oversight

The Michigan State Housing Development Authority, Lansing, Michigan, Failed to Operate Its Section 8 Project-Based Voucher Program According to HUD's and Its Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-09-30.

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

                                                                   Issue Date
                                                                            September 30, 2009
                                                                   Audit Report Number
                                                                           2009-CH-1019




TO:        Tom Lacey, Acting Director of Public Housing Hub, 5FPH


FROM:      Heath Wolfe, Regional Inspector General for Audit, 5AGA

SUBJECT: The Michigan State Housing Development Authority, Lansing, Michigan, Failed
           to Operate Its Section 8 Project-Based Voucher Program According to HUD’s
           and Its Requirements

                                    HIGHLIGHTS

 What We Audited and Why

             We audited the Michigan State Housing Development Authority’s (Authority)
             Section 8 Project-Based Voucher program (program). The audit was part of the
             activities in our fiscal year 2009 annual audit plan. We selected the Authority’s
             program based upon our internal audit survey of the U.S. Department of Housing
             and Urban Development’s (HUD) oversight of the program and our analysis of
             risk factors relating to the housing agencies in Region V’s jurisdiction. Our
             objectives were to determine whether (1) the Authority effectively administered
             its program in accordance with HUD’s and its own requirements and (2) the
             Authority’s project-based unit inspections were sufficient to detect housing
             quality standards violations and provide decent, safe, and sanitary housing to its
             residents. This is the first of two planned audit reports of the Authority’s
             program.

 What We Found

             The Authority lacked documentation to support its selection and approval of
             program projects. As a result, it could not support that any of the five projects it
             had approved since January 1, 2007, were eligible for more than $1 million in
           program assistance and nearly $85,000 in program administrative fees received by
           the Authority were appropriate. We estimate that over the next 12 months, the
           Authority will receive more than $70,000 in program funds for improper
           administrative fees.

           The Authority’s program units generally met HUD’s housing quality standards.
           Of the 60 program units selected for inspection, 23 did not meet minimum
           housing quality standards, and four (7 percent) materially failed due to 24-hour
           exigent health and safety hazards that predated the Authority’s previous
           inspections. As a result, more than $5,700 in program funds was spent on units
           that were not decent, safe, and sanitary.

           We informed the Agency’s executive director and the Acting Director of HUD’s
           Detroit Office of Public Housing of a minor deficiency through a memorandum,
           dated September 29, 2009.


What We Recommend

           We recommend that the Acting Director of HUD’s Detroit Office of Public
           Housing require the Authority to reimburse its program from nonfederal funds for
           the improper use of more than $85,000 in program funds, provide documentation
           or reimburse its program more than $1 million from nonfederal funds for the
           unsupported payments cited in this audit report, and implement adequate
           procedures and controls to address the findings cited in this audit report to prevent
           more than $93,000 in program funds from not being used over the next year to
           house needy families.

           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 review results and supporting schedules to the Acting Director
           of HUD’s Detroit Office of Public Housing and the Authority’s executive director
           during the audit. We provided our discussion draft audit report to the Authority’s
           executive director, its board chairman, and HUD’s staff during the audit. We held
           an exit conference with the executive director on September 15, 2009.

           We asked the executive director to provide comments on our discussion draft audit
           report by September 25, 2009. The executive director provided written comments,
           dated September 25, 2009. The executive director disagreed with our findings. The
           complete text of the written comments, along with our evaluation of those


                                             2
comments, can be found in appendix B of this report except for 922 pages of
documentation that was not necessary for understanding the Agency’s comments. A
complete copy of the Authority’s comments plus the documentation was provided to
the Acting Director of HUD’s Detroit Office of Public Housing.




                                3
                            TABLE OF CONTENTS

Background and Objectives                                                            5

Results of Audit
      Finding 1: The Authority Inappropriately Approved Contracts for Its Program
                                                                                     6
      Finding 2: The Authority’s Program Generally Met HUD’s Housing Quality
                 Standards                                                           9

Scope and Methodology                                                               12

Internal Controls                                                                   14

Appendixes
   A. Schedule of Questioned Costs                                                  16
   B. Auditee Comments and OIG’s Evaluation                                         17
   C. Federal Requirements                                                          29




                                            4
                     BACKGROUND AND OBJECTIVES

The Michigan State Housing Development Authority (Authority) is a nonprofit governmental
Authority created by the Michigan State Housing Development Act of 1966 to provide decent,
safe, and sanitary housing for low-income people. The Authority operates with oversight by the
Michigan Department of Commerce. The Authority’s jurisdiction includes the entire state of
Michigan. An eight-member board of commissioners governs the Authority. The board
members consist of the director of Michigan’s Department of Labor and Economic Growth, the
director of Michigan’s Department of Human Services, the Michigan state treasurer, and four
persons appointed by the governor, which include one tenant representative. The Authority’s
executive director is appointed by the board of commissioners and is responsible for
coordinating established policy and carrying out the Authority’s day-to-day operations.

The Authority administers a Section 8 Housing Choice Voucher program funded by the U.S.
Department of Housing and Urban Development (HUD). The Authority provides assistance to
low- and moderate-income individuals seeking decent, safe, and sanitary housing by subsidizing
rents with owners of existing private housing. As of July 31, 2009, the Authority had 24,056
units under contract with annual housing assistance payments totaling more than $141 million in
program funds. Of the 24,056 units, 465 were assisted under the Authority’s Section 8 Project-
Based Voucher program (program).

This is the first audit report on the Authority’s program. Our objectives were to determine
whether (1) the Authority administered its program in accordance with HUD’s and its own
requirements and (2) the Authority’s project-based unit inspections were sufficient to detect
housing quality standards violations and provide decent, safe, and sanitary housing to its
residents.




                                                5
                                RESULTS OF AUDIT

Finding 1: The Authority Inappropriately Approved Contracts for
                             Its Program
The Authority lacked documentation to support its selection and approval of its program
projects. The problems occurred because the Authority failed to exercise proper supervision and
oversight of the program and also lacked adequate procedures and controls to ensure that HUD’s
requirements were appropriately followed. As a result, it was unable to support more than $1
million in housing assistance and utility allowance payments and that $84,509 in administrative
fees paid to the Authority was appropriately earned.


 The Authority Lacked
 Documentation to Support That
 HUD’s Requirements Were
 Followed

              We reviewed the Authority’s files for its five Section 8 project-based projects
              approved after January 1, 2007. The five projects contained 114 units. The program
              project files were reviewed to determine whether the Authority maintained
              documentation to support that its projects were eligible. Our review was limited to
              the information maintained by the Authority in its program project files. The
              Authority failed to ensure that

              •       114 units in five projects had an initial housing quality standards
                      inspection conducted,
              •       114 units in five projects had a proper rent reasonableness determination,
              •       30 units in one project had an analysis conducted to demonstrate how the
                      projects would assist low-income people without unduly concentrating
                      them, and
              •       one project was handicapped accessible.

              In response to our discussion draft audit report, the Authority provided
              documentation to support that the initial housing quality standards inspections
              were conducted.

              There was correspondence in the Authority’s files for four (project numbers 924,
              1118, 3037, and 3062) of the five projects that requested the Authority’s contract
              housing agents to provide comparable properties for rent reasonableness studies
              that supported the owners’ proposed rents. Comparable properties for project
              numbers 924 and 3037 were for properties located from 25 to 41 miles from the
              respective properties. Project number 924 is located in Detroit and according to

                                               6
             subsection 1437f(o)(10)(A) of the United States Code, rent for dwelling units for
             which a housing assistance payments contract is established under this subsection
             shall be reasonable in comparison with rents charged for comparable dwelling
             units in the private, unassisted local market. Comparables in the same city were
             used for project number 3062, but documentation in the Authority’s project file
             raised questions about the validity of the reasonableness determination. The
             following definition was in documentation from the consultant that performed the
             rent reasonableness determination. ”Comparability is defined as the following:
             gross rents at comparable properties must be equal or greater than gross rents at
             the proposal.” The Authority also lists this definition on its Web site in a January
             2009 market study addendum regarding rent reasonableness information for
             project-based vouchers. This definition gives the appearance that comparables
             with rents equal to or greater than the rents for a proposed project-based unit
             should be sought when determining the reasonable rent.

             The Authority provided the environmental reviews for four of the projects. It
             located the documentation in another department’s files. The Authority’s director
             of housing voucher programs told us that she believed that HUD’s requirements
             were met and the documentation was misplaced.

             As a result, the projects were inappropriately selected and approved for project-
             based assistance and were ineligible to receive the assistance. Based on actual
             housing assistance payments and administrative fees earned from January 1, 2007,
             through July 31, 2009, we calculated that the Authority paid $1,047,691 in
             housing assistance and inappropriately earned $84,509 in administrative fees for
             the five projects improperly selected.

Conclusion

             As a result of its procedural and control weaknesses, HUD and the Authority
             lacked assurance that program funds were used efficiently and effectively. The
             Agency did not properly use program funds when it failed to comply with HUD’s
             requirements. The Agency disbursed more than $1 million in program housing
             assistance payments for program units without proper documentation.

             In accordance with HUD’s regulations at 24 CFR (Code of Federal Regulations)
             982.152(d), HUD may reduce or offset any administrative fee to a public housing
             agency, in the amount determined by HUD, if the public housing agency fails to
             perform public housing agency administrative responsibilities correctly or
             adequately under the program. The Agency received $84,509 in administrative
             fees from January 1, 2007, to July 31, 2009, while not adequately supporting its
             selection and approval of its program projects.




                                               7
Recommendations

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

          1A.     Provide supporting documentation or reimburse its program $1,132,200
                  ($1,047,691 in housing assistance and utility allowance payments plus
                  $84,509 in administrative fees) from nonfederal funds for the housing
                  assistance payments to the five program projects cited in this finding.

          1B.     Implement adequate procedures and controls to ensure compliance with all
                  federal requirements for the operation of its program.




                                           8
Finding 2: The Authority’s Program Units Generally Met HUD’s
                     Housing Quality Standards
The Authority’s contract housing agents did not adequately enforce HUD’s housing quality
standards. Of the 60 program units selected for inspection, 23 (38 percent) did not meet
minimum housing quality standards. However, only four units (7 percent) had material
violations that predated the Authority’s previous inspections. The violations existed because the
Authority failed to exercise proper supervision and oversight of its program unit inspections
conducted by contract housing agents. As a result, $6,399 in program funds ($5,783 in housing
assistance and $616 in administrative fees) was spent on units that were not decent, safe, and
sanitary.


 HUD’s Housing Quality
 Standards Were Not Met


               Based upon our review, the Authority’s program units were generally well
               maintained by the owners and met HUD’s housing quality standards. As of April
               30, 2009, the Authority had 451 program units under contract. The Authority or
               its contract housing agents inspected 60 of these units between February 1 and
               May 8, 2009, and passed all 60 of the units. We selected all 60 of these units for
               inspection.

               We inspected the 60 units between May 26 and June 10, 2009. Twenty-three (38
               percent) of the units did not meet HUD’s housing quality standards, and four (7
               percent) had material violations, 24-hour exigent health and safety deficiencies,
               that predated the Authority’s previous inspections. Of the 60 units inspected, 23
               had 40 violations, and 10 had 11 violations that existed when the Authority or its
               contract housing agents last inspected and passed the units.

               For the four materially failed units, we calculated that from the time the Authority
               or its agents should have identified, cited, and obtained correction or abated the
               units’ housing assistance until June 30, 2009, the Authority inappropriately paid
               $5,783 in housing assistance and improperly received $616 in program
               administrative fees. We also estimate that if the Authority fails to make
               corrections to its inspection process, it will pay $22,956 in housing assistance
               over the next year for the four units that do not meet HUD’s housing quality
               standards.

               The following table categorizes the 40 violations in the 23 units.




                                                9
                                                        Number of
                              Category of violations    violations
                            Electrical                      11
                            Windows                         7
                            Floors                          5
                            Walls                           4
                            Security                        3
                            Range/refrigerator              2
                            Other interior defect           2
                            Ceiling                         1
                            Sinks                           1
                            Food preparation/ storage       1
                            Ventilation                     1
                            Heating                         1
                            Stairs/rails/porches            1
                                        Total               40

            We provided our inspection results to the Authority’s executive director on July
            15, 2009, and to the Acting Director of HUD’s Detroit Office of Public Housing
            on July 20, 2009.

Examples of Violations


            Eleven electrical violations were present in eight of the Authority’s units
            inspected. The electrical violations consisted of missing switch or outlet cover
            plates, defective ground fault interruptor curcuits, and loose light switches or
            electrical service boxes. Seven window violations were present in seven of the
            Authority’s units inspected. These defects included windows that provided an
            alternative egrees would not open, windows that would not stay open and
            slammed shut when released, and windows with loose locking hardware.

            The Authority’s inspections were not performed at a standard sufficient to fully
            meet HUD’s housing quality standards due to a lack of understanding of the
            housing quality standards by the Authority’s contract housing agent inspection
            staff. The Authority contracted with various housing agents, which were each
            assigned territories in the state of Michigan. These housing agents took
            applications, maintained waiting lists, approved leases, determined assistance
            payments for tenants, and performed the required housing quality standard
            inspections. The Authority only oversaw activities of the housing agents by
            performing quality assurance reviews or inspections on a test basis. The
            Authority selected units for inspection randomly from all program units and did
            not ensure that program units were included in each review.




                                              10
Conclusion

             The housing quality standards violations existed because the Authority failed to
             exercise proper supervision and oversight of its program unit inspections. It also
             lacked adequate procedures and controls to ensure that its program units met
             HUD’s housing quality standards. The Authority’s households were subjected to
             health- and safety-related violations, and the Authority did not properly use its
             program funds when it failed to ensure that units complied with HUD’s housing
             quality standards. In accordance with 24 CFR 982.152(d), HUD is permitted to
             reduce or offset any program administrative fees paid to a public housing agency
             if it fails to enforce HUD’s housing quality standards. The Authority disbursed
             $5,783 in housing assistance payments for the four units that materially failed to
             meet HUD’s housing quality standards and received $616 in program
             administrative fees. Our methodology for this estimate is explained in the Scope
             and Methodology section of the audit report.

Recommendations

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

             2A.    Certify that the housing quality standards violations cited in this finding
                    have been repaired. If the necessary repairs have not been made, the
                    Authority should abate housing assistance payments to the landlords as
                    appropriate.

             2B.    Reimburse its program $6,399 from nonfederal funds ($5,783 for program
                    housing assistance payments plus $616 in associated administrative fees)
                    for the four units that materially failed to meet HUD’s housing quality
                    standards.

             2C.    Implement adequate procedures and controls to ensure that all units meet
                    HUD’s housing quality standards.




                                              11
                         SCOPE AND METHODOLOGY

To accomplish our objectives, we reviewed

•   Applicable laws; HUD’s program requirements at 24 CFR Parts 5, 58, 903, 908, 982, and 983;
    HUD’s Public and Indian Housing Notices 2001-4, 2005-1, 2005-9, 2005-29, 2006-16, 2007-
    27, 2008-14, 2008-39, and 2009-11; and HUD’s Housing Choice Voucher Guidebook 7420.10.

•   The Authority’s program project and environmental review files for projects approved after
    January 1, 2007; the Authority’s program administrative plan, effective February 2008; annual
    audited financial statements for 2007 and 2008; program household files; computerized
    databases; policies and procedures; organizational chart; board minutes; and program annual
    contributions contract.

•   HUD’s files for the Authority.

We also interviewed the Authority’s employees, HUD staff, and program households. We
reinspected all 60 project-based units that had been inspected by the Authority or its contract
housing agents between February 1 and May 8, 2009.

Finding 1

We used computerized data and project listings provided by the Authority to identify the five
projects that had project-based contracts approved since January 1, 2007. We reviewed the
Authority’s program files for the five owners to determine whether the Authority followed
HUD’s requirements for its selection of the projects and approval for project-based housing
assistance payments contracts. We used actual housing assistance payments and administrative
fees earned as reported by the Authority in HUD’s Voucher Management System and confirmed
by the Authority’s staff to compute the average housing assistance payments and administrative
fee per unit for each month.

We obtained the actual assistance payments made for the program households in the five
projects. For each of the households, we identified the associated average administrative fee
each month. Based on the actual housing assistance payments and calculated administrative fees
earned from January 1, 2007, through July 31, 2009, we calculated that the Authority paid
$1,047,691 in assistance payments and earned $84,509 in administrative fees during that period
for the program units.

Finding 2

Based on our inspections of the 60 project-based units inspected and passed by the Authority or
its agents between February 1 and May 8, 2009, we determined that 23 units had violations of
HUD’s housing quality standards. We considered only four of the units to be material failures
due to their having at least one 24-hour exigent health and safety hazard that was determined to


                                                12
have existed when the Authority’s inspection passed the unit. All units were ranked, and we
used auditor’s judgment to determine the material cutoff line.

We used actual housing assistance payments and administrative fees earned as reported by the
Authority in HUD’s Voucher Management System and confirmed by the Authority’s staff to
compute the average administrative fee per unit for each month.

For the four materially failed units, we determined when the Authority or its agents should have
identified the defects and abated the units. We calculated the improper housing assistance
payments by using the actual assistance payments made from the date the units should have been
abated through June 2009. We calculated inappropriate housing assistance for these four units
by using the calculated administrative fee for each of those same months.

Between January 1 and July 31, 2009, the Authority received an average administrative fee of
$51.32 per unit each month for its program units while administering an average of 448 units for
the same period. To estimate benefits of correcting the defects for these four units, we used the
latest monthly assistance payment for each of the four units, which totaled $1,913, and
multiplied by 12 to calculate an assistance savings of $22,956. We multiplied the average
administrative fee of $51.32 per unit times four units times 12 to calculate $2,463 in potential
improper administrative fees than could be avoided.

We performed our on-site audit work from February through August 2009 at the Authority’s
central office located at 735 East Michigan Avenue, Lansing, Michigan. The audit covered the
period January 1, 2007, through December 31, 2008, but was expanded when necessary to
include other periods.

We performed our 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
objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




                                               13
                              INTERNAL CONTROLS

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

   •   Program operations,
   •   Relevance and reliability of information,
   •   Compliance with applicable laws and regulations, and
   •   Safeguarding of assets and resources.

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. 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.

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




                                               14
Significant Weakness

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

          •   The Authority lacked adequate procedures and controls to ensure compliance
              with federal requirements and/or its policies by failing to support its selection
              and approval of its program projects (see finding 1).

Separate Communication of a
Minor Deficiency

           We informed the Agency’s executive director and the Acting Director of HUD’s
           Detroit Office of Public Housing of a minor deficiency through a memorandum,
           dated September 29, 2009.




                                             15
                                   APPENDIXES

Appendix A

                 SCHEDULE OF QUESTIONED COSTS

          Recommendation
              number            Ineligible 1/        Unsupported 2/
                 1A                                      $1,132,200
                 2B                     $6,399
                Totals                  $6,399           $1,132,200


1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or federal, state, or local
     policies or regulations.

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




                                                16
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION

Ref to OIG Evaluation   Auditee Comments




                         17
Ref to OIG Evaluation   Auditee Comments




Comment 1

Comment 2




Comment 3




                         18
Ref to OIG Evaluation   Auditee Comments




Comment 4




Comment 5




Comment 6




                         19
Ref to OIG Evaluation   Auditee Comments




                         20
Ref to OIG Evaluation   Auditee Comments




Comment 7




                         21
Ref to OIG Evaluation   Auditee Comments




Comment 8




                         22
Ref to OIG Evaluation   Auditee Comments




Comment 9




                         23
Ref to OIG Evaluation   Auditee Comments




Comment 10




Comment 11




                         24
Ref to OIG Evaluation   Auditee Comments




Comment 7




                         25
Ref to OIG Evaluation   Auditee Comments




Comment 12



Comment 13




Comment 14




                         26
                         OIG Evaluation of Auditee Comments

Comment 1   The Authority provided the initial housing quality standards inspections with its
            comments. We noted this on page 5 of this report.

Comment 2   HUD’s regulations at 24 CFR 983.103(a) and (b) require the Authority to inspect
            all units and determine that the proposed project-based units comply with housing
            quality standards before executing a housing assistance payments contract.

Comment 3   The Authority’s proposed actions should provide for a more efficient means of
            determining whether a project’s units had initial housing quality standards
            inspections conducted.

Comment 4   The rent reasonableness certifications were generated for each individual unit
            when a household was identified and provide three comparable units for each
            individual unit. These certifications compare contract rents, utility allowances,
            and gross rents, as well as the number of comparable points given, but no
            amenities. Of the 112 certifications provided by the Authority, 107 were dated
            after the housing assistance payments contracts were effective and only five were
            done on or before the applicable contracts’ effective date. In addition, 142 of the
            336 comparable units provided were located outside of the community where the
            projects were located.

Comment 5   The wording in the Authority’s internal guidelines on project market analysis
            implies that comparables are units with gross rents that are equal to or greater than
            the assisted contract rents. In addition, the Authority’s project files contained
            electronic correspondence from the Authority to its housing agents requesting
            comparables that supported the proposed rents.

Comment 6   HUD’s requirements for rent reasonableness are at 24 CFR parts 983.301 and
            983.303.

Comment 7   The report was adjusted.

Comment 8   We agree that the assistance payments contract for Lakewood Manor shows that
            two units are handicapped accessible units. The Authority did not provide
            documentation to support its assertion that the Emerald Woods project’s
            assistance contract as a whole meets the requirement for handicapped
            accessibility. We adjusted the report to show that the Authority did not provide
            documentation to support that one project met handicapped accessibility
            requirements.

Comment 9   The report was adjusted since no subsidy layering review needs to be conducted
            for existing projects.




                                             27
Comment 10 The project was located in a census track containing 44.4 percent of families
           below the poverty level. The Authority rejected this project on March 16, 2004,
           for various reasons including the need for a HUD waiver of the poverty
           concentration requirement and 100 percent subsidy. The waiver was requested
           July 22, 2005, but was not granted by HUD.

Comment 11 HUD’s regulations for the deconcentration of poverty were not revised when it
           issued changes to the program in the Federal Register on October 13, 2005.

Comment 12 We hand delivered a compact disc containing the results of our housing quality
           standards inspections to the Authority’s executive director on July 15, 2009. We
           agree with the Authority’s proposed actions for notifying the applicable owners
           and households.

Comment 13 We did not cite the 40 violations in 38 of the 60 units as a preexisting deficiency
           because we could not determine when these defects occurred. We cited 10 units
           as having preexisting defects but only four of the 60 units were material failures
           since they had 24-hour exigent health and safety violations that were not
           identified by the Authority’s inspectors.

Comment 14 We do not disagree that the Authority can determine what it deems as a health and
           safety 24-hour violation. However, its guidelines should be updated at times to
           coincide with nationally recognized health and safety issues. Both the
           Occupational Safety and Health Administration and the National Electrical Code
           National Fire Protection Association 70 require that electrical wiring be kept free
           from all recognizable hazards. The Code of Federal Regulations and the National
           Fire Protection Association also both require that live parts of electric equipment
           operating at 50 volts or more be guarded against accidental contact. Most
           common hazards include electrical outlets and switches with broken or missing
           covers.




                                              28
Appendix C

                           FEDERAL REQUIREMENTS

Finding 1
United States Code, title 42, chapter 8, subchapter I, subsection 1437f(o)(13)(H), states that rents
established by housing assistance payments contracts pursuant to this paragraph may vary from
the payment standards established by the public housing agency pursuant to paragraph (1)(B) but
shall be subject to paragraph (10)(A).

United States Code, title 42, chapter 8, subchapter I, subsection 1437f(o)(10)(A), states that the
rent for dwelling units for which a housing assistance payments contract is established under this
subsection shall be reasonable in comparison with rents charged for comparable dwelling units in
the private, unassisted local market.

HUD’s regulations at 24 CFR 983.301(c)(2) state that for tax credit properties, rent to the owner
may not exceed the lowest of (i) tax credit rent minus the utility allowance, (ii) the reasonable
rent, or (iii) the rent requested by the owner.

HUD’s regulations at 24 CFR 983.301(b) state that for other (non-tax credit) properties, rent to
the owner may not exceed the lowest of (i) 110 percent of fair market rent less utility allowance,
(ii) the reasonable rent, or (iii) the rent requested by the owner. HUD’s regulations at 24 CFR
983.301(b), (c), and (e) and 983.303(c) and (d) require the housing authority to do the rent
reasonableness reviews using three comparable unassisted units.

Chapter 9 of HUD’s Housing Choice Voucher Program Guidebook provides guidelines for
determining rent reasonableness. To determine reasonableness, a housing authority must
compare the voucher unit rent to rents for similar unassisted units in the marketplace and also to
rents for similar unassisted units on the premises. For comparability, the housing authority must
consider location, quality, size, unit type, age, amenities and services.

HUD regulations at 24 CFR 983.101(a) provide that 24 CFR 982.401, housing quality standards,
applies to the project-based voucher program.

HUD’s regulations at 24 CFR 982.401 require that all program housing meet HUD’s housing
quality standards performance requirements, both at commencement of assisted occupancy and
throughout the tenancy.

HUD’s regulations at 24 CFR 983.103(a) and (b) require the housing authority to inspect all
units and determine that the proposed project-based units comply with housing quality standards
before executing a housing assistance payments contract.

HUD’s regulations at 24 CFR 983.58(a)-(d), state: “activities under the project-based voucher
program are subject to HUD environmental regulations in 24 CFR parts 50 and 58. According to

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HUD’s regulations at 24 CFR Part 58, a unit of general local government, a county or a state is
responsible for the federal environmental review. In the case of existing housing under part 983,
the responsible entity that is responsible for the environmental review under 24 CFR part 58
must determine whether or not project-based voucher assistance is categorically excluded from
review under the National Environmental Policy Act and whether or not the assistance is subject
to review under the laws and authorities listed in 24 CFR 58.5. The public housing agency may
not enter into an agreement or housing assistance payments contract with an owner, and the
agency, the owner, and its contractors may not acquire, rehabilitate, convert, lease, repair,
dispose of, demolish, or construct real property or commit or expend program or local funds for
project-based voucher activities under this part, until one of the following occurs:

  (i) The responsible entity has completed the environmental review procedures required by 24
        CFR Part 58, and HUD has approved the environmental certification and request for
        release of funds;
 (ii) The responsible entity has determined that the project to be assisted is exempt under 24 CFR
        58.34 or is categorically excluded and not subject to compliance with environmental laws
        under 24 CFR 58.35(b); or
(iii) HUD has performed an environmental review under 24 CFR part 50 and has notified the
        agency in writing of environmental approval of the site.”

HUD’s regulations at 24 CFR 983.102(a) require project-based units to comply with disability
accessibility requirements of Section 504 of the Rehabilitation Act of 1973.

HUD’s regulations at 24 CFR 983.57(a) and (b) require that project-based assistance be
consistent with the goal of deconcentrating poverty and expanding economic opportunity while
avoiding undue concentration of low-income persons. If the poverty rate in the proposed project
area is greater than 20 percent, the authority should consider whether there has been an overall
decline in poverty in the last five years.

Finding 2
HUD regulations at 24 CFR 983.101(a) provide that 24 CFR 982.401, housing quality standards,
applies to the project-based voucher program. In general, the same statutory public housing
agency inspection requirements apply to project-based voucher assistance as to the tenant-based
voucher program (see United States Code, title 42, sections 1437f(o)(8) and 1437f(o)(13)(F)).

HUD’s regulations at 24 CFR 982.401 require that all Section 8 program housing meet the
housing quality standards performance requirements both at commencement of assisted
occupancy and throughout the tenancy.

HUD’s regulations at 24 CFR 982.404(a) state that the owner must maintain the unit in
accordance with HUD’s housing quality standards. If the owner fails to maintain the dwelling
unit in accordance with HUD’s housing quality standards, the agency must take prompt and
vigorous action to enforce the owner’s obligations. Remedies for such breach of the housing
quality standards include termination, suspension, or reduction of housing assistance payments
contract and the termination of the housing assistance payments contract. The agency must not

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make any housing assistance payments for a dwelling unit that fails to meet the housing quality
standards unless the owner corrects the defect within the period specified by the agency and the
agency verifies the correction. If a defect is life threatening, the owner must correct the defect
within 24 hours.

HUD’s regulations at 24 CFR 982.405(a) require public housing agencies to perform unit
inspections before the initial move-in and at least annually. The agency 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.

Chapter 10 of HUD’s Housing Choice Voucher Program Guidebook 7420.10G, April 2001,
discusses the minimum size of a public housing authority quality control sample. General
requirements for Section Eight Management Assessment Program indicator 5 quality control
inspections are provided. In addition, it provides information on precontract inspections and
annual inspections. Feedback on quality control inspections of inspectors’ work, which can be
used to determine whether individual performance or general housing quality standards training
issues need to be addressed. The public housing authority should maintain a quality control
tracking system for each program year, which indicates the address of the units; date of original
inspection and inspector; date of the quality control inspection; and the location of the unit by
neighborhood, zip code, and census tract.

In accordance with 24 CFR 982.152(d), HUD may reduce or offset any administrative fee to a
public housing agency in the amount determined by HUD if it fails to enforce HUD’s housing
quality standards.




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