or
       planned corrective action;

       Selected and reviewed a random sample of 16 of 966 Section 8 housing choice voucher
       units inspected in the last six months that received subsidy payments for September 2008;
       and

       Interviewed appropriate officials and staff from the HUD Atlanta office and the
       Authority.

During the audit, we inspected 16 units with a HUD OIG inspector to determine whether the
units met housing quality standards. We discontinued the audit because the 16 inspections
identified only one unit in material noncompliance. Material noncompliance was based on
consideration of factors such as (1) deficiencies that had existed for an extended period, (2)
deficiencies noted in a prior inspection but not corrected, and/or (3) deferred maintenance that
consistently failed the unit.

The audit covered the period July 1, 2006, through September 30, 2008. We conducted the
fieldwork from November 2008 through February 2009 at HUD, the Authority and the homes of
various tenants located within the Authority’s jurisdiction.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our finding and
conclusions based on our audit objective.




                                                10
                              INTERNAL CONTROLS

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

           Program operations,
           Relevance and reliability of information, 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. They include the processes and procedures for planning,
organizing, directing, and controlling program operations as well as the systems for measuring,
reporting, and monitoring program performance.



 Relevant Internal Controls


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

                  Program operations – Policies and procedures that management has
                  implemented to reasonably ensure that a program meets its objectives.

                  Relevance and reliability of data – Policies, procedures, and practices that
                  management has implemented to provide reasonable assurance that
                  operational and financial information used for decision making and reporting
                  externally is relevant, reliable, and fairly disclosed in reports.

                  Compliance with laws and regulations – Policies and procedures that
                  management has implemented to provide reasonable assurance that program
                  implementation is in accordance with laws, regulations, and provisions of
                  contracts or grant agreements.

              We assessed the relevant controls identified above.

              A significant weakness exists if management controls do not provide reasonable
              assurance that the process for planning, organizing, directing, and controlling
              program operations will meet the organization’s objectives.




                                               11
Significant Weaknesses


           Based on our audit, we believe that the following item is a significant weakness:

               The Authority lacked adequate controls and procedures to (1) enforce certain
               housing quality standards requirements, (2) track and timely perform annual
               inspections, and (3) provide proper abatement notification and timely follow-
               up inspections of units that fail their initial inspections (finding 1).




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                                   APPENDIXES

Appendix A
                SCHEDULE OF QUESTIONED COSTS


                           Recommendation
                                  number              Ineligible 1/
                                 1B                      $6,663

                               Total                     $6,663


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.




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Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION

Ref to OIG Evaluation   Auditee Comments




Comment 1




                             14
15
                          OIG’s Evaluation of Auditee Comments

The Authority generally agreed with the findings and recommendations, as indicated below:

Comment 1     The Authority commented that it does not disagree with the finding and that it
              will work hard to comply with our recommendations. However, the Authority
              requested forgiveness of the $6,573 ineligible subsidy payments because the
              amount is (a) directly related to one unit, (b) it conducted the required number of
              quality control inspections although the questioned unit was not included in their
              sample, (c) its management was not aware of the conditions detected by the audit,
              and (d) it only hired qualified inspectors to conduct inspections.

              We did not question the adequacy of the Authority’s quality control procedures
              and neither of the conditions cited by the authority justify allowing the ineligible
              subsidy amount. The regulations at 24 CFR 982.401(a)(3) require that all
              program housing must meet housing quality standards performance requirements,
              both at commencement of assisted occupancy and throughout the assisted
              tenancy. Thus, the $6,663 questioned in the report should be repaid. The
              difference between the $6,573 mentioned in the auditee comment and the $6,663
              resulted from a transposition mistake in the draft report.




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