oversight

State of Connecticut Department of Social Services' Section 8 Housing Units Did Not Always Meet HUD's Housing Quality Standards

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-11-02.

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

                                                                  Issue Date
                                                                           November 2, 2009
                                                                  Audit Report Number
                                                                               2010-BO-1001




TO:         Donna J. Ayala, Director, Office of Public Housing, Boston Hub, 1APH


FROM:
            John A. Dvorak, Regional Inspector General for Audit, Boston Region, 1AGA

SUBJECT: The State of Connecticut Department of Social Services’ Section 8 Housing
           Units Did Not Always Meet HUD’s Housing Quality Standards


                                    HIGHLIGHTS

 What We Audited and Why

             We audited the State of Connecticut Department of Social Services’ (agency)
             administration of its housing quality standards program for its Section 8 Housing
             Choice Voucher program (Voucher program) as part of our fiscal year 2009 audit
             plan. The agency was selected based upon our analysis of risk factors relating to
             rental housing authorities in Region 1. The audit objectives were to determine
             whether (1) Section 8 housing units met HUD’s housing quality standards, (2)
             housing inspections were performed in a timely manner, (3) housing assistance
             payments were properly abated when units did not meet standards, (4) landlords
             were notified of failing inspection results, and (5) the quality control reviews of
             inspections were adequately performed in support of the agency’s Section Eight
             Management Assessment Program (SEMAP) scores. This is the third and final
             audit of the agency.
What We Found


           The agency did not adequately ensure that its Section 8 housing units met HUD’s
           housing quality standards. Of the 67 program units statistically selected for
           inspection, 53 failed inspection, and 34 were materially noncompliant with
           housing quality standards. In addition, the agency did not always perform its
           inspections in a timely manner, properly abate the housing assistance payments
           when repairs were not made as required or notify the owners of inspection results
           in a timely manner. The agency also did not have an adequate housing quality
           standards quality control process.


What We Recommend


           We recommend that the Director of HUD’s Boston Office of Public Housing
           require the agency to strengthen controls to ensure that it follows HUD’s
           procedures for conducting inspections and performing Section 8 quality control
           inspections to ensure that units meet HUD’s housing quality standards to prevent
           $22 million in program funds from being spent annually on units that fail to
           materially meet HUD’s housing quality standards. In addition, the agency should
           be required to reimburse its program from nonfederal funds $62,459 for units that
           remained in noncompliance with housing quality standards and were not properly
           abated.

           For each recommendation in the body of the report 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 agency the draft report on October 15, 2009, and held an exit
           conference on October 20, 2009. The agency generally agreed with our findings
           and recommendations.

           We received the agency’s response on October 28, 2009. 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 1: The Agency’s Section 8 Housing Units Did Not Always Meet   5
      Housing Quality Standards

Scope and Methodology                                                       14

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
   C. HUD Comments and OIG’s Evaluation                                     25




                                            3
                      BACKGROUND AND OBJECTIVES

The State of Connecticut Department of Social Services (agency) provides a broad range of
services to the elderly; persons with disabilities; families; and individuals who need assistance in
maintaining or achieving their full potential for self-direction, self-reliance, and independent
living. The agency is designated as a public housing agency for the purpose of administering the
Section 8 program under the Federal Housing Act. It is headed by the commissioner of social
services, and there are deputy commissioners for administration and programs. There is a
regional administrator responsible for each of the three service regions. By statute, there is a
statewide advisory council to the commissioner, and each region must have a regional advisory
council. The agency administers most of its programs through offices located throughout the
state.

The agency’s Housing Services Unit oversees the Section 8 Housing Choice Voucher program
(Voucher program), as well as its Rental Assistance, Transitionary Rental Assistance, and
Security Deposit Guarantee programs. The agency receives Voucher program funding from the
U.S. Department of Housing and Urban Development (HUD). It received more than $44 million
in Voucher program funding from April 1, 2008, through March 31, 2009. It also earned more
than $4 million in administrative fees for the same period.

The agency’s Voucher program is a statewide program. The agency contracts the administration
of its Voucher program to J. D’Amelia & Associates, LLC. J. D’Amelia & Associates, LLC,
subcontracts operation of the Voucher program throughout Connecticut to seven local public
housing authorities and one community action agency. J. D’Amelia and Associates, LLC, also
subcontracts inspections to two inspection companies (Kelson Associates, Inc., and Daystar
Housing Inspections, LLC).

The agency must operate its Voucher program according to rules and regulations prescribed by
HUD in accordance with the United States Housing Act of 1937, as amended, its annual
contributions contract, and follow its Section 8 administrative plan.

Our objectives were to determine whether (1) Section 8 housing units met HUD’s housing
quality standards, (2) housing inspections were performed in a timely manner, (3) housing
assistance payments were properly abated when units did not meet standards, (4) landlords were
notified of failing inspection results, and (5) the quality control reviews of inspections were
adequately performed in support of the agency’s Section Eight Management Assessment
Program (SEMAP) scores.




                                                 4
                                      RESULTS OF AUDIT

Finding 1: The Agency’s Section 8 Housing Units Did Not Always
Meet Housing Quality Standards
The agency did not adequately ensure that its Section 8 housing units met HUD’s housing
quality standards. Of the 67 Section 8 housing units statistically selected for inspection, 53
failed inspection, and 34 were materially noncompliant with housing quality standards. In
addition, 20 of 671 inspections were not performed in a timely manner. The agency also did not
ensure that its contractor properly abated housing assistance payments when repairs were not
completed in a timely manner or always notify landlords of failed units in a timely manner.
Finally, the agency’s housing quality standards quality control program was inadequate, and its
contractor could not adequately support housing quality standards SEMAP scores for indicators
5 and 6. These conditions occurred because the agency failed to adequately monitor its
contractor and subcontractors and implement an effective quality control program. As a result,
the agency housed families in units that did not meet HUD’s standards for decent, safe, and
sanitary housing and paid $62,459 in housing assistance for units that did not meet housing
quality standards and were not abated as necessary.2 If the agency does not establish effective
management controls, we estimate that over the next year, it will pay more than $22 million in
Section 8 housing assistance for units with material housing quality standards violations.



    The Agency’s Section 8 Units
    Did Not Meet HUD’s Standards


                 From the agency’s 6,174 units, we statistically selected 67 Section 8 housing units
                 for inspection. The 67 units were inspected to determine whether the agency
                 ensured that its program units met HUD’s housing quality standards. The
                 inspections took place between April 14 and June 16, 2009.

                 Of the 67 units inspected, 53 (79 percent) had 353 housing quality standards
                 violations. Additionally, 34 of the 67 units (51 percent) were considered to be
                 materially noncompliant because they had 190 significant health and safety
                 violations that predated the agency’s last inspection and were not identified by the
                 agency’s inspectors. HUD regulations at 24 CFR (Code of Federal Regulations)
                 982.401 require that all program housing meet HUD’s housing quality standards
                 at the beginning of assisted occupancy and throughout the tenancy.



1
  These 67 files were the original sample prior to replacements needed during the inspections process.
2
 This was a separate nonrepresentative sample of 82 failed inspections reviewed to determine whether the agency
properly abated rents when owners did not repair deficiencies in accordance with the its administrative plan.

                                                        5
The following table categorizes the 353 housing quality standards violations in
the 53 units that failed the housing quality standards inspections.

 Category of violations    Number of violations      Number of units
 Electrical                110                       40
 Smoke detectors           35                        22
 Other interior hazards    31                        19
 Windows                   28                        15
 Handrails                 25                        20
 Security                  21                        13
 Doors                     10                        7
 Interior paint            9                         2
 Garbage and debris        8                         8
 Floor conditions          7                         6
 Plumbing                  7                         6
 Exterior surfaces         6                         5
 Walls                     6                         4
 Fire exits                6                         6
 Kitchen appliances        5                         5
 Ceiling conditions        5                         3
 Water heaters             5                         5
 Sinks, cabinets, and      4                         2
 countertops
 Toilets                   4                         4
 Exterior paint            4                         4
 Ventilation               3                         3
 Stairs                    3                         3
 Site and neighborhood     3                         3
 Mold/mildew               2                         2
 Porches                   2                         2
 Infestation               2                         2
 Tub or shower             1                         1
 Heating equipment         1                         1
 Total                     353

We presented the results of the housing quality standards inspections to the
agency and to the Public Housing Director of HUD’s Hartford Program Center.
The agency’s contractor notified the owners of the deficiencies and started to
follow up to ensure that the repairs were made as necessary or it abated the
housing assistance payments.

The following pictures illustrate some of the violations noted while conducting
housing quality standards inspections at the agency’s leased units.


                                 6
The electrical panel on the basement wall was missing seven breakers, exposing
electrical contacts.




The missing lock hook from the patio doorframe did not allow the door to be
properly secured.



                                7
The interior hall staircase from the first to second floor had no handrail.




The tub, tile, and walls had excessive mildew buildup.




                                  8
           The wiring was exposed at the junction box and the taped wire was also not
           encased in the junction box.


Annual Inspections Were Not
Performed in a Timely Manner

           The agency did not perform inspections in a timely manner or within 12 months
           of the previous inspection for 20 of 67 units (30 percent). Annual inspections
           must be scheduled so that all units are inspected every 12 months. Further, the
           agency's administrative plan required that annual inspections were conducted at
           least 30 days prior to the anniversary date. Neither the agency nor its contractor
           monitored or tracked the scheduling of inspections to ensure that they were
           performed in a timely manner. The inspection process was handled entirely by
           subcontractors (public housing authorities and inspection companies). In some
           instances, the lack of timeliness was due to the public housing authorities’ not
           requesting the inspection in a timely manner before the due date. In other
           instances, the public housing authorities requested the inspection in a timely
           manner, but it was not scheduled by the inspection company until up to two
           months later. There were also instances, in which the inspection was requested
           and scheduled in a timely manner, but the tenant did not show up for the
           inspection, and the inspection was not rescheduled in a timely manner. The table
           below shows the number of days the 20 inspections were late.




                                            9
            No. of days late               No. of inspections
            Less than 30                              9
            30 to 60                                  4
            61 to 90                                  5
            91 to 120                                 0
            121 to 150                                1
            More than 150                             1

           Based on the number of late inspections, we project that at least 1,280 of the
           agency’s inspections were not performed in a timely manner.


Payments Were Not Abated and
Landlords Were Not Notified in
a Timely Manner

           We selected a nonrepresentative sample of 82 failed inspections to determine
           whether housing assistance payments were abated as necessary. Of the 82 units
           that failed inspections, the agency paid $62,459 in housing assistance for 46 units
           that should have been abated had the agency followed its inspection process and
           abated the housing assistance payments on the first day of the month following
           the correction period.

           This problem occurred because the agency did not follow its inspection process
           policies and procedures. Specifically, it did not ensure that its contractor always

               •   Abated or properly abated housing assistance payments when repairs were
                   not made in a timely manner. If the inspection found life-threatening 24-
                   hour deficiencies and also 30-day deficiencies, the agency generally did
                   not abate the rents on the first day of the following month. The abatement
                   date used was generally the first of the month following the date that 30-
                   day deficiencies should have been corrected instead of the first of the
                   month following the inspection. In addition, even when 30-day
                   deficiencies were not corrected in a timely manner and the housing
                   assistance payment should have been abated, payments were not always
                   abated or properly abated.

               •   Notified the owners of life-threatening health and safety issues in a timely
                   manner and ensured that deficiencies were repaired within 24 hours. The
                   agency notified owners of life-threatening deficiencies by letter, which
                   was mailed to the owner. Therefore, it took several days for owners to
                   learn of the life-threatening deficiencies, so they were unable to correct
                   them within the required 24 hours. The agency also did not reinspect for
                   life-threatening deficiencies until it performed a reinspection for all
                   deficiencies (usually at least 30 days after the inspection). Therefore, the


                                            10
                 agency had no assurance that life-threatening deficiencies were mitigated
                 in a timely manner.


The Agency Did Not Implement
Adequate Quality Control or
Adequately Support Its SEMAP
Scores

          The agency did not implement adequate quality controls related to its housing
          inspections. Specifically, it did not adequately perform or document its quality
          control inspections and had no assurance its inspectors performed adequate
          inspections, identified all deficiencies, and followed its inspection policies and
          procedures. In addition, the agency’s quality control process was inadequate,
          which resulted in SEMAP indicators 5 and 6 being unsupported.

          Indicator 5, Housing Quality Standards Quality Control Inspections

          In addition to monitoring SEMAP compliance, quality control inspections provide
          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 quality control inspections were treated as routine inspections of
          the unit.

          •   The inspection company performing the quality control inspection did not
              have the original inspection results and did not compare the two inspections.
              This activity was also not performed by the agency or the contractor.

          •   The quality control inspection results did not indicate whether the deficiency
              was noted at the time of the original inspection or occurred/could have
              occurred after the original inspection. A quality control inspection is designed
              to ensure that the inspectors perform quality inspections and do not overlook
              violations.

          •   Based on our comparison of the original inspection report to the quality
              control inspections, we found that the inspectors missed deficiencies during
              their inspections. Deficiencies identified on the quality control inspections
              included non–ground fault circuit interrupter (GFCI) outlets by the kitchen
              sink, reverse ground on GFCI, outlets in bedrooms with no ground wires,
              crumbling concrete steps, exposed wires, a missing hallway handrail, and
              windows not staying up.

          •   There were eight units for which the quality control inspection occurred more
              than 90 days after the original inspection (passed inspection). Quality control


                                           11
                 inspections should be performed within 90 days of the original inspection.

             •   The SEMAP summary/tracking sheets did not always include the original
                 inspection information (date of original inspection, original inspector, and
                 inspection results). The original inspection was also not included with the
                 SEMAP support.

             Indicator 6, Housing Quality Standards Enforcement

             SEMAP indicator 6 states that the agency must have a system to promptly
             identify units for which deficiencies have not been corrected within the required
             timeframes to indicate abatement of rent and/or termination of assistance to the
             family. The agency should monitor housing quality standards enforcement on a
             regular basis (daily, weekly or monthly) to guarantee that reinspections occur
             within the proper timeframes.

             The agency used abatement lists provided by the subcontractors as support for
             indicator 6. It should have used a list of all failed units during the fiscal year and
             selected a sample of approximately 55 units to ensure that deficiencies were
             corrected within the proper timeframes (24 hours or 30 days) and that rents were
             abated when deficiencies were not corrected in a timely manner. The contractor
             stated that it used all of the units included in the abatement lists as support and no
             further review was performed. This process did not provide adequate support for
             this indicator. The inspection companies tracked failed inspections. Neither the
             agency nor its contractor monitored and performed oversight of the inspection
             companies to ensure that they reinspected within the required timeframes and
             properly followed up when landlords did not correct deficiencies in a timely
             manner. Additionally, the inspection companies notified the housing authorities
             when units needed to be abated, but there was no monitoring and oversight by the
             contractor or agency to ensure that units were abated when necessary.



Conclusion


             The agency did not ensure that its contractor effectively inspected and monitored
             the condition of its Section 8 units. As a result, tenants were subjected to health-
             and safety-related violations. If the agency strengthens its controls to ensure that
             its policies and procedures for housing inspections are consistently followed, we
             estimate that more than $22 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.
             Further, the agency needs to implement procedures and controls regarding its
             inspection quality control and abatement processes to ensure that they are
             performed in accordance with HUD requirements.

                                               12
Recommendations


          We recommend that the Director of HUD’s Boston Office of Public Housing require
          the agency to

          1A.     Strengthen controls to ensure that units meet HUD’s housing quality
                  standards to prevent $22,002,284 in program funds from being spent on
                  units that are in material noncompliance with HUD standards.

          1B.     Verify that the owners of the 53 program units cited in this finding have
                  repaired the units containing housing quality standards violations.

          1C.     Strengthen controls to ensure that housing inspections are performed in a
                  timely manner.

          1D.     Strengthen controls to ensure that landlords of failing units are notified in
                  a timely manner.

          1E.     Revise its administrative plan to explain how it will verify that 24-hour
                  emergency deficiencies are mitigated in a timely manner.

          1F.     Strengthen controls over the abatement process for failed units.

          1G.     Repay $62,459 from nonfederal funds for units that remained in
                  noncompliance with housing quality standards and were not properly
                  abated.

          1H.     Implement adequate controls for its quality control process for performing
                  Section 8 quality control inspections and to ensure support of its SEMAP
                  indicators 5 and 6.




                                            13
                         SCOPE AND METHODOLOGY

We conducted our audit between March and September 2009. We completed our fieldwork at the
agency located at 25 Sigourney Street, Hartford, Connecticut; its contractor, J. D’Amelia &
Associates, LLC’s main office located in Waterbury, Connecticut; and the various housing units
selected for review. Our audit covered the period April 1, 2008, through March 31, 2009, and was
extended when necessary to meet our audit objectives.

To accomplish our audit objectives, we

   •   Reviewed relevant HUD regulations, including 24 CFR Part 982 and the Housing Choice
       Voucher Guidebook 7420.10.G.

   •   Reviewed the agency’s administrative plan approved for use during our audit period.

   •   Inspected a statistical sample of 67 housing units and recorded and summarized the
       inspection results.

   •   Reviewed the agency’s completed quality control reviews for the fiscal year ending June
       30, 2008, to determine whether the reviews were adequate.

   •   Selected a nonrepresentative sample of failed units to determine whether the agency
       adequately followed up and whether abatements were performed as necessary.

   •   Reviewed the last two annual inspections for the 67 statistically selected units to
       determine whether the inspections were performed in a timely manner.

We relied in part on computer-processed data from the agency contractor’s database. We
assessed the reliability of the data by (1) reviewing existing information about the data and the
system that produced them, (2) interviewing officials knowledgeable about the data, and (3)
tracing tenant information, unit address, and housing assistance payments to source documents.
We determined that the data we used were sufficiently reliable for the purposes of this report.

Projection of Inspection Results

We statistically selected a sample of 67 of the agency’s program units to determine whether the
agency ensured that its units met housing quality standards. The sample was based on the
agency’s Voucher program database as of March 1, 2009. Our universe was 6,174. We obtained
the sample based on a confidence level of 90 percent, a precision rate of 10 percent, and an
expected error rate of 50 percent. Twenty-three additional sample units were selected to be used
as replacements as necessary. We used seven of the 23 replacement units.

Our sampling results indicated that 53 of the 67 program units selected for inspection did not
meet HUD’s housing quality standards. We ranked all the failed units based on the significance
of the violations, from the most serious health and safety violation that predated the agency’s
                                                14
most recent most inspection to the least serious, and determined that 34 units materially failed to
meet HUD’s housing quality standards. Materially failed units were those with more than one
health and safety violation or at least one exigent (24 hour) health and safety violation that
predated the agency’s previous inspections. We used auditor judgment to determine the material
cutoff line.

Projecting the results of the 34 units that were in material noncompliance with housing quality
standards to the universe indicates that 3,133 or 50.75 percent of the universe contained the
attributes tested. The sampling error is plus or minus 9.96 percent. In other words, we are 90
percent confident that the frequency of occurrence of the attributes tested lies between 40.78 and
60.71 percent of the universe. This equates to an occurrence of between 2,518 and 3,748 units of
the 6,174 units in the universe.

    •   The lower limit is 40.78 percent of 6,174 units = 2,518 units in material noncompliance
        with minimum housing quality standards.

    •   The point estimate is 50.75 percent of 6,174 units = 3,133 units in material
        noncompliance with minimum housing quality standards.

    •   The upper limit is 60.71 percent of 6,174 units = 3,748 units in material noncompliance
        with minimum housing quality standards.

Using the lower limit and the average annual housing assistance payments for the universe based
on the agency’s housing assistance payments register, dated March 2009, we estimate that the
agency will spend at least $22,002,284 (2,518 units x $8,738 average annual housing assistance
payment3) for units that are in material noncompliance with housing quality standards. This
estimate is presented solely to demonstrate the annual amount of Section 8 program funds that
could be put to better use on decent, safe, and sanitary housing if the Authority implements our
recommendations.

Projection of File Review Results (Timeliness of Inspections)

We reviewed the sample of 67 units and determined that 20 units were not inspected in a timely
manner. The 67 units reviewed were the original sample prior to replacements. Projecting the
results of the 20 units to the universe indicates that 1,843 or 29.85 percent of the universe
contained the attributes tested. The sampling error is plus or minus 9.12 percent. In other words,
we are 90 percent confident that the frequency of occurrence of the attributes tested lies between
20.73 and 38.97 percent of the universe. This equates to an occurrence of between 1,280 and
2,406 units of the 6,174 units in the universe.




3
 From the agency’s housing assistance payments register, dated March 2009, $4,495,806 was the total housing
assistance for the month. We annualized this amount to come up with $53,949,672. The total number of units in
our universe and on the housing assistance roll, dated March 2009, was 6,174. Therefore, the average annual
housing assistance payment per household was $8,738 ($53,949,672/6,174).

                                                      15
   •   The lower limit is 20.73 percent of 6,174 units = 1,280 units that were not inspected in a
       timely manner.

   •   The point estimate is 29.85 percent of 6,174 units = 1,843 units that were not inspected in
       a timely manner.

   •   The upper limit is 38.97 percent of 6,174 units = 2,406 units that were not inspected in a
       timely manner.

We used the lower limit to project the number of units that were not inspected in a timely manner
to be conservative.

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




                                               16
                              INTERNAL CONTROLS

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

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

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. They include the processes and procedures for planning,
organizing, directing, and controlling program operations as well as the systems for measuring,
reporting, and monitoring program performance.



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

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

                  •   Validity and reliability of data – Policies and procedures that management
                      has implemented to reasonably ensure that valid and reliable data are
                      obtained, maintained, and fairly disclosed in reports.

                  •   Compliance with laws and regulations – Policies and procedures that
                      management has implemented to reasonably ensure that resource use is
                      consistent with laws and regulations.

              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.




                                               17
Significant Weaknesses


           Based on our review, we believe that the following items are significant weaknesses
           (see finding 1):

               •   The agency lacked effective management controls over its Inspection
                   process to ensure that its units complied with HUD’s requirements and
                   met minimum housing quality standards, housing inspections to ensure
                   they were performed in a timely manner, notification to landlords to
                   ensure they were notified of the inspection results in a timely manner,
                   abatement procedures to ensure housing assistance payments were
                   properly abated for units that did not meet housing quality standards, and
                   quality control reviews performed for housing quality standards to ensure
                   SEMAP scores were adequately supported.




                                            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/
                        1A                                  $22,002,284
                        1G                $62,459


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. These amounts include
     reductions in outlays, deobligation of funds, withdrawal of interest, costs not incurred by
     implementing recommended improvements, avoidance of unnecessary expenditures
     noted in preaward reviews, and any other savings that are specifically identified. In this
     instance, if the agency implements our recommendation, it will cease to further 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 $22
     million in program funds to better use. Once the agency 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

Comment 3
Comment 4




                         20
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 5




Comment 6




                         21
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         22
                         OIG Evaluation of Auditee Comments

Comment 1    Whether deficiencies were identified in the unit itself or basement, they are still
            considered health and safety violations because the tenants had access. We agree
            that the agency needs to strengthen its inspection process in basements.


Comment 2   In Voucher Guidebook 7420.10G, section 10.3 Illumination and Electricity, it
            states that the PHA must be satisfied that the electrical system is free of hazardous
            conditions, including exposed, uninsulated or frayed wires; improper connections;
            improper insulation or grounding of any component of the system; overloading of
            capacity; or wires lying in or located near standing water or other unsafe places.
            The draft HUD notice clarifies that ungrounded outlets are an HQS violation.

Comment 3    Some of these units had several violations and one or more of them may have
            been tenant caused. The majority of the deficiencies were not considered tenant
            caused with the exception of one or two units. Regardless of whether the
            violation is tenant caused or not, the unit is required to meet HQS and these
            deficiencies should be identified by the inspectors. The difference is that the
            tenant, not the landlord, needs to be held responsible for mitigating the issues or
            in accordance with HUD guidance, they can be terminated. The agency needs to
            make sure that even if it is a tenant caused failure the item still fails HQS and
            needs to be properly repaired. According to 24 CFR 982.404(a)(4), the owner is
            not responsible for a breach of the HQS that is not caused by the owner, and for
            which the family is responsible (as provided in §982.404(b) and §982.551(c)). As
            stated in 24 CFR 982.404(b)(2), if an HQS breach caused by the family is life
            threatening, the family must correct the defect within no more than 24 hours. For
            other family-caused defects, the family must correct the defect within no more
            than 30 calendar days (or any PHA-approved extension). (3) If the family has
            caused a breach of the HQS, the PHA must take prompt and vigorous action to
            enforce the family obligations. The PHA may terminate assistance for the family
            in accordance with §982.552.

Comment 4   These two units may have only had one or 2 violations, but they are serious HQS
            violations that predated the last inspection. Unit A has a door that did not lock
            since the initial inspection (9 months prior to our inspection), which is a lack of
            security for the tenant. Unit B was reclassified as not being a materially
            noncompliant unit. As the agency stated, most of the units had more than 2
            deficiencies.

Comment 5   The agency may be inspecting the units within 30 days of the recertification in
            accordance with their administrative plan; however, we did not review that. In
            accordance with the HUD guidebook, annual inspections must be scheduled so
            that all units are inspected within 12 months of the previous inspection. Our
            review determined that inspections were not performed timely with regard to the
            HUD guidebook requirements.

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Comment 6   The agency did not abate all 46 housing assistance payments in accordance with
            HUD policy. Several of them were due to 24 hour failures. However, in
            accordance with the HUD guidebook the PHA must abate housing assistance
            payments to the owner for failure to correct an HQS violation under the following
            circumstances: (1) an emergency (life-threatening) violation is not corrected
            within 24 hours of inspection and (2) the PHA did not extend the time for
            compliance. Abatements must begin on the first of the month following the
            failure to comply. It cannot wait until the first of the following month following
            the 30 days deficiency deadline to begin the abatement, which is what the agency
            did. Further, according to 24 CFR 982.404(a)(3) the PHA must not make any
            housing assistance payments for a dwelling unit that fails to meet the HQS, unless
            the owner corrects the defect within the period specified by the PHA and the PHA
            verifies the correction. If a deficiency is life threatening, the owner must correct
            the deficiency within no more than 24 hours.




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Appendix C

            HUD COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation     HUD Comments




Comment 1




Comment 2




                           25
                           OIG Evaluation of HUD Comments

Comment 1   While we agree that the agency had made changes to improve their support and
            documentation of SEMAP indicators 5 and 6, these changes were the direct result
            of our audit work. We previously identified concerns with the SEMAP HQS
            quality control indicators, as well as, the other HQS issues discussed in this report
            during our first audit of the agency that was performed from February to June
            2008. We had informed HUD of our preliminary findings with HQS and the
            SEMAP indicators at that time and advised that we would be reviewing these
            issues in detail in a separate audit of the agency. HUD performed their tier 1
            consolidated review in March 2009 during our audit of the agency’s HQS
            program and came to the same conclusions, that the SEMAP indicators 5 and 6
            were not adequately performed and unsupported. Through both HUD and OIG
            guidance, the agency has improved their SEMAP review process; however, HUD
            needs to confirm the changes made (corrective action verification) to ensure that
            they are adequate to support SEMAP indicators 5 and 6. Therefore, our
            recommendation remains unchanged.

Comment 2   OIG’s projection was based on results from actual file reviews during the
            timeframes indicated. The results of those file reviews show that 30 percent of
            the inspections were not performed in a timely manner, regardless of what is
            indicted in HUD’s electronic system. Based on previous experience with PIC
            data, it has been found that the system has not always been accurate due to data
            entry errors and other problems. Therefore, our recommendation remains
            unchanged.




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