Issue Date
November 14, 2008
Audit Report Number
2009-PH-1001
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 Richmond Redevelopment and Housing Authority, Richmond, Virginia,
Did Not Ensure That Its Section 8 Housing Choice Voucher Program Units
Met Housing Quality Standards
HIGHLIGHTS
What We Audited and Why
We audited the Richmond Redevelopment and Housing Authority’s (Authority)
administration of its housing quality standards inspection program for its Section
8 Housing Choice Voucher program as part of our fiscal year 2008 audit plan.
This is our second of three reports to be issued on the Authority’s Section 8
Housing Choice Voucher program. The audit objective addressed in this report
was to determine whether the Authority adequately administered its Section 8
housing quality standards inspection program to ensure that its program units met
housing quality standards in accordance with U.S. Department of Housing and
Urban Development (HUD) requirements.
What We Found
The Authority did not adequately administer its inspection program to ensure that
its program units met housing quality standards as required. We inspected 62
housing units and found that 42 units did not meet HUD’s housing quality
standards. Moreover, 26 of the 62 units had material health and safety violations
that the Authority’s inspectors neglected to report during their last inspection. As
a result, the Authority spent $68,506 in program funds on units that were not
decent, safe, and sanitary.
We estimate that over the next year if the Authority does not implement adequate
procedures and controls to ensure that its program units meet housing quality
standards, it will pay more than $1.1 million in housing assistance on units with
material housing quality standards violations.
What We Recommend
We recommend that the Director of HUD’s Baltimore Public Housing Program
require the Authority to ensure that housing units inspected during the audit are
repaired to meet HUD’s housing quality standards, reimburse its program from
nonfederal funds for the improper use of $68,506 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 $1.1 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 the draft report to the Authority on October 16, 2008, and discussed
it with them at an exit conference on October 21, 2008. The Authority provided
written comments to our draft report on October 31, 2008. The Authority
generally agreed with the findings and recommendations. However, the Authority
contested the repayment of ineligible housing assistance payments.
The complete text of the auditee’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: Controls over Housing Quality Standards Were Inadequate 5
Scope and Methodology 15
Internal Controls 17
Appendixes
A. Schedule of Questioned Costs and Funds to Be Put to Better Use 19
B. Auditee Comments and OIG’s Evaluation 20
3
BACKGROUND AND OBJECTIVES
The Richmond Redevelopment and Housing Authority (Authority) was established in 1940 to
provide and preserve quality affordable housing and promote self-sufficiency, homeownership,
and independence for all housing residents. A seven-member board of commissioners governs
the Authority. The Authority’s current executive director is Anthony Scott. Its main
administrative office is located at 901 Chamberlayne Parkway in Richmond, Virginia.
Under the Section 8 Housing Choice Voucher program, the Authority makes rental assistance
payments to landlords on behalf of eligible low-income families. The U.S. Department of
Housing and Urban Development (HUD) compensates the Authority for the cost of
administering the program through administrative fees.
HUD authorized the Authority to provide leased housing assistance payments for 3,147 eligible
households. It authorized the Authority the following financial assistance for housing choice
vouchers:
Amount
Authority fiscal year Annual budget authority disbursed
2006 $20,369,329 $20,369,329
2007 $18,991,134 $18,991,134
Total $39,360,463 $39,360,463
HUD regulations at 24 CFR [Code of Federal Regulations] 982.305(a) state that the public
housing authority may not give approval for the family of the assisted tenancy or execute a
housing assistance contract until the authority has determined that the unit has been inspected by
the authority 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 the 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.
The audit objective addressed in this report was to determine whether the Authority adequately
administered its Section 8 housing quality standards inspection program to ensure that its
program units met housing quality standards in accordance with HUD requirements.
4
RESULTS OF AUDIT
Finding: Controls over Housing Quality Standards Were Inadequate
The Authority did not adequately enforce HUD’s housing quality standards. Of 62 program
units selected for inspection, 42 failed to meet minimum housing quality standards, and 26 of the
42 units materially failed to meet housing quality standards. The Authority’s inspectors did not
report 80 violations, which existed at the units when they did their inspections. The deficiencies
occurred because the Authority lacked adequate procedures and controls to ensure that its
program units met HUD’s housing quality standards. As a result, the Authority spent $68,506 in
program funds on units that materially failed to meet HUD’s housing quality standards and
consequently were not decent, safe, and sanitary. If the Authority does not implement adequate
procedures and controls to ensure that its program units meet HUD’s housing quality standards,
we estimate that over the next year, it will pay more than $1.1 million in housing assistance
payments for units with material violations of housing quality standards.
Section 8 Tenant-Based
Housing Units Did Not Meet
HUD’s Housing Quality
Standards
We statistically selected 62 units from unit inspections passed by the Authority’s
inspectors during the period November 1, 2007, to January 31, 2008. The 62
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
March 10 and March 21, 2008.
Of the 62 units inspected 42 (68 percent) had 174 housing quality standards
violations. Additionally, 26 of the 42 units (62 percent) were considered to be in
material noncompliance since they had health and safety violations that predated
the Authority’s last inspection which were not identified by the Authority’s
inspectors and/or repaired. Of the 42 units with housing quality standards
violations, three 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 26
units had 84 violations (including four 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 80 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
5
table categorizes the 174 housing quality standards violations in the 42 units that
failed the housing quality standards inspections.
Category of violations Number Number
of of
violations units
Electrical 30 16
Window 21 12
Security 16 11
Stair, rails, and porches 14 14
Floor 12 8
Exterior surfaces 10 9
Wall 9 7
Toilet 6 5
Smoke detector 6 6
Lead-based paint 6 3
Ceiling 5 4
Water heater 4 4
Fixed wash basin 4 4
Interior air quality 3 3
Garbage and debris 3 3
Fire exits 3 3
Stove or range with oven 3 3
Roof/gutters 2 2
Site and neighborhood 2 2
violations
Ventilation 2 2
Sink 2 2
Safety of heating equipment 2 2
Space for preparation, 2 2
storage, and serving of food
Other interior hazards 2 2
Refrigerator 2 2
Evidence of infestation 2 2
Tub or shower unit 1 1
Total 174
We presented the results of the housing quality standards inspections to the
Authority’s Housing Choice Voucher program manager and internal audit
manager and to the Director of HUD’s Richmond, Virginia, Office of Public
Housing.
6
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.
Inspection #1: Air conditioner disconnect box on the rear wall of the building is not
secured and wires are exposed. This violation was not identified during the Authority’s
November 6, 2007, inspection.
Inspection #34: The furnace power cable is improperly connected under the switch cover
plate. This violation was not identified during the Authority’s December 5, 2007, inspection.
7
Inspection #46: The roof failed next to the chimney in back of the house. The roof
settled approximately 5" near the chimney. This violation was not identified during the
Authority’s December 13, 2007, inspection.
Inspection #60: There is an unsecured electrical box on the back of the house exposing
electrical contacts. This violation was not identified during the Authority’s November 1,
2007, inspection.
8
Inspection #8: Planters and other small objects are stored on the balcony without a curb
to keep them from falling three stories onto a sidewalk. This violation was not identified
during the Authority’s November 1, 2007, inspection.
Inspection #8: The handrails stop short of the top of the stairs, and a steel bar was used to
create an extension of the handrail. This violation was not identified during the
Authority’s November 1, 2007, inspection.
9
Inspection #33: The plywood panel inside the right/rear bedroom closet separating the
closet from a gas-burning heating furnace is not secured. Combustible items are stored
against the plywood panel. This violation was not identified during the Authority’s
December 20, 2007, inspection.
Inspection #47: The cover plate is missing from the junction box on a wall in the common
laundry room .
10
Inspection #47: The pressure relief valve on the
central water heater in the common basement has a hose
attached to a discharge pipe that does not meet the length
requirements. The room is unsecured and accessible
to all tenants. This violation was not identified during
the Authority’s January 3, 2008, inspection.
The Authority Lacked
Adequate Procedures and
Controls
Although HUD requirements and the Authority’s administrative plan required the
Authority to ensure that its program units met housing quality standards, it failed
to do so because it lacked adequate procedures and controls to ensure compliance
with HUD’s standards. The Authority (1) did not ensure that its housing
inspectors had sufficient knowledge of housing quality standards and (2) did not
implement an effective quality control inspection process.
11
The Authority Did Not Ensure That Its Housing Inspectors Had Sufficient
Knowledge of Housing Quality Standards
The Authority did not ensure that its housing inspectors were adequately trained
or equipped with the knowledge they needed to perform inspections in
compliance with HUD’s housing quality standards requirements. As a result, the
inspectors misinterpreted the requirements and missed or overlooked a number of
violations. The Authority stated that all four of its housing inspectors had
recently taken a Housing Choice Voucher program quality standards course but
that only two of the four were required to take the related certification exam at the
end of the training. We requested the training certificates for the inspectors;
however, the Authority could only provide certificates for two of the four
inspectors.
Three of the four inspectors attributed the housing quality standards failures to a
lack of training. Two of the inspectors stated that electrical outlets were not
checked with a circuit tester after the initial inspection. These inspectors also
indicated that they normally did not inspect outlets or windows in nonsleeping
rooms. One of them stated that electrical receptacles were only tested if tenants
complained. The other inspector stated that he was not aware that the outlets and
windows in nonsleeping rooms should be inspected until he had observed the
HUD Office of Inspector General (OIG) inspector checking those items. He also
stated that he had not checked ventilation systems or handrails on porches during
inspections. Another inspector stated that the inspection process was inconsistent
among the Authority’s inspectors because each inspector interpreted housing
quality standards requirements in his/her own way. The Authority needs to
ensure that all its inspectors are equipped with the knowledge they need to
perform inspections in a consistent manner and in compliance with HUD
requirements.
The Authority Did Not Implement an Effective Quality Control Inspection
Process
The Authority did not implement an effective quality control process as a tool to
ensure that inspections were performed in compliance with HUD’s housing
quality standards. It did not have written or documented procedures for
performing quality control inspections of its program units. The Authority relied
on its housing inspectors’ judgment for its quality control inspection process
instead of providing them with procedures for an effective quality control process.
HUD regulations at 24 CFR 985.3 require housing authorities to designate a
supervisor or other qualified person to conduct quality control inspections on a
sample of units under contract during the authority’s fiscal year. Between
December 2007 and August 2008, the Authority did not have a supervisory
housing inspector. During that time, quality control inspections alternated among
the Authority’s four housing inspectors. The Authority could not demonstrate
that all of the inspectors performing the quality control inspections had received
12
housing quality standards training. As stated above, the Authority could only
provide training certificates for two of the four inspectors, and only those two
inspectors were required to take the related certification examination after
completing the training.
According to HUD regulations at 24 CFR 985.3, an authority’s sample for quality
control inspections is to be drawn from housing quality standards inspections
performed during the three months preceding reinspection and is to be drawn to
represent a cross-section of neighborhoods and the work of a cross-section of
inspectors. Also, based on HUD’s definition of a quality control sample, the
sample should be unbiased. Authority staff stated that units selected for quality
control inspections came from units that had failed an annual or initial inspection
and that a random selection of the followup inspections for those units was
combined with quality control inspections. In other words, the Authority used
followup inspections of previously failed units to satisfy the requirement for
quality control inspections. Authority staff stated that the followup inspections
were used to satisfy the quality control inspection requirement because the
Authority was short staffed. The Authority’s methodology for selecting its
quality control sample was inconsistent with HUD’s definition of a quality control
sample because it resulted in a biased selection of only failed units for quality
control reviews. Further, the Authority’s methodology prevented it from
detecting instances in which units were erroneously passed by its inspectors
because it only sampled failed units.
HUD’s Housing Choice Voucher Guidebook 7420.10G states that the results of
quality control inspections should be provided as feedback on inspectors’ work
which can be used to determine if individual performance or general housing
quality standards training issues need to be addressed. The Authority provided
reports on the followup inspections that were also labeled as quality control
inspections. However, the reports lacked a formal critique of the Authority’s
inspection process or of inspectors’ performance, and the Authority could not
demonstrate that the results of the quality control inspections were used as a tool
to assess and improve its housing inspectors’ performance. Authority staff stated
that the results of the quality control inspections were verbally discussed with the
inspectors and that the feedback discussions were not documented. The
Authority’s administrative plan states that the purpose of quality control
inspections is to ascertain that each inspector conducts accurate and complete
inspections, and to ensure that there is consistency among inspectors in the
application of the housing quality standards. However, two of the Authority’s
housing inspectors indicated that there was a lack of consistency among
inspectors in the application of standards.
The Authority needs to develop and implement documented or written procedures
for an effective quality control process that complies with HUD requirements.
The quality control procedures should reflect a sampling methodology that is
13
unbiased so that the Authority can use the results of its quality control inspections
as a tool to effectively assess and improve its inspectors’ performance.
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
its program units complied with HUD’s housing quality standards. In accordance
with HUD regulations at 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. The Authority disbursed $63,604 in
housing assistance payments to landlords for the 26 units that materially failed to
meet HUD’s housing quality standards and received $4,902 in program
administrative fees. If the Authority implements adequate procedures and controls
regarding its program unit inspections to ensure compliance with HUD’s housing
quality standards, we estimate that more than $1.1 million in future housing
assistance payments will be spent for 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
require the Authority to
1A. Certify that the owners of the 42 program units cited in this finding have
repaired the units containing housing quality standards violations.
1B. Reimburse HUD’s program $68,506 from nonfederal funds ($63,604 for
housing assistance payments and $4,902 in associated administrative fees)
for the 26 units that materially failed to meet HUD’s housing quality
standards.
1C. Implement adequate procedures and controls to ensure that all units meet
HUD’s housing quality standards to prevent $1,138,025 in program funds
from being spent on units that do not meet the standards.
14
SCOPE AND METHODOLOGY
To accomplish our objective, we reviewed
Applicable laws; regulations; the Authority’s administrative plan, effective July 1, 2005;
HUD’s program requirements at 24 CFR Parts 982 and 985; and HUD’s Housing Choice
Voucher Guidebook 7420.10G.
The Authority’s accounting records, annual audited financial statements for 2005 and 2006,
tenant files, computerized databases, policies and procedures, board meeting minutes from
September 2005 to May 2007, organizational chart, and program annual contributions
contract.
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 found the data to be adequate for our purposes.
We statistically selected 62 of the Authority’s program units to inspect from 545 unit inspections
passed by the Authority’s inspectors during the period November 1, 2007, to January 31, 2008. We
selected the sample using the U.S. Army Audit Agency Statistical Sampling System, Version 6.3,
software. The 62 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 26 of 62 units (42 percent) materially failed to meet HUD’s
housing quality standards. Materially failed units were those with at least one 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 62 from a total population of 545, an estimate of 42 percent (26
units) of the sample population materially failed housing quality standards inspections. The
sampling error is plus or minus 9.70 percent. There is a 90 percent confidence that the frequency
of occurrence of program units materially failing housing quality standards inspections lays
between 32.23 and 51.64 percent of the population. This equates to an occurrence of between
175 and 281 units in the population. We used the most conservative numbers, which is the lower
limit or 175 units.
We analyzed the applicable Authority databases and estimated that the annual housing assistance
payment per recipient in our sample universe was $6,503. Using the lower limit of the estimate
of the number of units and the estimated annual housing assistance payment, we estimate that the
15
Authority will spend $1,138,025(175 units times $6,503 estimated average annual housing
assistance) annually for units that are in material noncompliance with HUD’s housing quality
standards.
We performed our on-site audit work from February through July 2008 at the Authority’s
Section 8 office located at 918 Chamberlayne Parkway, Richmond, Virginia. The audit covered
the period June 2005 through June 2007 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
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective(s).
16
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.
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.
Significant Weaknesses
Based on our review, we believe the following item is a significant weakness:
17
The Authority lacked sufficient procedures and controls to ensure that
program unit inspections complied with HUD regulations and that
program units met minimum housing quality standards.
18
APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
AND FUNDS TO BE PUT TO BETTER USE
Recommendation Ineligible 1/ Funds to be put
number to better use 2/
1B $68,506
1C $1,138,025
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 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 recommendation, 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, thereby putting
approximately $1,138,025 in program funds to better use. Once the Authority
successfully implements our recommendation, this will be a recurring benefit. Our
estimate reflects only the initial year of this benefit.
19
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1
Comment 2
20
Comment 1
21
OIG Evaluation of Auditee Comments
Comment 1 We are encouraged by the Authority’s statements that it is taking corrective action
and will continue to take corrective action to address the recommendation.
Comment 2 We provided the Authority the results of our housing quality standard inspections
in May 2008; therefore, the Authority has had adequate time to conduct an
analysis to determine the findings of this report. Our audit findings and related
recommendations are based on audit work performed in accordance with
generally accepted auditing standards. Since the Authority did not properly use
its program funds when it failed to ensure that its program units complied with
HUD’s housing quality standards the applicable housing assistance payments
made for these units were ineligible. Additionally, in accordance with HUD
regulations at 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.
22
The Richmond Redevelopment and Housing Authority, Richmond, Virginia, Did Not Ensure That Its Section 8 Housing Choice Voucher Program Units Met Housing Quality Standards
Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-11-14.
Below is a raw (and likely hideous) rendition of the original report. (PDF)