oversight

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)

                                                               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.




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