oversight

The Philadelphia Housing Authority, Philadelphia, PA, 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 2010-07-08.

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

                                                               Issue Date
                                                                     July 8, 2010
                                                               Audit Report Number
                                                                     2010-PH-1011




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

           //signed//
FROM:      John P. Buck, Regional Inspector General for Audit, Philadelphia Region, 3AGA

SUBJECT:   The Philadelphia Housing Authority, Philadelphia, PA, 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 Philadelphia 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 2010 audit plan. This is our second
           audit report issued on the Authority’s program. The audit objective addressed in
           this report was to determine whether the Authority ensured that its program units
           met the U.S. Department of Housing and Urban Development’s (HUD) housing
           quality standards.

 What We Found


           The Authority did not ensure that its program units met housing quality standards
           as required. Of 67 program units statistically selected for inspection, 62 did not
           meet HUD’s housing quality standards. Moreover, 29 of the 62 units were in
           material noncompliance with housing quality standards. The Authority spent
           $68,900 in program funds and received $2,100 in administrative fees for these 29
           units. 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, HUD will pay more than $18.6 million in housing assistance on
           units that materially fail to meet HUD’s housing quality standards.

What We Recommend


           We recommend that HUD 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 non-Federal funds for the improper use of $71,000 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 $18.6 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 a draft audit report to the Authority and HUD officials on April 23,
           2010. We discussed the audit results with the Authority and HUD officials
           throughout the audit and at an exit conference on May 5, 2010. The Authority’s
           outside counsel provided written comments to our draft report on May 19, 2010.
           It disagreed with our findings and recommendations. The complete text of the
           response, along with our evaluation of that response, can be found in appendix B
           of this report.




                                            2
                            TABLE OF CONTENTS

Background and Objective                                                 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 OBJECTIVE

The U.S. Housing Act of 1937 initiated the Nation’s public housing program. That same year,
the City of Philadelphia established the Philadelphia Housing Authority (Authority) under the
laws of the Commonwealth of Pennsylvania to address housing issues affecting low-income
persons. A five-member board of commissioners governs the Authority. The current executive
director is Carl R. Greene. The Authority’s main administrative office is located at 12 South
23rd Street, Philadelphia, PA.

In 1996, Congress authorized the Moving to Work Demonstration program (Moving to Work) as
a U.S. Department of Housing and Urban Development (HUD) demonstration program. This
program allowed certain housing authorities to design and test ways to promote self-sufficiency
among assisted households, achieve programmatic efficiency, reduce costs, and increase housing
choice for low-income households. Congress exempted participating housing authorities from
much of the Housing Act of 1937 and associated regulations as outlined in the Moving to Work
agreements. Participating housing authorities have considerable flexibility in determining how
to use Federal funds. In December 2000, the Authority submitted an application to HUD to enter
the program, and in February 2002, HUD signed a 7-year agreement with the Authority that was
retroactive to April 2001. From April to October 2008, the Authority continued to operate under
a HUD-developed plan to transition back to traditional HUD program regulations because the
term of its Moving to Work agreement had expired. However, in October 2008, HUD entered
into a new 10-year Moving to Work agreement with the Authority. The expiration date of the
Authority’s new agreement is March 2018.

Under the Section 8 Housing Choice Voucher program, HUD authorized the Authority to
provide leased housing assistance payments to more than 18,000 eligible households. HUD
authorized the Authority the following financial assistance for housing choice vouchers for fiscal
years 2007 through 2009:

                                         Number of
                          Authority       vouchers       Annual budget
                          fiscal year    authorized         authority
                             2007          18,075         $147,066,278
                             2008          18,185         $178,940,566
                             2009          18,349         $173,891,024

HUD regulations at 24 CFR (Code of Federal Regulations) 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.

Our audit objective was to determine whether the Authority ensured that its program units met
HUD’s housing quality standards.

                                                  4
                                 RESULTS OF AUDIT

Finding: Controls Over Housing Quality Standards Were Inadequate
The Authority did not adequately enforce HUD’s housing quality standards. Of 67 program
housing units selected for inspection, 62 did not meet HUD’s housing quality standards, and 29
materially failed to meet housing quality standards. The Authority’s inspectors did not observe
or report 228 violations, which existed at the units when they conducted their inspections. This
condition occurred because the Authority’s inspectors did not consider some deficiencies
violations of housing quality standards and the Authority did not implement an effective quality
control program for its inspection process. As a result, the Authority spent $68,900 in program
funds and received $2,100 in administrative fees for 29 units that materially failed to meet
HUD’s housing quality standards. Unless the Authority implements adequate procedures and
controls to ensure that its program units meet housing quality standards, we estimate that it will
pay more than $18.6 million in housing assistance for units that materially fail to meet housing
quality standards over the next year.



 Housing Units Did Not Meet
 HUD’s Housing Quality
 Standards


               We statistically selected 67 units from unit inspections passed by the Authority’s
               inspectors during the period April 1 to September 30, 2009. The 67 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
               November 30 and December 11, 2009.

               Of the 67 units inspected, 62 (93 percent) had 483 housing quality standards
               violations. Additionally, 29 of the 62 units (47 percent) were considered to be in
               material noncompliance since they had a number of violations that predated the
               Authority’s last inspection and were not identified by the Authority’s inspectors,
               creating unsafe living conditions. Of the 62 units with housing quality standards
               violations, three units had violations that were noted on the Authority’s previous
               inspection reports, and the Authority later passed the units. However, during our
               inspection, it was determined that the violations had not been corrected. The 29
               units had 233 violations (including 5 violations identified by the Authority but not
               corrected) that existed before the Authority’s last inspection. 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 table categorizes the 483 housing quality standards violations in
               the 62 units that failed the housing quality standards inspections.

                                                 5
                                                                     Number of        Number of Percentage
                       Key aspect 1                                  violations         units    of units
                     Illumination and electricity                       244              48        72%
                     Structure and materials                            156              46        69%
                     Interior air quality                                21              15        22%
                     Space and security                                  16               9        13%
                     Sanitary condition                                  15              11        16%
                     Smoke detectors                                     13              11        16%
                     Sanitary facilities                                  5               5         8%
                     Water supply                                         5               2         3%
                     Thermal environment                                  4               3         5%
                     Food preparation and refuse disposal                 2               2         3%
                     Access                                               1               1         2%
                     Site and neighborhood                                1               1         2%
                       Total                                            483

                    We provided our inspection results to the Authority and to the Director of HUD’s
                    Pennsylvania State Office of Public Housing during the audit.

    Housing Quality Standards
    Violations Were Identified

                    The following pictures illustrate some of the violations we noted while
                    conducting housing quality standards inspections in the 29 units that materially
                    failed to meet HUD’s housing quality standards.




1
    24 CFR 982.401 categorizes housing quality standards performance and acceptability criteria into 13 key aspects.

                                                           6
Inspection #25: There is a loose cover on a junction box, and wires are spliced outside a
junction box.




Inspection #35: The water heater discharge pipe (left) is too short and the boiler discharge
pipe (right) is horizontal.




                                        7
Inspection #70: The fuse box is unsecured and missing its internal cover, exposing electric
contacts.




Inspection #59: The stairway to the basement requires a guardrail on the open side.




                                       8
Inspection #30: A gap under the front entrance door allows air infiltration and vermin to
enter the unit.




Inspection #36: The stairway to the basement requires a handrail. The stairway requires a
guardrail on the open side.




                                       9
Inspection #11: The open side of the rear stairway needs a guardrail.




Inspection #24: The carpet is torn on the stairway to the second floor.




                                       10
           Inspection #72: The front entrance doorway has a large
           vertical gap along the entire height of the door jamb and the
           wall.


The Authority Did Not Have
Adequate Procedures and
Controls Regarding Its
Inspections


           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 did not do so because its inspectors did not consider some
           deficiencies violations of housing quality standards and it did not implement an
           adequate and effective quality control program and give sufficient emphasis to the
           effectiveness of its inspection program.




                                                  11
Inspectors Did Not Consider Some Deficiencies Violations of Housing
Quality Standards

The Authority relied on the inspectors’ knowledge of housing quality standards
and experience to conduct inspections. Its administrative plan required it to
inspect units based upon HUD’s housing quality standards and its own
requirement that all units meet the minimum standards set forth in the local codes.
However, the administrative plan and inspection procedures provided by the
Authority to its inspectors primarily addressed the type, scheduling, notification to
tenant and owner, and follow-up of housing quality standards inspections rather
than detailed instructions for determining the nature and extent of violations and
deficiencies. Some inspectors that we interviewed stated that during their
inspections, they routinely checked for open grounds in three-pronged outlets,
missing handrails and guardrails, and missing knockout plugs and covers on
junction boxes and panels. However, the Authority’s inspection reports for the
units in our sample showed that these inspectors did not identify these
deficiencies, although we identified them during our inspections of the same
units.

The Authority’s Quality Control Program Was Inadequate and Ineffective

The Authority did not perform the number of quality control inspections required
by its administrative plan. The Authority’s administrative plan required it to
perform quality control inspections on 10 percent of housing choice voucher units
of all types to ensure consistency in housing quality standards inspections and that
rental units continued to meet the program standards. Our review of the
Authority’s inspection records showed that it conducted more than 13,000
housing quality standards inspections during the period October 1, 2008, through
September 30, 2009. The Authority asserted that it performed 414 quality control
inspections during the same period. This number represented roughly 3 percent
of the universe of completed inspections. However, we reviewed the
documentation that the Authority provided for the 414 inspections and determined
that only 266 inspections were completed. The other 148 actions did not result in
completed quality control inspections because the Authority incorrectly included
instances in which its quality control inspectors attempted to conduct a quality
control inspection when the inspector may have had the wrong address, the tenant
had moved, the tenant refused access to the unit, and/or there was no one at the
unit to permit entry into the unit.

The Authority did not use the results of its quality control inspections as a tool to
improve its inspection program. 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 provided no documentation to show


                                  12
                  that it used the inspection results to improve its program by giving inspectors
                  feedback on their performance to ensure that there was consistency among the
                  inspections regarding the application of HUD’s housing quality standards.

                  The Authority Did Not Give Sufficient Emphasis to the Effectiveness of Its
                  Inspection Program

                  The Authority assigned the responsibility for conducting quality control
                  inspections to members of its police department and its investigations unit. The
                  job descriptions for these employees did not include the task of conducting quality
                  control inspections as a duty. Further, their job descriptions did not include a
                  requirement for the employees to possess knowledge, skills, and abilities
                  corresponding to building trades, inspection procedures, or housing quality
                  standards.

                  The Authority did not complete a planned internal audit of its housing quality
                  standards inspection program. The Authority’s inspector general planned to
                  conduct a review of its Housing Choice Voucher Inspection Process and Quality
                  Assurance Inspection Program in the third and fourth quarters of the Authority’s
                  fiscal year 2008.2 However, the inspector general did not perform the review as
                  planned.


    The Authority Is Taking Action

                  The Authority informed us that it took action to improve controls over the
                  program. In a memorandum, dated March 18, 2010, it reassigned the
                  responsibility for quality control inspections from its police department to its
                  quality assurance department. An attachment to the memorandum specified
                  procedures for quality assurance staff members and asset managers to follow
                  regarding the selection, conduct, timing, analysis, and reporting of housing quality
                  standards quality control inspections. We commend the Authority for taking this
                  step to improve its controls. The Authority will need to provide evidence that the
                  procedures have been implemented and that they are being followed and enforced.
                  Since the new procedures were not operational during the audit period, we did not
                  audit them and, therefore, did not evaluate their adequacy and effectiveness.

    Conclusion


                  The Authority’s program participants were subjected to a number of housing quality
                  standards violations, which created unsafe living conditions, and the Authority did
                  not properly use its program funds when it failed to ensure that its program units

2
  The Authority’s fiscal year begins April 1. The third and fourth quarters of the Authority’s fiscal year 2008
included the months October 2007 to March 2008.

                                                         13
         met HUD’s housing quality standards as required. 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 $68,870 in
         housing assistance payments to owners and received $2,062 in program
         administrative fees for the units that materially failed to meet HUD’s housing
         quality standards. If the Authority implements an effective quality control
         inspection program and develops and implements controls to ensure that its
         inspectors are provided with policy and procedural standards for performing
         consistent inspections, we estimate that more than $18.6 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, along with the owners of the 62 units cited in this finding, that the
                  applicable housing quality standards violations have been corrected.

         1B.      Reimburse its program $70,932 from non-Federal funds ($68,870 for
                  housing assistance payments and $2,062 in associated administrative fees)
                  for the 29 units that materially failed to meet HUD’s housing quality
                  standards.

         1C.      Develop and implement procedures and controls to ensure that program
                  units meet housing quality standards, thereby ensuring that $18,625,950 in
                  program funds is expended only on units that are decent, safe, and
                  sanitary.

         1D.      Perform quality control inspections in accordance with its administrative
                  plan and use the results of those inspections to provide feedback to its
                  inspectors to correct recurring deficiencies noted.




                                            14
                         SCOPE AND METHODOLOGY

To accomplish our objective, we reviewed

       Applicable laws, regulations, the Authority’s administrative plan, HUD’s program
       requirements at 24 CFR Part 982, and HUD’s Housing Choice Voucher Program
       Guidebook 7420.10G.

       The Authority’s inspection reports; computerized database information including housing
       quality standards inspection data, housing assistance payment data, and tenant data;
       employee data; organizational chart; board meeting minutes; employee position
       descriptions; policies and procedures; and Moving to Work agreement and amendments.

We also interviewed the Authority’s employees, HUD staff, and program households. A minimum
of two of the Authority’s outside attorneys were present at every interview we conducted with its
employees during the audit.

To achieve our audit objective, we relied in part on computer-processed data from 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 67 of the Authority’s program units to inspect from 7,649 unit inspections
that passed the Authority’s housing quality standards inspections between April 1 and
September 30, 2009. We selected 67 units to determine whether the Authority’s program units met
housing quality standards. We selected the sample based on a confidence level of 90 percent, an
estimated error rate of 50 percent, and a precision level of plus or minus 10 percent. We inspected
the selected units between November 30 and December 11, 2009. The Authority had one
employee, one public housing consultant, and one to three outside attorneys accompany our
auditor and appraiser on all of the inspections.

Our sampling results determined that 29 of 67 units (43 percent) materially failed to meet HUD’s
housing quality standards. We determined that the 29 units were in material noncompliance
because they had 233 violations that existed before the Authority’s last inspection, creating
unsafe living conditions. All units were ranked, and we used auditors’ judgment to determine
the material cutoff point.

Based upon a sample size of 67 from a total population of 7,649 units, an estimate of 43.3
percent (29 units) of the sample population materially failed housing quality standards
inspections. The sampling error is plus or minus 9.9 percent. There is a 90 percent confidence
that the frequency of occurrence of program units materially failing housing quality standards
inspections lays between 33.4 and 53.2 percent of the population. This equates to an occurrence
of between 2,555 and 4,067 units of the 7,649 units in the population. We used the most
conservative number, which is the lower limit or 2,555 units.


                                                 15
We analyzed the Authority’s automated housing assistance payment register for the period
October 1, 2008, through September 30, 2009, and estimated that the average annual housing
assistance payment per household was $7,290. Using the lower limit of the estimate of the
number of units and the estimated average annual housing assistance payment, we estimate that
the Authority will spend $18,625,950 (2,555 units times $7,290, the estimated average annual
housing assistance payment) annually for units that are in material noncompliance with HUD’s
housing quality standards.

This estimate is 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 onsite audit work from October 2009 through April 2010 at the Authority’s
office located at 642 North Broad Street, Philadelphia, PA. The audit covered the period
October 2008 to September 2009 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.




                                              16
                              INTERNAL CONTROLS

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

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

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



 Relevant Internal Controls


              We determined that the following internal controls were relevant to our 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 Weakness


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


                                               17
                  The Authority lacked sufficient procedures and controls to ensure that unit
                  inspections complied with HUD regulations and that program units met
                  minimum housing quality standards.

Separate Communication of
Minor Deficiencies


           Minor internal control and compliance issues were reported to the Authority by a
           separate letter dated April 29, 2010.




                                            18
                                   APPENDIXES


Appendix A

              SCHEDULE OF QUESTIONED COSTS
             AND FUNDS TO BE PUT TO BETTER USE

                Recommendation                               Funds to be put
                    number                 Ineligible 1/     to better use 2/
                       1B                      $70,932
                       1C                                       $18,625,950
                      Total                    $70,932          $18,625,950


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. 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 Authority implements our
     recommendations, 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 $18.6 million in program funds to better use. Once the
     Authority successfully improves its controls, 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




Comment 1




                        20
Comment 1




            21
Comment 1




            22
Comment 2



Comment 3




            23
Comment 4




Comment 5




Comment 6




            24
Comment 7


Comment 8




Comment 9




Comment 10

Comment 11




             25
Comment 12




Comment 13




Comment 14




             26
Comment 15




Comment 16




             27
Comment 17




Comment 18




             28
Comment 19




Comment 20




Comment 21




             29
Comment 6


Comment 20

Comment 22

Comment 16




             30
31
Comment 23




             32
33
Comment 2




Comment 6




            34
Comment 8


Comment 13



Comment 10


Comment 13




Comment 14



Comment 24




Comment 3




             35
Comment 5




Comment 3




            36
                          OIG Evaluation of Auditee Comments

Comment 1 The general statements made by the Authority’s outside counsel (counsel) and the
          consultant (consultant) counsel hired to help it refute the audit are addressed
          below where more specific details are provided. It is important to note again
          however that we conducted this performance audit in accordance with generally
          accepted government auditing standards and designed the audit to determine
          whether the Authority ensured that its program units met HUD’s housing quality
          standards.

Comment 2    The consultant’s statistics are slightly inaccurate. For 24 of the 67 inspections,
             the Authority’s consultant used failed or inconclusive inspection results rather
             than the most recent passed inspection in its analysis. The average time between
             our inspection and the Authority’s previous inspection was 153 days, and we
             performed 10 inspections within 90 days. The Housing Choice Voucher Program
             Guidebook, 7420.10G, does in fact require the Authority’s sample to be no older
             than 3 months. However, although this is a requirement for public housing
             authorities under the Section 8 Management Assessment program, our audit was
             not intended to follow the self-assessment process under that program. We
             performed our audit in much greater detail and broader scope than a housing
             authority does in its self-assessment. To obtain a representative sample of
             whether the Authority properly inspected units, we selected a random sample
             from a 6-month period or approximately one-half (7,649 passed inspections of
             13,950 assisted units) of the total units participating in the Authority’s leased
             housing program. Also, in conjunction with our inspections, we took a number of
             photographs of units, interviewed tenants, and reviewed the Authority’s latest
             inspection reports to help us determine whether a housing quality standards
             violation existed before the last passed inspection conducted by the Authority or
             whether it was identified on the last passed inspection conducted by the Authority
             and was not corrected. As indicated by the pictures in the report, some
             deficiencies were easily determined to have existed at the time of the Authority’s
             inspection. We were conservative in our determination of preexisting conditions.

Comment 3    To obtain an accurate determination of whether the Authority properly inspected
             units, we selected a random sample of units and inspected them. We understand
             that housing quality standards violations can occur after the last inspection
             conducted by the Authority, but Federal regulations require that all program
             housing meet housing quality standards performance requirements at the
             commencement of the assisted occupancy and throughout the assisted tenancy.
             Therefore, we reported all violations that we identified at the time of our
             inspections so that the Authority could ensure that they were corrected. We
             determined that the Authority did not observe or report 228 violations which
             existed at the units when it conducted its most recent inspection. We were
             conservative in our approach and used our professional knowledge, tenant
             interviews, and the Authority’s latest inspection reports in determining whether a


                                             37
            housing quality standards violation existed before the last passed inspection
            conducted by the Authority or whether it was identified on the last passed
            inspection conducted by the Authority and was not corrected. In the event that we
            could not reasonably make that determination, we did not categorize the violation
            as preexisting.

Comment 4   As stated in the audit report, we determined that 29 of 67 units (43 percent)
            materially failed to meet HUD’s housing quality standards. We determined that
            the 29 units were in material noncompliance because they had 228 violations that
            existed before the Authority’s last inspection, creating unsafe living conditions.
            We were conservative in our approach and used our professional knowledge,
            tenant interviews, and the Authority’s latest inspection reports in determining
            whether a housing quality standards violation existed before the last passed
            inspection conducted by the Authority or whether it was identified on the last
            passed inspection conducted by the Authority and was not corrected. In the event
            that we could not reasonably make that determination, we did not categorize the
            violation as preexisting.

Comment 5   Contrary to counsel’s and its consultant’s assertion, the testimony of the tenant is
            a helpful method to use in assisting to determine the existence of deficiencies.
            HUD’s Housing Choice Voucher Program Guidebook, 7420.10G, section 10.9,
            states that often the tenant can describe when the deficiency occurred and will be
            helpful in making this determination. For the vast majority of the preexisting
            violations that we identified, such as ungrounded electrical outlets, missing or
            improperly sized discharge pipes, missing knockout plugs on junction boxes,
            missing or defective guardrails and handrails on stairs, and improperly joined flue
            pipes, the tenants had no motivation to be less than candid in their statements.

Comment 6   Contrary to counsel’s and its consultant’s assertion, we used HUD regulations at
            24 CFR 982.401, the Authority’s Section 8 Tenant Based Assistance Housing
            Choice Voucher Program Administrative Plan, the HUD Housing Choice
            Voucher Program Guidebook, 7420.10G, and the City of Philadelphia Property
            Maintenance Code as the underlying criteria to identify housing quality standards
            violations. We performed our inspections accurately and appropriately applied
            HUD’s housing quality standards. In no instance did we apply a higher standard
            than was required by HUD regulations.

            Counsel’s position on housing quality standards also directly conflicts with the
            prudent actions of Authority officials directly responsible for executing the
            program. On November 4, 2009, shortly after we began the audit, the Authority’s
            executive general manager for operations sent a letter to owners of its leased
            housing units. In the letter, the executive general manager reminded owners that
            the Housing Choice Voucher program is funded by HUD and instructed them that
            HUD officials planned to conduct a routine review of units that participate in the
            program, which would include onsite inspections of a sample of units.


                                             38
            Accompanying the letter was a copy of a September 2009 Housing Quality
            Standards Inspection Bulletin published by the Philadelphia regional HUD office.
            The purpose of the bulletin was to provide a detailed summary of housing quality
            standards violations identified by OIG during five recently conducted audits
            within the jurisdiction of the Philadelphia regional HUD office. The summary
            identified violations such as missing or damaged exterior and interior handrails
            (four or more steps); peeling and chipping paint; cracks and stains in ceilings;
            loose carpet tripping hazards; inadequate weather stripping; inoperable stove
            burners; loose commodes; inoperable ground fault circuit interrupters; open
            ground outlets; knockout plugs missing from junction boxes; unsecured electrical
            panels, fuse boxes, and junction boxes; heating flue or water heater flue
            disconnected from wall; and, windows that did not shut or lock as intended. The
            letter pointed out that the bulletin described some housing quality standards
            violations that have been identified in similar audits, and it encouraged owners to
            review the information immediately and continue to manage and maintain their
            properties in accordance with the housing quality standards. We applaud
            Authority officials for proactively taking these measures to help ensure program
            participants are living in decent, safe, and sanitary housing. However, we are
            puzzled why counsel and its consultant are now erroneously contending that
            conditions addressed in the bulletin are not violations of housing quality
            standards.

Comment 7   As described in the audit report, the audit found 29 units were in material
            noncompliance with housing quality standards with 233 violations (including 5
            violations identified by the Authority but not corrected) that existed before the
            Authority’s last inspection. Of these 29 units, 26 units had numerous other
            preexisting deficiencies besides ungrounded electrical outlets such as missing or
            damaged exterior and interior handrails (four or more steps), peeling and chipping
            paint, cracks and stains in ceilings, loose carpet tripping hazards, inadequate
            weather stripping, inoperable stove burners, loose commodes, and inoperable
            ground fault circuit interrupters. The 3 remaining units had up to 10 ungrounded
            electrical outlets which we considered a potential safety hazard

Comment 8   Counsel and its consultant fail to make a very key distinction here between the
            acceptability criteria for two-pronged versus three-pronged outlets. Two-pronged
            ungrounded systems and outlets are in fact acceptable under housing quality
            standards as long as the outlet is in proper operating condition. However, all of
            the ungrounded outlets the audit cited as violations were three-pronged outlets. A
            three-pronged outlet that is not in proper operating condition (e.g., ungrounded)
            and not functioning as designed is a potential hazard and a violation of housing
            quality standards. Regulations at 24 CFR 982.401(f)(2), when referring to outlets
            in both sections (ii) and (iii), specifically state that outlets must be in proper
            operating condition. Further, section 10.3 of HUD’s Housing Choice Voucher
            Program Guidebook, 7420.10G, discusses acceptability criteria for each of 13
            housing quality standards performance requirements. The acceptability criteria


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              for illumination and electricity performance requirements states, in part, that
              public housing agencies must be satisfied that the electrical system is free from
              hazardous conditions, including improper grounding of any component of the
              system. If outlets do not function as designed, they are a potential hazard. Three-
              pronged outlets are safe and functioning as designed only when (1) a ground wire
              is connected to the outlet, or (2) a Ground Fault Circuit Interrupter (GFCI)
              protects the outlet. Lastly, the Philadelphia Property Maintenance Code, section
              PM-407.2, states that all electrical equipment, wiring, and appliances shall be
              properly installed and maintained by a qualified licensed electrical contractor in
              accordance with subcode E and that every fixture and outlet shall function
              properly and shall be properly fastened in place. Ungrounded three-pronged
              outlets are not considered properly installed.

Comment 9     We informed counsel during the audit and at the exit conference that all of the
              ungrounded outlets we cited as violations were three-pronged outlets. We are not
              aware of a HUD notice, dated March 31, 2009, regarding housing quality
              standards but we believe counsel is referring to the HUD Office of Public and
              Indian Housing (PIH) Notice PIH 2010-10 (HA), dated March 31, 2010,
              regarding guidance related to electrical outlets. As stated in its purpose, the
              notice reviews the existing housing quality standards requirements and existing
              guidance that public housing authorities may rely upon when conducting
              inspections and also offers additional guidance on what types of three-pronged
              electrical outlets an inspector should consider acceptable under the standards.
              The notice clarifies existing requirements and guidance. It does not create or
              implement new requirements related to the three-pronged electrical outlets.

Comment 10 Counsel’s statements regarding the guardrail violations are unsupported and
           inconsistent with housing quality standards. We measured the height of every
           landing, stoop, and stairway before determining them to be deficient for not being
           protected on the open side or for not having a handrail at all. In every instance,
           the drop to grade was more than 30 inches. The consultant provided no pictures
           or other evidence to demonstrate that the drop to grade was less than 30 inches.
           Section PM-602.3 of the City of Philadelphia Property Maintenance Code states
           that every portion of a stair which is more than 30 inches above the floor or grade
           below shall have guards. The code does not specify that the top riser of a stair is
           not a portion of the stair. Thus, as a minimum in measuring the height of the stair,
           the height of the top riser must be included for purposes of determining whether
           every portion of the stair is more than 30 inches above the floor or grade.

Comment 11 The OIG appraiser (official job title) who conducted our inspections is an
           eminently qualified and certified housing quality standards inspector.

Comment 12 Counsel’s statements regarding deficiencies related to a minimum length for
           pressure valve discharge pipes are unsupported and inconsistent with housing
           quality standards. Regulations at 24 CFR 982.401(g)(1) require that the dwelling


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              unit not present a threat to the health and safety of the occupants and protect the
              occupants from the environment. HUD’s Housing Choice Voucher Program
              Guidebook, 7420.10G, requires that water-heating equipment be installed safely
              and not present safety hazards to families. The Philadelphia Property
              Maintenance Code, section PM-405.3, requires every plumbing fixture to be
              properly installed and maintained in a safe, sanitary, and functional condition.
              Section PM-405.3.2.1 of the code requires that water heaters be equipped with a
              combination temperature and pressure relief valve and relief valve discharge pipe
              which is properly installed and maintained. Section 10.16.6.e of the National
              Standard Plumbing Code specifies that when relief valves discharge to the floor,
              the discharge pipe shall terminate not more than 6 inches or less than 2 inches
              above the floor. When relief valves and/or discharge pipes do not meet this
              standard, they present a scalding hazard to the tenants.

Comment 13 Counsel’s statements regarding deficiencies related to handrails are unsupported
           and inconsistent with housing quality standards. Regulations at 24 CFR
           982.401(g)(2)(iv) state that the condition and equipment of interior and exterior
           stairs, halls, porches, walkways, etc., must not present a danger of falling. HUD’s
           Housing Choice Voucher Program Guidebook, 7420.10G, reiterates this
           requirement. The Philadelphia Property Maintenance Code, section PM-602.3,
           requires that every exterior and interior flight of stairs having more than three
           risers has handrails. The code makes no reference to “little used” as a qualifying
           factor in determining applicability. Neither 24 CFR Part 982, the HUD Housing
           Choice Voucher Program Guidebook, 7420.10G, nor the Philadelphia Property
           Maintenance Code states that a balustrade is an acceptable substitute for a
           required handrail.

Comment 14 Counsel’s and its consultant’s statements regarding deficiencies related to
           unsecured closable junction boxes are unsupported and inconsistent with housing
           quality standards. The Philadelphia Property Maintenance Code, section PM-
           407.2, states that all electrical equipment, wiring, and appliances shall be properly
           installed and maintained by a qualified licensed electrical contractor in
           accordance with subcode E and that every fixture and outlet shall function
           properly and shall be properly fastened in place. This section of the code also
           states that every switch plate and outlet plate shall be properly fastened in position
           and no obvious shock hazard shall exist. The purpose of this requirement is to
           isolate electrical contacts by providing a separation that cannot be undone
           manually. By logical extension, for the same reason that a switch or outlet shall
           have a plate properly fastened, so should a junction box, disconnect box, or
           electric panel box. An obvious hazard exists if a junction box, disconnect box, or
           electric panel box can be opened by hand and expose electrical contacts.

Comment 15 We revised the language in the report to state that the Authority provided no
           documentation to demonstrate that it used the results of its quality control
           inspections to give feedback to its inspectors on their performance.


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Comment 16 Regulations at 24 CFR 982.54(c) require the Authority to comply with and
           administer its program in accordance with its administrative plan. The Authority
           failed to comply with its administrative plan requiring it to conduct quality control
           inspections on 10 percent of Housing Choice Voucher program units of all types
           to ensure consistency in housing quality standards inspections and that rental units
           continue to meet the program standards.

Comment 17 We disagree with counsel’s assertion that there were inadequate opportunities for
           give and take on this audit. As stated in the scope and methodology section of
           this report, at least two of the Authority’s outside attorneys were present at every
           interview we conducted with Authority employees during the audit. The
           Authority had one employee, one public housing consultant, and one to three
           outside attorneys accompany our auditor and appraiser on every inspection
           allowing even more opportunities for give and take. We further provided copies
           of all of our inspection reports and the corresponding photographs to the
           Authority during the audit. Throughout the audit, we cited HUD regulations at 24
           CFR 982.401, the Authority’s Section 8 Tenant Based Assistance Housing Choice
           Voucher Program Administrative Plan, the Housing Choice Voucher Program
           Guidebook, 7420.10G, and the City of Philadelphia Property Maintenance Code
           as the underlying criteria that we used to identify housing quality standards
           violations. We provided the Authority the criteria in a finding outline on
           March 22, 2010, and discussed the criteria in a meeting on April 6, 2010. At that
           meeting, the auditors attempted to provide specific citations from the applicable
           regulations and guidance; however, the four outside attorneys and one Authority
           official at that meeting dismissed and rejected the documentation that the auditors
           offered because they did not agree that the majority of the conditions we
           identified during our inspections were violations of housing quality standards. At
           the exit conference, we agreed to again provide the Authority the basis for our
           findings in the form of a detailed spreadsheet listing the specific citation from the
           provisions of HUD’s housing quality standards (regulations at 24 CFR 982), the
           Housing Choice Voucher Program Guidebook, 7420.10G, and the City of
           Philadelphia Property Maintenance Code for each violation that we identified. It
           is apparent that the Authority does not agree with our interpretation and
           application of housing quality standards. We do not agree with the Authority’s
           assertion that we failed to follow our protocols in conducting this audit.

Comment 18 We issued the discussion draft audit report to the Authority on April 23, 2010.
           After the exit conference, we made minor changes to the draft report and issued
           the Authority an updated discussion draft report on May 11, 2010.

Comment 19 We are confident that this report accurately and fairly depicts the conditions we
           found in the units when we performed our inspections.

Comment 20 Contrary to counsel’s assertion, regulations at 24 CFR 982.404(a) state that if the
           owner fails to maintain the dwelling unit in accordance with HUD’s housing


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               quality standards, the public housing authority must take prompt and vigorous
               action to enforce the owner obligations. The authority must not make housing
               assistance payments for a dwelling unit that fails to meet housing quality
               standards unless the owner corrects the defect within the period specified by the
               authority and the authority verifies the correction. Further, regulations at 24 CFR
               982.152 allow HUD to reduce or offset any administrative fee paid to a public
               housing authority if it fails to perform administrative responsibilities correctly or
               adequately, such as not enforcing HUD’s housing quality standards. For the units
               that materially failed to meet HUD’s housing quality standards, we did not
               calculate ineligible housing assistance payments for the first 30 days after the date
               of the Authority’s inspection.

Comment 21 The calculation of funds to be put to better use is based on the results of our
           inspections of a random sample of program units that statistically represents the
           population from which it was drawn. We commend the Authority for recognizing
           the need for improvement and taking action to improve its quality assurance
           procedures. However, our projection is what we expect would occur if we had
           not performed our audit which brought about these changes in the Authority’s
           quality control inspection program.

Comment 22 We disagree with counsel’s assertion. As stated in the audit report, our sampling
           results determined that 29 of 67 units (43 percent) materially failed to meet HUD’s
           housing quality standards. This percentage equates to failure of between 2,555 and
           4,067 units of the 7,649 units in the population. We used the most conservative
           number, which is the lower limit or 2,555 units, and estimate that the Authority
           will spend $18,625,950 annually for units that are in material noncompliance with
           HUD’s housing quality standards.

Comment 23 The consultant’s report included 4 spreadsheets totaling 14 pages containing data
           to support assertions it made in its narrative response. Because the content of the
           spreadsheets was addressed in the consultant’s narrative response, we did not
           include the spreadsheets in the final report.

Comment 24 We disagree with the consultant’s assertion. We disagree that a malfunctioning
           stove burner, a faulty ground circuit fault interrupter, and holes in electrical boxes
           and panels exposing wire connections and contacts do not present an immediate
           danger to the health and safety of the tenants.




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