oversight

The Delaware County Housing Authority, Woodlyn, Pennsylvania, 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 2008-12-03.

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

                                                               Issue Date
                                                                     December 3, 2008
                                                               Audit Report Number
                                                                     2009-PH-1002




TO:        Dennis G. Bellingtier, Director, Office of Public Housing, Pennsylvania State
            Office, 3APH



FROM:      John P. Buck, Regional Inspector General for Audit, Philadelphia Regional
            Office, 3AGA

SUBJECT:   The Delaware County Housing Authority, Woodlyn, Pennsylvania, 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 Delaware County 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 and final of two 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 ensured 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 61
         housing units and found that 60 units did not meet HUD’s housing quality
         standards. Moreover, 32 of the 60 units had health and safety violations that the
         Authority’s inspectors did not observe or report during their last inspection. The
         Authority spent $43,324 in program and administrative funds for these 32 units.

         The Authority did not properly abate rents when units failed its housing quality
         standards inspections. We reviewed 25 program units that did not pass the
         Authority’s housing quality standards inspections and determined that the
         Authority failed to abate payments for 21 of the units and inappropriately abated
         payments for four units. The 21 units remained in a failing status for as long as
         65 days. However, the Authority failed to abate the program rents or terminate
         the contracts for these units, resulting in improper payments of $6,522. In four
         cases, the Authority did not resume the housing assistance payments once the
         units became compliant with housing quality standards, resulting in $1,520 in
         underpayments to landlords.

         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 and that abatement requirements are enforced, HUD will pay more than
         $1.9 million in housing assistance on units with material housing quality
         standards violations and for units that should have had assistance payments
         abated.


What We Recommend

         We recommend that the Director of HUD’s Pennsylvania State Office of Public
         Housing 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 $43,324 in program and
         administrative 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 $1.9 million from being spent annually on units that materially fail to
         meet HUD’s housing quality standards. Further, we recommend that HUD
         require the Authority to reimburse its program $6,522 for the 21 units for which it
         did not abate assistance payments, pay landlords $1,520 for payments that were
         not abated correctly, and enforce its established policies and procedures to ensure
         that its abatements comply with HUD requirements, thereby preventing an
         estimated $26,000 from being spent annually on units that should have had
         assistance payments abated.

         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.
                                          2
Auditee’s Response


           We provided our discussion draft audit report to the Authority’s executive
           director and HUD officials on October 22, 2008. We discussed the audit results
           with the Authority and HUD officials throughout the audit and at an exit
           conference on October 30, 2008. The Authority provided written comments to
           our draft report on November 7, 2008. The complete text of the Authority’s
           response, along with our evaluation of that response, can be found in appendix B
           of this report.




                                           3
                            TABLE OF CONTENTS

Background and Objectives                                                     5

Results of Audit
      Finding 1: Controls over Housing Quality Standards Were Inadequate      6
      Finding 2: The Authority Did Not Abate Housing Assistance Payments as   14
      Required

Scope and Methodology                                                         17

Internal Controls                                                             19

Appendixes
   A. Schedule of Questioned Costs and Funds to Be Put to Better Use          21
   B. Auditee Comments and OIG’s Evaluation                                   22




                                            4
                      BACKGROUND AND OBJECTIVES

The Delaware County Housing Authority (Authority) was created by the Delaware County
Council in January 1938. The Authority was created to address the lack of decent, safe, and
sanitary housing for the low-income families in the Delaware County, Pennsylvania, area. The
Authority is governed by a board of commissioners made up of a chairman, vice chairman,
secretary, assistant secretary, treasurer, and assistant treasurer. The current executive director is
Lawrence E. Hartley. The Authority’s main administrative office is located at 1855 Constitution
Avenue, Woodlyn, Pennsylvania.

Under the Section 8 Housing Choice Voucher program, the Authority makes rental assistance
payments to landlords on behalf of eligible low-income families. 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 2,753 eligible
households. It authorized the Authority the following financial assistance for fiscal years 2005
through 2007:

                Authority fiscal         Annual budget
                     year                  authority                  Disbursed
                    2005                  $21,541,266                $21,541,266
                    2006                  $20,026,512                $20,026,512
                    2007                  $20,560,195                $20,560,195
                    Totals                $62,127,973                $62,127,973

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 ensured its
program units met housing quality standards in accordance with U.S. Department of Housing
and Urban Development (HUD) requirements. As part of this audit, we also reviewed the
Authority’s portability program. Minor findings noted in relation to the program were separately
communicated to the Authority in a letter dated November 17, 2008.




                                                  5
                                 RESULTS OF AUDIT

Finding 1: Controls over Housing Quality Standards Were Inadequate
The Authority did not adequately enforce HUD’s housing quality standards. Of 61 program
units selected for inspection, 60 did not meet HUD’s housing quality standards, and 32
materially failed to meet housing quality standards. The Authority’s inspectors did not observe
or report 308 health and safety violations which existed at the units when they conducted their
inspections. The deficiencies occurred because the Authority did not ensure that its housing
inspectors had sufficient knowledge of housing quality standards and did not implement an
effective quality control inspection process. As a result, the Authority spent $43,324 in program
and administrative 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 $1.9 million in housing
assistance for units that materially fail to meet housing quality standards.



 Section 8 Tenant-Based
 Housing Units Were Not in
 Compliance with HUD’s
 Housing Quality Standards


               We statistically selected 61 units from unit inspections passed by the Authority’s
               inspectors during the period November 1, 2007, to January 31, 2008. The 61
               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
               February 26 and March 7, 2008.

               Of the 61 units inspected 60 (98 percent) had 640 housing quality standards
               violations. Additionally, 32 of the 60 units (52 percent) were considered to be in
               material noncompliance since they had health and safety violations that predated
               the Authority’s last inspection and were not identified by the Authority’s
               inspectors and/or repaired. The 32 units had 308 health and safety violations that
               existed before the Authority’s last inspection report and were not identified by the
               Authority’s inspectors. 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.




                                                6
The following table categorizes the 640 housing quality standards violations in
the 60 units that failed the housing quality standards inspections.

    Category of violations             Number        Number
                                          of           of
                                      violations      units
      Electrical                         187           43
      Security                            59           28
      Other potentially hazardous         40           20
      features
      Site and neighborhood               39            20
      conditions
      Wall condition                      37            18
      Stairs, porch, landing, and         35            25
      deck
      Tub/shower                          26            21
      Floor conditions                    25            13
      Other interior hazards              24            14
      Stove, oven, and refrigerator       21            16
      Heating, ventilation, and           20            13
      plumbing
      Interior stairs                     19            17
      Lead-based paint                    18             6
      Windows                             14             5
      Exterior surfaces                   14            12
      Roof and gutters                    13            10
      Ceiling conditions                  11             7
      Smoke detectors                     11             8
      Toilet                              10             9
      Space for preparation,               8             7
      storage, and serving of food
      Sink and cabinets                    3             3
      Evidence of infestation              2             2
      Access to units                      1             1
      Foundation                           1             1
      Fire exits                           1             1
      Chimney                              1             1
                  Total                    640

We presented the results of the housing quality standards inspections to the
Authority and to the Director of HUD’s Pennsylvania State Office of Public
Housing.



                                 7
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 V54274: There are exposed wires in the recessed light fixture. This violation
            was not identified during the Authority’s December 12, 2007, inspection.




            Inspection V53442: The switch is not installed in the proper switch box, exposing
            electrical wiring. This violation was not identified during the Authority’s January 7, 2008,
            inspection.

                                                    8
Inspection V54218: The recessed light fixture at the base of stairs is not secure and wires
are exposed. This violation was not identified during the Authority’s November 21, 2007,
inspection.




Inspection V45074: The furnace flue is disconnected from the wall, allowing harmful
gases back into the basement. This violation was not identified during the Authority’s
November 28, 2007, inspection.




                                        9
Inspection V73332: Improper and poor ventilation of the heating and air conditioning unit
allows harmful gases to seep back into the basement. This violation was not identified
during the Authority’s January 28, 2008, inspection.




Inspection V07006: The handrail is not running the full length of the basement stairs. This
violation was not identified during the Authority’s December 12, 2007, inspection.




                                      10
            Inspection V73712: The handrail is not running the full length of the basement stairs. This
            violation was not identified during the Authority’s December 10, 2007, inspection.

The Authority Did Not Have
Adequate Procedures and
Controls over Its Inspectors


            Although HUD regulations at 24 CFR 982.401 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 did not ensure that its housing inspectors
            had sufficient knowledge of housing quality standards and did not implement an
            effective quality control inspection process.

            The Authority’s Housing Inspectors Did Not Have Sufficient Knowledge of
            Housing Quality Standards

            The Authority’s housing inspectors did not have sufficient knowledge of housing
            quality standards. The Authority did not ensure its three housing inspectors were
            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’s inspectors stated that a number of the missed violations we found
            were simply overlooked but that some violations were missed due to insufficient
            training. For example, the inspectors stated that electrical outlets were not
            checked with a circuit tester to ensure that they were wired correctly. They stated
            that they were only trained to ensure that electricity was running to the outlet and
            not that it was wired correctly. The inspectors also stated that they were required
            to perform from 8 to 14 inspections per day and that the quality of inspections
            sometimes suffered because of their workload. The Authority needs to ensure
                                              11
             that all of its inspectors are equipped with the knowledge and resources 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 as a Tool to Ensure That Inspections Were Performed in Compliance
             with HUD’s Housing Quality Standards

             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. HUD regulations at 24 CFR 982.54(d) require the public
             housing authority’s administrative plan to sufficiently cover policies, procedural
             guidelines, and performance standards for conducting housing quality inspections.
             The Authority’s administrative plan sufficiently covered policies, procedural
             guidelines, and performance standards for conducting housing quality inspections.
             However, the Authority did not adequately use its quality control inspections to
             determine whether individual performance or specific housing quality standards
             training issues needed to be addressed.

             The Authority’s administrative plan states that the purpose of quality control
             inspections is to determine 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. Also, HUD’s Housing Choice
             Voucher Guidebook 7420.10G states that the results of the quality control
             inspections should be provided as feedback on inspectors’ work, which can be
             used to determine whether individual performance or general housing quality
             standards training issues need to be addressed.

             The Authority performed 103 quality control inspections from October 1, 2005,
             through September 31, 2007. The Authority’s quality control results differed
             significantly from its original inspection results. Of the 103 initially passed
             inspections, 53 passed and 50 failed. The results of the quality control inspections
             demonstrated problems with the Authority’s original housing quality standards
             inspections. The Authority stated that the results of the quality inspections were
             verbally communicated to the housing inspectors. However, we did not find
             sufficient evidence to show that the Authority used the results of the followup
             quality control inspections to identify training issues that needed to be addressed.

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
                                              12
          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 $39,839 in
          housing assistance payments to landlords and received $3,485 in program
          administrative fees for the 32 units that materially failed to meet HUD’s housing
          quality standards. If the Authority implements an effective quality control program
          and ensures that inspectors are equipped with the knowledge they need to perform
          inspections in a consistent manner and in compliance with HUD requirements, we
          estimate that more than $1.9 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 Pennsylvania State Office of Public
          Housing require the Authority to

          1A.     Certify that the owners of the 60 program units cited in this finding have
                  repaired the units containing housing quality standards violations.

          1B.     Reimburse HUD’s program $43,324 from nonfederal funds ($39,839 for
                  housing assistance payments and $3,485 in associated administrative fees)
                  for the 32 units that materially failed to meet HUD’s housing quality
                  standards.

          1C.     Ensure that its housing inspectors are equipped with the knowledge they
                  need to perform inspections in compliance with HUD’s housing quality
                  standards and implement an effective quality control process to prevent
                  $1,908,312 in program funds from being spent on units that do not comply
                  with the standards.




                                            13
Finding 2: The Authority Did Not Abate Housing Assistance Payments
as Required
The Authority did not appropriately abate housing assistance payments after its inspectors
determined that program units did not meet housing quality standards. We reviewed the files for
25 program units that failed the Authority’s housing quality standards inspections and
determined that payments for 21 units were not abated and payments for four units were not
abated correctly. This condition occurred because Authority personnel failed to follow the
Authority’s own policies regarding abatements. As a result, the Authority paid $6,522 in
ineligible housing assistance for units that were not decent, safe, and sanitary. The Authority
also underpaid landlords $1,520 in housing assistance for four units with improperly abated
payments. We estimate that over the next year, HUD will pay more than $26,000 in housing
assistance for units for which the Authority should have abated the payments.



 The Authority Did Not
 Appropriately Abate Payments
 for Failed Units


              The Authority did not abate housing assistance payments as required. HUD
              regulations at 24 CFR 982.404(a) require public housing authorities to take
              prompt and vigorous action to enforce the owners’ obligations and state that the
              authorities must not 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 authority and the authority has verified
              the correction. The timeframe for correction of life-threatening violations will be
              no more than 24 hours, and other violations will be corrected within no more than
              30 calendar days. The Authority made ineligible housing assistance payments
              totaling $6,522 because it paid owners for units that continued to have housing
              quality standards violations although the period for the owners to make the
              necessary repairs had expired. Using inspection data for the period November 1,
              2007, through January 31, 2008, we determined that there were 54 housing units
              in which the owners did not repair the housing quality standards violations within
              the required 30-day timeframe. We selected 25 of the 54 units to determine
              whether the Authority properly abated the housing assistance payments. The
              Authority failed to abate payments for 21 units (84 percent) as required. The 21
              units were in a failed status between 40 and 65 days.

              Of the 25 housing units reviewed, the Authority abated the housing assistance
              payments for four units (16 percent). However, these payments were not abated
              correctly. The Authority’s administrative plan states that housing assistance
              payments will resume effective the day the unit passes inspection. However, the
              Authority did not resume the payments until the beginning of the month after the

                                              14
             units came into compliance with housing quality standards and not the day the
             unit passed inspection. As a result, the Authority underpaid the landlords $1,520
             in housing assistance.

The Authority Overlooked
Established Policies and
Procedures


             The Authority did not follow HUD requirements and its own policies and
             procedures when it failed to abate payments for 21 units and incorrectly abated
             payments for four units. The Authority’s administrative plan clearly defines its
             policies for abating payments for units that fail to meet housing quality standards.
             Specifically, the plan states that if an owner fails to correct housing quality
             standards deficiencies by the specified date, the Authority will abate housing
             assistance payments no later than the first of the month following the specified
             correction period. Also, the plan states that the housing assistance for units with
             abated payments will resume effective the day the unit passes inspection. The
             Authority needs to enforce its policies and procedures to ensure that it
             appropriately abates housing assistance payments when necessary.

Conclusion


             Contrary to HUD regulations and its own administrative plan, the Authority made
             assistance payments for units that had housing quality standards violations
             although the period for the owners to make the necessary repairs had expired. As
             a result, the Authority made ineligible housing assistance payments totaling
             $6,522. Also, the Authority did not abate housing assistance in accordance with
             its own administrative plan. As a result, it underpaid its landlords $1,520 in
             housing assistance.

             If the Authority implements the recommendations in this report to ensure
             compliance with HUD regulations and its own administrative plan for enforcing
             housing quality standards, we estimate that over a one-year period, $26,088 in
             housing assistance payments will be properly abated for units that are not in
             compliance with housing quality standards, and those funds can be spent on
             housing 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 Pennsylvania State Office of Public
             Housing require the Authority to

                                              15
2A.   Repay its program, $6,522 from nonfederal funds for the housing
      assistance payments identified by the audit that were not abated as
      required.

2B.   Pay $1,520 from program funds to landlords whose housing assistance
      payments were not abated correctly.

2C.   Enforce its established policies and procedures to ensure that its
      abatements comply with HUD requirements thereby putting $26,088 in
      program funds to better use over a one-year period.




                               16
                         SCOPE AND METHODOLOGY

To accomplish our objective, we reviewed

       Applicable laws, regulations, the Authority’s administrative plan, 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,
       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 61 of the Authority’s program units to inspect from 612 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 software. The
61 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 32 of 61 units (52 percent) materially failed to meet HUD’s
housing quality standards. Materially failed units were those with at least one health and safety
violation or exigent (24-hour) 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.

Projecting our sample review results of the 32 units (52 percent) that materially failed housing
quality standards inspections indicates that 322 (or 52.46 percent of the total population) of 612
units would materially fail to meet housing quality standards. The sampling error is plus or
minus 9.98 percent. There is a 90 percent confidence that the frequency of occurrence of
program units materially failing housing quality standards inspections lays between 42.48 and
62.44 percent of the population. This equates to an occurrence of between 259 and 382 units of
the 612 units in the population. We used the most conservative number, which is the lower limit
or 259 units.

We analyzed the applicable Authority databases and estimated that the average annual housing
assistance payment per recipient in our sample universe was $7,368. Using the lower limit of the

                                                 17
estimate of the number of units and the estimated average annual housing assistance payment,
we estimate that the Authority will spend $1,908,312 (259 units times $7,368 estimated average
annual housing assistance) annually for units that are in material noncompliance with HUD’s
housing quality standards.

Using the inspection data provided by the Authority for all inspections performed between
November 1, 2007, and January 31, 2008, we determined that the Authority performed housing
quality standards inspections on a total of 786 units. Using data mining software, we determined
that 343 of the units failed the Authority’s housing quality standards inspection at least once.
The Authority should have abated housing assistance payments to owners of 54 of the 343 units
because the owners did not make repairs within 30 calendar days as required. We selected the
top 25 units with the greatest number of days between failed and passed inspection to review. Of
the 25 units reviewed, the Authority failed to abate payments on 21 units (84 percent) as required
and improperly abated payments on four units (16 percent). The units were in a failed status
between 40 and 65 days after the original failed inspection. We calculated $6,522 in ineligible
payments by identifying the monthly housing assistance payments for each tenant that should
have been abated by reviewing the Authority’s housing assistance payment register. We
determined the daily payment amounts by dividing the monthly payment by 30 (days in a month)
and calculated the ineligible payment for each tenant by multiplying the number of days the
payments should have been abated by the daily payment amounts. Since we reviewed units from
a universe of inspections that occurred during a three-month period of activity, we multiplied
$6,522 by four to conservatively estimate that the Authority could put $26,088 to better use over
a period of a year by abating assistance payments as required.

Our estimates are presented solely to demonstrate the annual amount of program funds that could
be put to better use on decent, safe, and sanitary housing if the Authority implements our
recommendations. While these benefits would recur indefinitely, we were conservative in our
approach and only included the initial year in our estimate.

We performed our on-site audit work from February through September 2008 at the Authority’s
Section 8 office located at 1855 Constitution Avenue, Woodlyn, Pennsylvania. The audit
covered the period October 2005 through January 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
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                               18
                             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:



                                               19
The Authority lacked sufficient procedures and controls to ensure that unit
inspections complied with HUD regulations, that program units met
minimum housing quality standards, and that assistance payments were
abated for units that did not meet housing quality standards.




                         20
                                 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               $43,324
                               1C                                   $1,908,312
                               2A                  $6,522
                               2B                                       $1,520
                               2C                                      $26,088
                             Total              $49,846             $1,935,920



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

2/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an Office of Inspector General (OIG) recommendation is
     implemented. This includes reductions in outlays, deobligation of funds, withdrawal of
     interest subsidy costs not incurred by implementing recommended improvements,
     avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
     which are specifically identified. In this instance, if the Authority implements our
     recommendations, it will use $1,520 in Section 8 funds to serve its purpose of assisting
     eligible families, and 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 $1.9 million 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.




                                              21
      Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         22
Comment 1




Comment 2




Comment 3




Comment 4




            23
Comment 5




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                         OIG Evaluation of Auditee Comments


Comment 1   We have modified this section of the report to state that the inspectors did not
            observe and/or report health and safety violations.

Comment 2   We agree that many of the violations between the date of the Authority’s latest
            inspection and our inspection could be caused by tenant abuse. In fact, of the 640
            violations noted during our inspection we only considered 337 of the violations to
            have pre-dated the Authority’s last inspection. We used our professional
            knowledge and tenant interviews in determining whether a housing quality
            standards violation existed prior to the last passed inspection conducted by the
            Authority. During our inspections, the auditor and the HUD OIG housing
            inspector questioned the tenants about the violations identified during the
            inspections in order to determine whether the violations were preexisting or not.
            The HUD OIG housing inspector documented the preexisting conditions on the
            inspection report and took pictures of the violations as needed.

Comment 3   We acknowledge that the Authority provided training to its inspection staff.
            However, the inspectors were not equipped with the knowledge that they needed
            to perform inspections in compliance with HUD’s housing quality standards
            requirements. For example, three of the Authority’s inspectors were unaware of
            the need to test electrical outlets for proper wiring and grounding. They made
            sure the outlet had electrical current running to it, but did not check to ensure it
            was wired or grounded properly. We have revised the language in the report to
            more clearly reflect the causes of the deficiencies noted.

Comment 4   We are encouraged that the Authority has already taken steps to improve its
            housing quality standards training program by holding housing quality standards
            training for its owners and landlords.

Comment 5   The Authority was very cooperative and professional throughout the audit
            engagement. We commend the Authority for creating a favorable environment
            for conducting the audit which allowed us to complete our audit work in a timely
            manner. We are encouraged that the Authority looks to use the results of this
            audit to better its programs.




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