oversight

The Housing Authority, City of Wilson, NC, Mismanaged Its Section 8 Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2011-01-14.

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

                                                                 Issue Date

                                                                         January 14, 2011
                                                                 Audit Report Number

                                                                         2011-AT-1003




TO:         Michael A. Williams, Director, Office of Public Housing, Greensboro, NC,
              4FPH


            //signed//
FROM:       James D. McKay, Regional Inspector General for Audit, Atlanta Region,
                4AGA

SUBJECT: The Housing Authority, City of Wilson, NC, Mismanaged Its Section 8 Program



                                    HIGHLIGHTS
 What We Audited and Why

             We audited the Housing Authority of the City of Wilson’s (Authority) Section 8
             Housing Choice Voucher program. We elected to perform the audit after finding
             indicators of Section 8 deficiencies during our review of the Authority’s capacity
             to administer capital funds awarded under the American Recovery and
             Reinvestment Act of 2009 (Audit Report 2010-AT-1007).

             Our objective was to determine whether the Authority complied with U.S.
             Department of Housing and Urban Development (HUD) requirements for
             administering its Housing Choice Voucher program, including its special Section
             8 programs comprised of a Family Self Sufficiency program and a
             homeownership program.

 What We Found

             The Authority failed to comply with many of HUD’s Section 8 program
             requirements. It mismanaged its program funds, improperly selected tenants for
         assistance, improperly terminated tenants, made improper housing assistance
         payments, and had other areas of noncompliance. By not establishing and
         following basic internal controls the Authority incurred $109,778 in ineligible
         costs and made $14,568 in unsupported payments. In addition, some families
         may have been unnecessarily removed from the program and HUD lacked
         assurance that the Authority’s resources were efficiently and effectively used to
         benefit its Section 8 tenants.

         Our inspection of 23 units showed that none met minimum housing quality
         standards and 6 were in material noncompliance. In addition, the Authority failed
         to ensure that quality control inspections were performed in accordance with
         HUD requirements. This condition occurred because the Authority’s
         management did not implement adequate controls to ensure that its program units
         met the required standards. As a result, tenants lived in units that were not decent,
         safe, and sanitary, and the Authority made housing assistance payments for units
         that did not meet standards.

         The Authority mismanaged two special Section 8 programs, its Family Self
         Sufficiency and homeownership programs, established to help participants self-
         improve. It did not maintain accurate accountability of participant funds or
         comply with HUD’s administrative requirements for its Section 8 Family Self-
         Sufficiency program. It also did not ensure that it complied with administrative
         requirements for its Section 8 homeownership program. As a result, the Authority
         paid ineligible self-sufficiency and homeownership expenses, and family self-
         sufficiency participants did not reap the full benefits of the program. These
         deficiencies occurred because the Authority did not follow its own procedures or
         consistently provide trained and capable staff familiar with the program
         requirements.

What We Recommend

         We recommend that the Director of the Greensboro Office of Public Housing
         require the Authority to follow its existing controls as well as develop and
         implement additional controls where needed to ensure that it complies with all
         Section 8 program requirements. These controls must be designed to ensure that

                HUD housing assistance funds are efficiently and effectively used;
                Tenants are properly selected for and removed from the program;
                Housing assistance payments are properly made;
                Housing units comply with HUD’s housing quality standards;
                Rents to owners are abated when necessary;
                Requirements for the Family Self-Sufficiency and homeownership
                programs are complied with; and
                A competent and well-trained staff is maintained.


                                           2
           The Authority must repay $109,778 in ineligible expenses from non-Federal
           funds and provide documentation showing that $14,568 in unsupported expenses
           was eligible or repay that amount from non-Federal funds.

           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 discussed the findings with the Authority and HUD officials during the audit.
           We provided the draft report to the Authority on November 17, 2010, and
           discussed the findings with Authority officials at an exit conference on December
           2, 2010. The Authority provided its written comments on December 10, 2010.
           Authority officials agreed with parts of the report but disagreed with some of our
           conclusions and recommendations.

           The complete text of the Authority’s response, along with our evaluation of that
           response, can be found in appendix B of this report.




                                            3
                            TABLE OF CONTENTS

Background and Objectives                                                            5

Results of Audit
       Finding 1: The Authority Mismanaged Its Section 8 Program                     6
       Finding 2: Tenants Lived in Units That Were Not Decent, Safe, and Sanitary   14
       Finding 3: The Authority Mismanaged Its Special Section 8 Programs           20

Scope and Methodology                                                               24

Internal Controls
                                                                                    26
Appendixes
   A. Schedule of Questioned Costs                                                  28
   B. Auditee Comments and OIG’s Evaluation                                         29
   C. Criteria                                                                      41




                                            4
                     BACKGROUND AND OBJECTIVES

The Housing Authority of the City of Wilson (Authority) was established in 1953 pursuant to the
North Carolina Housing Authority’s Law. Its primary objective is to maintain a stock of good,
affordable housing to meet the needs of its citizens while providing an environment in which
families can live, raise their children, and feel safe. The Authority’s records are located at 213
Broad Street, Wilson, NC.
A five-member board of commissioners appointed by the mayor of Wilson governs the
Authority. Mr. Thomas Eatmon is the chairman of the board, and Mr. Edward Jagnandan has
been the executive director since January 22, 2007.
The Authority receives U.S. Department of Housing and Urban Development (HUD) funds to
administer approximately 550 units funded under the Housing Choice Voucher program. It uses
the funds to provide rental assistance to eligible Wilson families. HUD’s Greensboro, NC,
Office of Public Housing oversees the Authority. HUD provided funds for the Authority’s
program as follows:

                                 Fiscal Year        Amount
                                 2008               $2,030,256
                                 2009               $2,285,101
                                 2010               $2,101,958
                                 Total              $6,417,315

Our objective was to determine whether the Authority complied with U.S. Department of
Housing and Urban Development (HUD) requirements for administering its Housing Choice
Voucher program, including its special Section 8 programs comprised of a Family Self
Sufficiency program and a homeownership program.




                                                5
                                RESULTS OF AUDIT

Finding 1: The Authority Mismanaged Its Section 8 Program
The Authority mismanaged its Section 8 Housing Choice Voucher program. The Authority

       Mismanaged its program funds,
       Improperly selected tenants for assistance,
       Improperly terminated tenants,
       Made improper housing assistance payments,
       Failed to comply with all lease requirements, and
       Did not maintain a housing assistance payments register.

The Authority also failed to comply with HUD’s housing quality standards requirements and the
requirements for its Family Self Sufficiency and homeownership programs. These deficiencies
are presented separately in findings 2 and 3 of this report. This noncompliance occurred because
Authority management failed to establish and follow basic internal controls needed to ensure
compliance with program requirements. As a result, the Authority spent $88,511 on ineligible
items and made $14,568 in unsupported payments. In addition, some families may have been
unnecessarily removed from the program, and HUD lacked assurance that the Authority’s
resources were efficiently and effectively used to benefit its Section 8 tenants.



 The Internal Control System
 Was Deficient

              Management failed to exercise its responsibility to establish appropriate internal
              controls in the form of adequate policies and procedures and ensure that they were
              followed. Financial administration standards at 24 CFR (Code of Federal
              Regulations) 85.20 require the Authority to maintain effective control and
              accountability of assets. Missing or ineffective controls created an environment
              resulting in or contributing to the significant areas of noncompliance detailed in
              this report. Examples of the kind of internal control deficiencies encountered
              during the audit included

                      Existing controls that were not followed by staff,
                      Nonexistent written procedures for some functions,
                      Inadequately trained staff,
                      An ineffective information system,
                      Excessive staff turnover,
                      Lack of effective communication between staff functions, and
                      Lack of proper staff supervision.


                                               6
           In response to our questions during the audit, Authority staff tended to place
           blame for deficiencies on such factors as the use of temporary staff, excessive
           workloads, information system deficiencies, human error, or a lack of
           communication between functions. Such factors present control challenges but
           should be managed through implementation of an effective internal control
           system.

The Authority Mismanaged Its
Program Funds

           The Authority mismanaged funds for its 550 unit program. It failed to perform
           the required program analysis and monitor its spending. As a result, the number
           of families receiving assistance fluctuated widely due to overutilization or
           underutilization, and some families may have been removed from the program
           unnecessarily.

           During 2008, the Authority overutilized it program by spending $272,245 more in
           housing assistance than its annual program budget authority permitted. As a
           result, the Authority terminated 113 families as of December 31. The following
           year it maintained as few as 361 of its 550 baseline units under lease, resulting in
           underutilization of its funds. In response to the underutilization, the Authority
           conducted a large lease-up effort during the second half of 2009, which added 189
           families to the roster by December 2009. However, it still remained, on average,
           underutilized for the year. As of September 30, 2010, the Authority was once
           again overutilizing available funding.

           The Authority failed to follow HUD requirements and its own administrative plan
           which required it to maintain a system to ensure that it would be able to make
           housing assistance payments for all participants within the amounts agreed to
           under its annual contributions contract. HUD Guidebook 7420.10G, chapter 24,
           details the methodology the Authority should have used to analyze its program to
           ensure the maximum use of available funds. The Authority’s administrative plan
           required staff to compare its annual budget authority to the annual total housing
           assistance payment needs on a monthly basis. The total housing assistance
           payment needs for the calendar year should have been projected by establishing
           the actual housing assistance payment costs year to date.

           Not performing the required financial analysis of its program appears to have
           contributed to widely fluctuating utilization of the program and the termination of
           such a large number of families from a small program. Management
           acknowledged that the program analysis had not been performed in accordance
           with the administrative plan but attributed the Authority’s utilization problems to
           a lack of communication between the finance and Section 8 departments and
           inconsistent funding from HUD. However, the current chief financial officer
           agreed that too many families had been removed from the program. She stated
           that it should have been necessary to terminate assistance for only about 20
                                            7
           families, instead of 113, if previous staff had correctly performed the analysis and
           used the available funding. HUD had been monitoring the Authority since April
           2010 to ensure that no more families would have to be forcibly removed from the
           program.

Applicants Were Improperly
Selected for Assistance

           The Authority maintained multiple waiting lists, failed to include required
           information on its waiting list, and failed to properly advertise its waiting list.
           This occurred because the Authority failed to follow the applicable requirements
           for maintaining its waiting list and selecting applicants, and failed to adequately
           supervise temporary workers. As a result, during 2009, the Authority improperly
           granted housing assistance to at least 46 recent applicants, when other eligible
           applicants had been waiting several years.

           The regulations (24 CFR 982.204) required the Authority to maintain and select
           applicants from a single waiting list. Instead, it selected applicants from two
           separate spreadsheets it had developed based on waiting list openings occurring
           during 2007 and 2009. In addition, of the 365 entries on the 2009 waiting list, 99
           (27 percent) did not include all required information. HUD regulations (24 CFR
           982.204(b)) require that, for each tenant, the family unit size, date/time of
           application, qualification for local preference, and the family’s ethnic designation
           be documented on the waiting list. The Authority also failed to follow its own
           policy when advertizing the opening of its program waiting list. Although its
           administrative plan required a 14-day advance notice, the Authority advertised the
           opening of its program waiting list only 1 week before accepting applications on
           July 13, 2009.

           The housing director stated that when a lease-up effort began at the end of 2009,
           the intention was to give first priority to the 113 families forcibly removed from
           the program in December 2008. The next selections were to be families from the
           2007 waiting list, followed by selections from the 2009 waiting list. However,
           Authority records showed that the staff selected at least 46 applicants from the
           2009 list before selecting from the 2007 list. The housing director blamed the
           deficiencies on mistakes made by temporary workers and insufficient time for
           consolidating the waiting lists. However, it is management’s responsibility to see
           that staff has the written procedures and supervision necessary to ensure that the
           HUD requirements are met.




                                             8
Termination of Assistance
Procedures Were Not Followed

          Review of 9 of the 69 tenant assistance terminations occurring between January
          2009 and July 2010 showed that the Authority failed to properly follow its
          procedures in eight cases. Specifically, termination letters did not contain all of
          the required information, tenants were not always given a proper informal appeal
          hearing, and files did not contain proper documentation.

          The administrative plan required that specific information be included in the
          termination of assistance letters sent to families. The Authority included all of the
          required information except for a statement permitting the family an informal
          hearing to protest the decision and a copy of the hearing procedures.

          The Authority’s policy stated that informal hearings were required to be
          conducted by a person or persons approved by the Authority, other than the
          person who made or approved the decision or a subordinate of the person who
          made or approved the decision. The Authority designated an outside individual as
          its informal hearing officer but failed to consistently follow other procedures. For
          example, two tenants’ files showed that the informal hearings had been conducted
          by Authority management in violation of the procedure. When asked why the
          hearing officer was not used for these cases, the program manager was unable to
          tell us. Another file showed that a tenant sent two letters and called requesting an
          informal hearing; however, the hearing was not granted and the tenant was
          removed from the program. In another case, a tenant who had been given a
          termination letter for missing scheduled inspections provided the Authority an
          appeal letter requesting an informal hearing. The hearing was not granted, but the
          tenant was not removed from the program. In the resulting confusion, the tenant’s
          unit did not pass inspection for more than a year because the inspector thought
          that the tenant’s assistance had been terminated.

          The tenants’ files did not always contain all termination-of-assistance information
          required by the administrative plan. Two of the files did not contain
          documentation indicating the reason for termination. Another file showed that the
          tenant had requested in writing to be removed from the program but contained no
          follow-up documentation. As outlined in the Authority’s policy, staff should have
          sent a confirmation notice to the family and the owner within 10 days of the
          family’s request but no later than the termination effective date.

          The Authority’s administrative plan contained adequate policies and procedures
          for the termination process; however, staff had either disregarded the procedures
          or been unaware of them. As a result, the Authority has not provided HUD
          assurance that it treated all tenants fairly or in a consistent manner.



                                            9
Assistance Payments Were
Improper

           The Authority sometimes made housing assistance payments to landlords without
           having a properly executed housing assistance payments contract, without
           verifying the owner’s eligibility, without inspecting or passing the unit, and
           without making a determination that the rent was reasonable.

           We reviewed 86 unexecuted housing assistance payments contracts where the
           Authority paid $85,675 in ineligible housing and utility assistance payments.
           HUD regulations (24 CFR 982.305(c)(2)) state that the Authority may not make a
           housing assistance payment to the owner until the housing assistance payments
           contract has been executed. In addition, of the 86 contracts, 11 remained
           unexecuted more than 60 days after the beginning of the lease period. HUD
           requires (24 CFR 982.305(c)(1)) that housing assistance payments contracts
           remaining unexecuted within 60 calendar days from the beginning of the lease
           term be voided. We provided this information to management during the review
           so that the Authority could execute new contracts and stop the ineligible
           payments. The Authority was successful in executing new contracts, but the
           $56,211 already paid under the unexecuted contracts was ineligible.

           None of 17 tenant files we reviewed contained verification of owner eligibility
           before their participation in the program. Chapter 11 of HUD Handbook
           7420.10G states that the owner’s eligibility must be verified before the execution
           of a housing assistance payments contract. Without a verification of eligibility
           the Authority had no way of knowing whether it had contracted with ineligible
           owners. The Authority’s program manager confirmed that owner eligibility had
           not been verified. Following our inquiries, Authority staff successfully verified
           the eligibility of all owners participating in the program.

           Of 17 tenant files we reviewed, five showed that the Authority paid housing
           assistance for units that had not passed a housing quality standards inspection.
           HUD regulations (24 CFR 982.305(a)) prohibit the execution of a housing
           assistance payments contract before a satisfactory housing quality standards
           inspection. For example, one tenant received housing assistance payments
           beginning in December 2009, when the unit did not pass inspection until February
           2010. The Authority made $2,836 in ineligible payments for the five units.

           In 5 of 17 cases, the Authority failed to follow HUD’s requirements for
           determining rent reasonableness. The regulations (24 CFR 982.507) require that
           housing authorities determine that the rent is reasonable before approving leases.
           The regulations and the Authority’s administrative plan explain the process for
           determining rent reasonableness through a survey of comparable unassisted units.
           For these families, the Authority had no basis for assuring HUD that funds were
           not wasted on inflated rents or that families were not inappropriately restricted as
           to where they could live.

                                            10
           The Authority’s administrative plan contained all the needed policies and
           procedures for ensuring housing assistance payments were proper. However, staff
           were either unaware of the correct procedures or chose to ignore them.
           Management stated that some of the contracts were unexecuted because they had
           “fallen through the cracks” during the recent lease-up effort. It is management’s
           responsibility to ensure that staff is aware of the proper procedures and follow
           them.


Lease Requirements Were Not
Followed

           The Authority sometimes failed to provide HUD-required tenancy addendums to
           tenants, failed to retain copies of leases in the files, and failed to ensure lease
           terms ran concurrently with housing assistance payment contracts.

           None of the 17 files reviewed contained documentation showing that the
           Authority provided form HUD-52641-A (tenancy addendum) to the tenants or
           that it was included as part of the tenants’ lease with the owner as required. The
           tenancy addendum contains specific terms explaining the rights and obligations of
           all parties to a housing assistance payments contract that must prevail over any
           other provisions of the lease. The housing manager stated that she understood
           that the tenancy addendum was required but was not sure whether it had been
           provided to tenants. After we brought the matter to management’s attention, the
           Authority mailed all program participants a copy of the tenancy addendum and
           instructed them to retain it as part of their lease agreement.

           The Authority failed to retain a copy of the lease between the owner and the
           tenant in 7 of 17 cases. HUD regulations (24 CFR 982.158(e)) require that the
           Authority retain a copy of the executed lease during the term of each assisted
           lease and for at least 3 years thereafter. When we questioned the Authority about
           this matter, staff was able to obtain leases from the landlords for four of the seven
           tenants. The Authority made $14,568 in unsupported payments on behalf of the
           three tenants still lacking leases as of April 1, 2010.

           For 10 of 17 tenants, the Authority failed to ensure that housing assistance
           payments contract terms ran concurrently with lease terms. HUD requires (24
           CFR 982.309(b)(1)) that the term of the housing assistance payments contract
           begin on the first day of the lease term and end on the last day of the lease term.
           The Authority’s administrative plan also included this requirement. The
           Authority’s housing director stated that the Authority was trying to correct the
           problem.

           The Authority’s administrative plan contained adequate policies and procedures
           for ensuring the lease requirements were met. However, management had not
           ensured that staff had complied with the policies and procedures. Management

                                            11
             either blamed the problems on the workload caused by the recent large lease-up
             effort or could offer no explanation.

Housing Assistance Payment
Register Was Not Maintained

             The Authority failed to maintain a housing assistance payment register as required
             by the regulations (24 CFR 982.158(a) and HUD Handbook 7420.10G (chapter
             11.11)). The Authority’s independent public accountant’s 2008 audit report also
             disclosed this deficiency. The register is used to record data necessary for making
             and tracking housing assistance payments and adjustments made to owners each
             month. Since no housing assistance payment register was maintained, Authority
             staff was unable to provide us with an accurate number of housing units under
             contract. The housing director stated that the housing management system did not
             provide for such a register.

Conclusion

             Mismanagement of the Authority’s program resulted in significant deficiencies
             across the Section 8 program. Management must begin to take meaningful action
             immediately to bring its program into an acceptable level of compliance with
             HUD’s requirements. It must improve its controls to ensure that existing written
             policies and procedures are followed and new ones are created and implemented
             where needed. It must maintain a capable, adequately trained, and well-
             supervised staff. Taking these measures will better assure HUD that its funding is
             efficiently and effectively used, tenants are fairly selected for assistance and fairly
             removed when necessary, assistance payments are eligible, and other program
             requirements are met.

Recommendations


             We recommend that the Director of HUD’s Greensboro, NC, Office of Public
             Housing require the Authority to

             1A. Conduct utilization projections as outlined in the Authority’s administrative
                 plan to determine whether there is adequate funding to issue vouchers or
                 continue to fund current participants.

             1B. Consolidate and purge its waiting list and include all required information.

             1C. Implement existing policies and make any necessary adjustments to its Section
                 8 administrative plan to ensure that tenants from the waiting list are selected in
                 the correct order and the opening of its waiting list is advertised according to
                 its administrative plan.
                                               12
1D. Implement existing procedures to ensure that termination letters include the
    required information, tenants are given a hearing after an appeal has been
    requested, and impartial appointed hearing officers are used.

1E. Document the applicable tenant files with all of the required information
    detailing the termination of assistance process.

1F. Develop and implement controls to ensure

         1. Housing assistance payments contracts are executed before housing
            assistance payments are made,
         2. Landlords are properly screened for eligibility and files are properly
            documented,
         3. Assisted units pass housing quality standards inspections before the
            commencement of housing assistance payments,
         4. Rent reasonableness studies are performed before a lease is approved
            and files are properly documented.

1G. Repay its Housing Choice Voucher program from non-Federal funds $88,511
    for housing assistance payments without a properly executed housing
    assistance contract and housing assistance payments made prior to units
    passing housing quality standards inspections.

1H. Develop and implement controls to ensure

         1. Tenants are provided a copy of the tenancy addendum,
         2. Tenant files are properly documented with an executed lease,
         3. Terms for leases and housing assistance payment contracts run
            concurrently.

1I.   Provide adequate documentation or repay $14,568 spent on housing assistance
      payments for tenants whose files did not contain an executed copy of the lease.

1J.   Maintain a housing assistance payments register in accordance with the
      requirements.




                                 13
Finding 2: Tenants Lived in Units That Were Not Decent, Safe, and
Sanitary
Our inspection of 23 units showed that none met minimum housing quality standards and 6 were
in material noncompliance. In addition, the Authority failed to ensure that quality control
inspections were performed in accordance with HUD requirements. This noncompliance
occurred because the Authority’s management did not implement adequate controls to ensure
that its program units met the requirements. As a result, tenants lived in units that were not
decent, safe, and sanitary, and the Authority made housing assistance payments for units that did
not meet standards. The Authority paid property owners $14,119 in housing assistance for the 6
units in material noncompliance and $3,481 for 11 units for which it should have abated the
housing assistance payments.



 The Authority’s Units Did Not
 Meet HUD’s Housing Quality
 Standards

               We inspected a sample of 23 units from 545 program units under contract as of
               March 2010 for compliance with HUD’s housing quality standards. An Authority
               inspector accompanied us on the inspections and generally agreed with our
               results. None of the inspected units met minimum housing quality standards. We
               provided copies of our inspection forms to the Authority so that it could ensure
               that the property owners corrected all deficiencies.
               HUD regulations (24 CFR 982.401(a)(3)) require that assisted units meet housing
               quality standards both at commencement of assisted occupancy and throughout
               the assisted tenancy.
               The 23 units had a total of 164 housing quality standards violations, and 6 units
               were in material noncompliance with housing quality standards because they had
               one or more material deficiencies that existed at the time of the Authority’s
               previous inspection. The Authority paid property owners $14,119 in housing
               assistance for the six units in material noncompliance. The following table lists
               the most frequently occurring deficiencies.




                                               14
      Type of          Number of Number Percentage
     deficiency        deficiencies of units of units
 Electrical hazards         31            15           65
 Walls                      17            11           48
 Windows                    16            12           52
 Exterior surfaces          16            10           43
 Floors                     13             8           35
 Stairs, handrails,
 porches                    13            10           43

Electrical violations were the most frequently occurring deficiency. Of the 23
failing units, 15 had one or more such deficiencies. Examples of deficiencies
are shown below.




Exposed wiring on an exterior light fixture that the Authority failed
to report during its previous inspection.




                               15
Hole in wall at electrical outlet and exposed wiring not in conduit that the
Authority failed to report on its previous inspection.




Evidence of a roach infestation that the Authority failed to report
on its previous inspection.




Rotting soffit that the Authority failed to report on its previous inspection.



                                16
               Tripping hazard caused by unsecured carpet on front porch/steps.




             Leaking bathroom ceiling patched with tape by tenant.

The Authority Had Not
Implemented Adequate Internal
Controls

           Authority management had not placed appropriate emphasis on housing quality
           standards requirements. The Authority’s written procedures for quality control
           inspections were inadequate in some areas and not properly followed in others. In
           addition, the inspectors had received only limited training.

           HUD requires (24 CFR 982.405(b)) that authorities conduct supervisory quality
           control inspections. HUD Guidebook 7420.10G further requires that authorities
           conduct quality control housing quality standards inspections of a sample of
           Section 8 units under contract at the end of the authority’s previous fiscal year.
           The sample must include all types of inspections, a cross section of
           neighborhoods where program units are located, and inspections completed by all
           inspectors. The Authority did not design its inspection sample to meet these
           requirements. In addition, it did not adequately document the inspection results or
           use them to improve inspector performance or housing quality.
                                           17
           All 11 of the quality control inspections reviewed had deficiencies related to
           consistency with the previously completed housing quality standards inspection,
           completeness, or both. For example, quality control inspection forms sometimes

                  Lacked complete tenant or unit information;
                  Failed to indicate that all of the unit’s rooms had been inspected;
                  Indicated the presence of windows when the Authority inspector indicated
                  that no window existed; and
                  Failed to note that the identified deficiencies were emergency issues
                  requiring repair within 24 hours.

           Authority officials attributed the inconsistencies and incompleteness of the quality
           control inspections to human error.
           The Authority had no written policies or procedures detailing how the results of
           the quality control inspections were to be used and did not use the inspection
           results to improve housing quality. Quality control inspections are an essential
           tool for ensuring that housing is decent, safe, and sanitary. They can be used to
           determine formal or informal training needs and provide timely feedback to the
           inspectors to improve the quality of future inspections and, thus, the level of
           compliance with the standards.
           The Authority had 1 inspector for its 545 program units. When the inspector was
           unable to inspect all of the units as required, another Authority employee was
           assigned to perform some of the inspections. The inspector told us that he had
           received no training since 2004 and was not a certified inspector. An employee
           who sometimes assisted the inspector had received some housing quality
           standards training about 20 years ago. The Authority sent the inspector to
           housing quality standards inspection training during the audit after we inquired
           about the lack of recent training.

The Authority Did Not Always
Abate Housing Assistance
Payments as Required

           Based on our review of 38 tenant files, the Authority paid $3,481 for 11 units for
           which it should have abated the housing assistance payments. HUD requires (24
           CFR 982.404(a)(3)) landlords to repair nonhazardous deficiencies within 30 days
           and emergency items within 24 hours. If the landlord fails to make the required
           repairs on a timely basis, the Authority is required to abate the housing assistance
           payment. This condition occurred because the Authority lacked specific written
           procedures detailing the rent abatement process. While the Authority’s
           administrative plan addressed its abatement policy generally, it did not have the
           specific procedures that Authority staff needed to ensure compliance.



                                            18
Conclusion


             Because Authority management did not place sufficient emphasis on housing
             quality standards requirements and did not implement adequate internal controls,
             (1) HUD funds were used to make housing assistance payments for units that
             were in material noncompliance with standards, (2) quality control inspections
             were not completed in accordance with the requirements, and (3) rents were not
             abated as required. Management must provide tenants the opportunity to live in
             decent, safe, and sanitary conditions by implementing appropriate policies and
             procedures and ensuring that they are followed.

Recommendations


             We recommend that the Director of the Greensboro Office of Public Housing
             require the Authority to
             2A.    Repay its Housing Choice Voucher program $14,119 from non-Federal
                    funds for housing assistance payments made for units that were in material
                    noncompliance with housing quality standards.
             2B.    Repay its Housing Choice Voucher program $3,481 from non-Federal
                    funds for housing assistance payments made to owners that were
                    delinquent in completing required repairs.
             2C.    Inspect the 23 units that did not meet minimum housing quality standards
                    to verify that the landlords took appropriate corrective actions to make the
                    units decent, safe, and sanitary. If appropriate actions were not taken, the
                    Authority should abate the rents or terminate the contracts.
             2D.    Develop and implement an internal control plan and make any necessary
                    adjustments to its Section 8 administrative plan and/or any other Authority
                    policies or procedures to better ensure that (1) its units meet HUD’s
                    housing quality standards, (2) supervisory quality control housing quality
                    standards inspections are properly performed, and (3) rents are abated as
                    required.
             2E.    Perform a special inspection of a representative sample of its units to
                    determine the extent of housing quality standards noncompliance. The
                    Authority should report the results of these inspections to you, along with
                    an explanation of how the results were used to develop its new internal
                    control plan.




                                             19
Finding 3: The Authority Mismanaged Its Special Section 8 Programs
The Authority mismanaged its Family Self Sufficiency and homeownership programs
established to help participants self-improve. The Authority did not maintain accurate
accountability of participant funds or comply with HUD’s requirements for the Section 8 Family
Self-Sufficiency program. It also did not ensure that it complied with administrative
requirements for the Section 8 homeownership program. The Authority paid monthly mortgage
assistance without a signed statement of home ownership obligations and did not correctly
calculate monthly mortgage subsidies. These deficiencies occurred because the Authority did
not follow its own procedures or consistently provide trained and capable staff familiar with the
program requirements. As a result, the Authority paid $3,667 in ineligible self-sufficiency and
home ownership expenses, and family self-sufficiency participants did not reap the full benefits
of the program



 The Family Self-Sufficiency
 Program Was Mismanaged

               The Authority did not administer the Section 8 Family Self-Sufficiency program
               in accordance with the regulations (24 CFR Part 984) and the family-self
               sufficiency action plan contained within its administrative plan. HUD
               implemented the program to assist families in obtaining employment and breaking
               the cycle of reliance on government assistance. Housing authorities rely on
               community partnerships through which opportunities and supportive services such
               as job readiness training, parenting skills, and homeownership classes are made
               available to families that volunteer to participate. Participating families enter into
               a contractual agreement with the Authority for up to 5 years.

               We reviewed the files for 4 of the 12 participants and found that the Authority did
               not maintain accurate accountability of participant funds and comply with
               administrative requirements. The Authority’s files did not show that any of the
               participants received the appropriate support needed to aid them in becoming self-
               sufficient. There was little documentation for provision of supportive services or
               follow-up on the goals outlined in individual training and services plans. This
               condition occurred because Authority staff was inadequately trained and not
               familiar with program requirements. Consequently, the participants did not reap
               the full benefits of the program.

               Inaccurate Accountability of Participant Funds
               The Authority did not maintain accurate accountability of participant funds. The
               Authority was required to maintain an escrow account for each participant, track
               fund increases and decreases and beginning and ending balances, and record
               participant funds held by the Authority in the bank.


                                                20
For the four files in our sample, the Authority did not correctly calculate Self-
Sufficiency program credits for two participants. Participants earn credits when
their income increases, thus increasing their share of the rent and decreasing the
Federal contribution. Credits earned allow the participant’s escrow account
balance to increase. The Authority used an incorrect income amount for one
participant and the incorrect initial tenant’s rent share for the other participant.
This error caused one participant’s account to be overfunded by $783 and the
other’s to be underfunded by $114.

The Authority did not have an accurate accounting of participant funds deposited
in the bank. After the computer system maintaining the escrow accounts failed,
the resident services coordinator and chief financial officer each kept an unofficial
record of the participants’ funds on deposit. However, the unofficial amounts did
not reconcile to each other or to the bank balance. For example, the coordinator’s
record showed a $22,902 balance as of December 31, 2009, whereas the bank
records reported that the balance was $39,073, a difference of $16,171. The
Authority did not detect this discrepancy because it did not implement an alternate
reconciliation control method, such as requiring the staffs to coordinate.
The Authority did not maintain escrow accounts for all participants or adjust the
escrow accounts for changes in participation. The Authority’s escrow accounts
showed only one of the four current participants reviewed. We also found $3,742
in the subsidiary ledger for a participant who had died. Regulations require that
such funds be moved from the escrow account to the Authority’s Section 8
general fund.
The Authority did not provide any of the four participants with meaningful annual
escrow account reports. None of the 2008 or 2009 annual escrow reports showed
activity in the accounts as required by the regulations and the Authority’s
administrative plan. The reports only showed end-of-year balances. Without
reports showing the increases and decreases to the fund balances, participants
would be unable to measure their success in the program or alert the Authority to
inaccuracies.
Noncompliance With Program Administration Requirements
The Authority did not maintain complete case management files. We reviewed
the four files and found that case managers did not always document monthly
contacts and the results of the meetings as required by the Authority’s
administrative plan. The participant files and correspondence stored in the
Authority’s computer system noted that meetings were held and new ones
scheduled but contained little regarding individual goals, milestones, and the
status of measures taken to assist the participants to become self-sufficient.

The Authority did not consistently enforce the requirement (24 CFR
984.303(b)(4)) that the head of household seek and maintain suitable employment
while in the program. In January of 2010, the Authority established a work search
form for unemployed individuals to record employment search efforts. The form
                                  21
          stated that failure to meet the requirement could cause a denial of escrow funds or
          termination from the program. One participant had not submitted the work search
          form since March 2010, and another with periods of unemployment had also not
          submitted the form.

          Inadequately Staffed Program
          The Authority’s Self-Sufficiency program had gone through frequent periods of
          short staffing since it began in November of 2007. As of September 30, 2010, the
          program was being managed by the resident services coordinator. For the 8
          months before her October 2009 appointment, the position was vacant. The
          coordinator had no prior experience when she was hired but attended training in
          November 2009 and February 2010. She was responsible for administering the
          Self-Sufficiency programs for both public housing and Section 8 until June 2010
          when the Authority hired a full-time coordinator for the Section 8 Self-
          Sufficiency program. That full-time coordinator resigned in August 2010, leaving
          the resident services coordinator to once again manage both the public housing
          and Section 8 programs. Over the course of the audit, both coordinators stated
          that they were not fully aware of all of the Self-Sufficiency program
          requirements.

The Section 8 Homeownership
Program Was Mismanaged


          The Authority did not ensure that Section 8 homeownership program
          administrative requirements were met. The homeownership program allowed the
          Authority to provide monthly mortgage assistance to Section 8 families that were
          eligible to purchase a home under the terms of the program. The Authority’s
          Section 8 administrative plan contained procedures for its homeownership
          program, but staff did not always follow them.

          We reviewed the files for all three participants in the Authority’s homeownership
          program and found that none of the statements of home ownership obligations
          specifying the participant’s responsibilities were signed before the participant
          received assistance as required. One participant received monthly mortgage
          assistance for more than 7 months before signing the statement. The $3,667 that
          the Authority paid before having signed statements was ineligible.

          Authority staff did not correctly calculate the monthly mortgage subsidies for two
          of the three program participants. The Authority’s administrative plan required it
          to use a form to document the monthly subsidy calculation for mortgage principal
          and interest, homeowner’s insurance, property taxes, repair reserves, and utility
          allowance. We recalculated the subsidies and found that one participant had been
          underpaid $309 and another had been overpaid $234. We were unable to compare
          our calculations to the Authority’s calculations because staff did not prepare the
          required forms for two of the three participants. After we showed Authority staff

                                          22
             our calculations, the staff correctly recalculated the subsidies and reimbursed the
             underpaid participant.


Conclusion


             The Authority mismanaged its Family Self Sufficiency and homeownership
             programs because it failed to maintain effective control over the programs.
             Authority management must act immediately to improve its program compliance
             by ensuring that the controls in its Section 8 administrative plan are followed. It
             must also ensure that these programs are run by well-supervised, knowledgeable
             staff. Taking these measures will better ensure that the Authority can help
             participants fully achieve self-improvement through meaningful employment and
             home ownership.

Recommendations


             We recommend that the Director of HUD’s Greensboro, NC, Office of Public
             Housing require the Authority to

             3A. Strengthen internal controls of the Family Self-Sufficiency program by
                 providing adequate training to staff responsible for administering the program,
                 implementing existing written policies, and developing written procedures as
                 needed to ensure that participants are provided appropriate supporting services
                 as required and the files are documented.

             3B. Implement written policies and procedures for the Section 8 homeownership
                 program to ensure that the statement of home ownership obligations is
                 executed before paying mortgage assistance and monthly subsidies are
                 correctly calculated.

             3C. Recalculate escrow credits and maintain an accurate subsidiary ledger for all
                 active family self-sufficiency participants to ensure that correct credits are set
                 aside.

             3D. Reconcile corrected escrow balances to the family self-sufficiency bank
                 account and remove any excess funds to the appropriate general fund to be
                 used for program expenses.

             3E. Repay the Section 8 program $3,667 in ineligible Section 8 homeownership
                 program mortgage assistance payments from non-Federal funds.




                                               23
                         SCOPE AND METHODOLOGY

Our objective was to determine whether the Authority complied with U.S. Department of
Housing and Urban Development (HUD) requirements for administering its Housing Choice
Voucher program, including its special Section 8 programs comprised of a Family Self
Sufficiency program and a homeownership program.
To accomplish our objective, we reviewed

       Financial management regulations at 24 CFR 85.20, program regulations at 24 CFR Parts
       982 and 984, HUD Guidebook 7420.10G, Rental Integrity Monitoring Guide, HUD’s
       amended annual contributions contract with the Authority, and HUD’s Greensboro Office of
       Public Housing’s correspondence and files pertaining to the Authority.

       The Authority’s policies and procedures manuals, program-assisted units, program
       participants’ files, program applicants’ files, housing assistance payments, utility assistance
       payments, family self-sufficiency action plan, family self-sufficiency files, Section 8
       homeownership program participant files, Authority-reported data in the Public and Indian
       Housing Information Center, board minutes, staffing assignments, job descriptions, and
       organizational charts.

We also interviewed the Authority’s employees and HUD’s Greensboro staff involved with
oversight of the Authority. We selected several non-statistical samples as described below. The
results from these samples pertain only to the items sampled and were not projected to the universe
as a whole.
We selected a non-statistical sample of 15 program participant files for general review from a
universe of 545 program participants as of March 2010. We chose 11 participant files from among
those participants who first received assistance during 2009, 1 from 2007, and 3 from 2008. As the
review progressed, we found indicators of deficiencies in two more participant files and expanded
our sample to 17 participant files.
The Authority had a total of 545 program participants at the time of our housing quality standards
sample selection. We selected a non-statistical sample of 26 program units for inspection. The first
17 were randomly selected using a random number generator, and 9 were a non-statistical selection
based on information obtained during the audit. Three tenants were removed from our sample due
to their termination from the program. We inspected the remaining 23 units for housing quality
standards compliance.
We selected a sample of 15 tenant files to evaluate the Authority’s compliance with abatement
requirements. A non-statistical random sample of 10 tenant files was selected from a universe of 31
tenants having potentially unabated rent. The 31-tenant universe identified using computer-assisted
auditing techniques had housing quality standards inspections with pass dates greater than 30 days
following the original inspection date. The remaining five of the sample were a non-statistical
selection from the housing quality standards inspections that we conducted.


                                                  24
We selected a non-statistical sample of nine tenant files to test for compliance with termination
procedures from a universe of 69 tenants that the Authority reported to have been terminated
between January 2009 and July 2010. The sample was designed to ensure terminated tenants’
files were selected from each quarter or represented each Housing Choice Voucher manager’s
tenure at the Authority during our audit period. We added an additional file to the sample that was
not included in the universe but was found during a cursory test for timely housing quality standards
requirements.
We selected a sample of four Family Self-Sufficiency program participants from the universe of 22
participants. All four tenants were a non-statistical selection designed to ensure that the reviewed
participants had gone through a reexamination and had escrow credits calculated.
The Authority had three Section 8 homeownership program participants during our audit scope. We
reviewed files for all three participants.
All electronic data relied upon during the review were tested during the performance of the
various review steps. We found a significant portion of the electronic data to be unreliable. For
example, the Authority did not maintain a housing assistance payment register or a complete and
accurate listing of tenants and provided outdated information to HUD’s Public and Indian
Housing Information Center due to the unreliability of its housing management software and the
information it contained.
We performed our onsite work from March 2010 through September 2010 at the Authority’s office
located at 213 Broad Street, Wilson, NC. The audit covered the period January 1, 2008, through
June 30, 2010, and was expanded as determined necessary.
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.




                                                 25
                              INTERNAL CONTROLS

Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

       Effectiveness and efficiency of operations,
       Reliability of financial reporting, and
       Compliance with applicable laws and regulations.

Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls 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 operation – Policies and procedures that management has
                   implemented to reasonably ensure that a program meets its objectives.
               .
                   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 deficiency in internal control exists when the design or operation of a control does
               not allow management or employees, in the normal course of performing their
               assigned functions, the reasonable opportunity to prevent, detect, or correct (1)
               impairments to effectiveness or efficiency of operations, (2) misstatements in
               financial or performance information, or (3) violations of laws and regulations on a
               timely basis.




                                                 26
Significant Deficiencies

             Based on our review, we believe that the following items are significant deficiencies:

                    The Authority did not have controls for effective Section 8 administration
                    (findings 1-3).
                    The Authority did not have internal controls in place to ensure that Section 8
                    units met housing quality standards (finding 2).
                    The Authority did not have controls for effective administration of its Family
                    Self Sufficiency and homeownership programs (finding 3).




                                              27
                                   APPENDIXES


Appendix A
                 SCHEDULE OF QUESTIONED COSTS


                Recommendation
                         number               Ineligible 1/      Unsupported 2/
                    1G                            $88,511
                    1I                                                  $14,568
                    2A                              14,119
                    2B                               3,481
                    3E                               3,667             _______
                   Total                          $109,778              $14,568



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/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.




                                             28
Appendix B
        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                          29
Comment 1




Comment 2




            30
Comment 3




Comment 4




            31
Comment 5




            32
Comment 6




            33
Comment 7




            34
Comment 8




Comment 9




Comment 10




             35
36
Comment 11




Comment 12




             37
                          OIG Evaluation of Auditee Comments


Comment 1   We acknowledged a decrease in program performance during the Authority’s
            lease up effort to attain full utilization of its program funding. However, we also
            noted deficiencies during our review that existed prior to this leasing period. The
            Authority did not maintain a Housing Assistance Payments register, provide
            tenancy addendums to participants, or perform background checks on landlords
            prior to the lease up effort to attain full utilization.

Comment 2   HUD did not approve the removal of 113 families from the program as the
            Authority’s response states. HUD regulations and the Authority’s administrative
            policy dictate that the Authority may terminate the Housing Assistance Payment
            contract if the Authority determines, in accordance with HUD requirements, that
            funding under the consolidated Annual Contributions Contract (annual budget
            authority and restricted reserves) is insufficient to support continued assistance for
            families in the program. The use, or non-use, of unrestricted reserves
            (administrative fee reserves) for housing assistance is at the sole discretion of the
            Authority. Authority management provided HUD field office staff with
            documentation, prior to the release of the 113 families, indicating the Authority
            had over $190,000 in administrative fee reserves. The field office suggested that
            the Authority utilize all reserves before terminating assistance to the families but
            the Authority chose not to do so.

Comment 3   The Authority states that its quality control inspections are done annually.
            However, the Authority should conduct quality control inspections on a quarterly
            basis as required by the Housing Choice Voucher Guidebook and its
            Administrative plan.

Comment 4   The Authority states that prior to the excessive workload and high turnover of
            staff, all termination letters contained the required information. Our review of
            termination letters from this period showed that they lacked the basis for the
            termination as well as information regarding the hearing process. The more
            recent letters appeared to address these requirements but still failed to include the
            hearing process procedures.

Comment 5   The new policies and procedures the Authority claims to have implemented to
            address funds utilization, as well as any actions taken to address other
            recommendations in the report, will be evaluated by the HUD Greensboro field
            office as part of the recommendation clearance process. The administrative plan
            should be updated to reflect any new procedures that cause a conflict with the
            current plan.

Comment 6   In addition to the termination letter revisions claimed by the Authority, the letters
            should also provide tenants with an outline of the Authority’s hearing process as
            required by its Section 8 Administrative Plan.

                                              38
Comment 7     OIG disagrees with the Authority’s request that it not be required to repay
              $88,435 in ineligible costs paid owners without an executed housing assistance
              payment contract. HUD regulations allow housing authorities to pay owners from
              the beginning of the lease term if the contract is executed within 60 days.
              Although there was a massive lease up effort, 60 days should have been ample
              time to properly execute the contracts. In addition, although the Authority stated
              that it had inspected the units before families moved in, we found that the
              Authority had paid rents for at least 3 of the 86 units before they had passed
              inspection.

Comment 8     The lease documentation provided by the Authority was not sufficient to address
              all of the findings included in our recommendation 1I. The Authority should
              provide the leases with the additional documentation identified in the report to the
              HUD Greensboro field office in order to clear the entire recommendation.

Comment 9 The Authority’s statement that it inspects all assisted units annually is not correct
          based on our audit work. For example, OIG inspected the unit located at 1601-F
          Pecan Court, Wilson, NC 27893 on March 11, 2010. The agency’s latest
          inspection of that unit was performed on January 16, 2009, nearly 14 months
          earlier. We also found other instances of units not being inspected annually.

              The Authority argued that some of OIG identified deficiencies were not housing
              quality standards violations. For example, the Authority claimed that ant
              infestations are not housing quality standards violations. The ant infestation in
              the subject unit was severe and, in our opinion, meets the definition of evidence of
              infestation on the HUD housing quality standards inspection checklist.

              The Authority also claimed that OIG identified items that the Authority had also
              identified and properly addressed during its previous inspection. The Authority
              stated that, “Deficiencies can happen between inspections even when they have
              been corrected previously.” While this statement is true, OIG purposely took a
              conservative position. As stated in the report, “…units were in material
              noncompliance with housing quality standards because they had one or more
              material deficiencies that existed at the time of the Authority’s previous
              inspection.” As such, the deficiencies cited as being material noncompliant
              during the OIG inspections were not adequately addressed by the Agency as
              claimed.

              The Authority stated, “The inspector revisits each unit for re-inspection to ensure
              all repairs are corrected.” We assume that the Authority meant to say “…to
              ensure all repairs are made.” OIG cited several deficiencies that were present at
              the time of the Authority’s previous inspection but remained uncorrected, thus we
              do not agree that the Authority has always ensured that all repairs were made. For
              example, OIG cited a leak in the bathroom ceiling of a unit. The tenant stated that
              the leak had not been fixed even though the unit had been inspected by the
              Authority and the leak was present at the time of the inspection. The leak was not

                                               39
              only present during the Authority’s latest inspection performed on October 22,
              2009, but was a problem dating back more than two years (the same deficiency
              was cited in the inspection performed on December 15, 2008).

              The Authority’s response attempts to make the case that either it followed proper
              procedures in identifying deficiencies and ensuring that they were adequately
              addressed, or that the deficiencies cited by OIG somehow occurred during the
              time from the Agency’s last inspection to the date of the OIG inspection. We
              disagree with the Authority’s claims and its request that it not be required to repay
              the ineligible costs attributable to units in material noncompliance with housing
              quality standards.

Comment 10 The documentation the Authority submitted for the repayment of $3,481 in
           ineligible housing assistance payments made to owners that were delinquent in
           completing required repairs was not sufficient to close recommendation 2B. The
           photocopy of the check showed that it was written from the Authority’s general
           fund; thus, there was no evidence to show a non-Federal source of funds as
           required by the recommendation. The Authority must provide acceptable
           evidence of repayment to the Greensboro field office in order to clear the
           recommendation.

Comment 11 The documentation the Authority submitted for the repayment of $3,667 in
           ineligible homeownership program mortgage assistance payments was not
           sufficient to close recommendation 3E. The photocopy of the repayment check
           showed that it was written from the Authority’s general fund; thus, there was no
           evidence to show a non-Federal source of funds as required by the
           recommendation. The Authority must provide acceptable evidence of repayment
           to the Greensboro field office in order to clear the recommendation.

Comment 12 We concluded that the Section 8 homeownership program was mismanaged
           because the Authority generally failed to follow HUD’s administrative
           requirements for all 3 program participants. Although we agree that the monthly
           mortgage subsidy was miscalculated for only 2 participants, we believe that level
           of noncompliance is significant since the entire program consisted of only 3
           participants.




                                               40
Appendix C
                                       CRITERIA

Finding 1
24CFR85.20(b)(3)
                     Effective control and accountability must be maintained for all grant and
                     subgrant cash, real and personal property, and other assets. Grantees and
                     subgrantees must adequately safeguard all such property and must assure
                     that it is used solely for authorized purposes.

WHA Admin Plan: 16-VIII.B
                  The WHA will determine whether there is adequate funding to issue
                  vouchers, approve moves to higher cost units and areas, and continue
                  subsidizing all current participants by comparing the WHA’s annual
                  budget authority to the annual total HAP needs on a monthly basis. The
                  total HAP needs for the calendar year will be projected by establishing the
                  actual HAP costs year to date. To that figure, the WHA will add
                  anticipated HAP expenditures for the remainder of the calendar year.
                  Projected HAP expenditures will be calculated by multiplying the
                  projected number of units leased per remaining months by the most
                  current month’s average HAP. The projected number of units leased per
                  month will take into account the average monthly turnover of participant
                  families. If the total annual HAP needs equal or exceed the annual budget
                  authority, or if the WHA cannot support the cost of the proposed subsidy
                  commitment (voucher issuance or move) based on the funding analysis,
                  the WHA will be considered to have insufficient funding.

24CFR982.204(f)
                     A PHA must use a single waiting list for admission to its Section 8 tenant-
                     based assistance program. However, the PHA may use a separate single
                     waiting list for such admissions for a county or municipality.

24CFR982.204(b)
                     The PHA must maintain information that permits the PHA to select
                     participants from the waiting list in accordance with the PHA admission
                     policies. The waiting list must contain the following information for each
                     applicant listed: (1) applicant name; (2) family unit size; (3) date and time
                     of application; (4) qualification for any local preference; and (5) racial or
                     ethnic designation of the head of household.

24CFR982.206(a)(1)
                     When the PHA opens a waiting list, the PHA must give public notice that
                     families may apply for tenant-based assistance. The public notice must
                     state where and when to apply.
                                              41
WHA Admin Plan: 4-II.C
                   The WHA [Authority] will announce the reopening of the waiting list at
                   least 14 days prior to the date applications will first be accepted. If the list
                   is only being reopened for certain categories of families, this information
                   will be contained in the notice.

WHA Admin Plan 16-III.C
                  Informal hearings will be conducted by a person or persons approved by
                  the WHA, other than the person who made or approved the decision or a
                  subordinate of the person who made or approved the decision.

HUD 7420.10G 15.4
                      Upon making a decision to terminate assistance, the PHA must give both
                      the owner and the family written notice of termination that states: (1)
                      reason for the termination; (2) effective date of the termination, and (3)
                      family’s right to request a hearing.

WHA Admin Plan 16-III.C
                  The WHA must schedule and send written notice of the informal hearing
                  to the family within 10 business days of the family’s request.

24CFR982.305(c)(2)
                      The PHA may not pay any housing assistance payment to the owner until
                      the HAP contract has been executed.

24CFR982.305(c)(1)
                      The PHA must use best efforts to execute the HAP contract before the
                      beginning of the lease term. The HAP contract must be executed no later
                      than 60 calendar days from the beginning of the lease term.

24CFR982.305(a)
                      The PHA may not give approval for the family of the assisted tenancy, or
                      execute a HAP contract, until the PHA has determined that all the
                      following met program requirements: (1) the unit is eligible; (2) the unit
                      has been inspected by the PHA and passes HQS [housing quality
                      standards]; (3) the lease includes the tenancy addendum; (4) the rent to
                      owner is reasonable; and (5) at the time a family initially receives tenant-
                      based assistance for occupancy of a dwelling unit, and where the gross
                      rent of the unit exceeds the applicable payment standard for the family, the
                      family share does not exceed 40 percent of the family’s monthly adjusted
                      income.

24CFR982.306(a)
                      The PHA must not approve an assisted tenancy if the PHA has been
                      informed that the owner is debarred, suspended, or subject to a limited
                      denial of participation.

                                                42
24CFR982.507(a)(1)
                     The PHA may not approve a lease until the PHA determines that the initial
                     rent to owner is a reasonable rent.
HUD 7420.10G 11.2
                     Prior to executing a HAP contract and processing housing assistance
                     payments, the PHA must determine that the owner of the assisted unit is
                     eligible to participate in the Housing Choice Voucher Program.
24CFR982.162(a)
                     The PHA must use program contracts and other forms required by HUD
                     headquarters, including: (1) the consolidated ACC [annual contributions
                     contract] between HUD and the PHA; (2) the HAP contract between the
                     PHA and the owner; and (3) the tenancy addendum required by HUD
                     (which is included both in the HAP contract and in the lease between the
                     owner and the tenant).
24CFR982.308(f)(2)
                     All provisions in the HUD-required tenancy addendum must be added
                     word-for-word to the owner’s standard form lease that is used by the
                     owner for unassisted tenants. The tenant shall have the right to enforce the
                     tenancy addendum against the owner, and the terms of the tenancy
                     addendum shall prevail over any other provisions of the lease.
24CFR982.158(e)
                     During the term of each assisted lease, and for at least three years
                     thereafter, the PHA [public housing agency] must keep: (1) a copy of the
                     executed lease; (2) the HAP [housing assistance payments] contract; and
                     (3) the application from the family.
24CFR982.309(b)(1)
                     The term of the HAP contract begins on the first day of the lease term and
                     ends on the last day of the lease term.

24CFR982.158(a)
                     The PHA must maintain complete and accurate accounts and other records
                     for the program in accordance with HUD requirements, in a manner that
                     permits a speedy and effective audit. The records must be in the form
                     required by HUD, including requirements governing computerized or
                     electronic forms of record-keeping.

Finding 2
24CFR982.401(a)(3)
                     All program housing must meet the HQS performance requirements both
                     at commencement of assisted occupancy, and throughout the assisted
                     tenancy.

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24CFR982.405(b)
                     The PHA must conduct supervisory quality control HQS inspections.
HUD 7420.10G 10.9
                     In addition to monitoring SEMAP [Section Eight Management
                     Assessment Program] compliance, quality control inspections provide
                     feedback on inspectors’ work, which can be used to determine if
                     individual performance or general HQS training issues need to be
                     addressed.

24CFR982.404(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
                     defect is life threatening, the owner must correct the defect within no more
                     than 24 hours. For other defects, the owner must correct the defect within
                     no more than 30 calendar days (or any PHA-approved extension).

HUD 7420.10G 10.7
                     The PHA must abate HAP payments to owners who do not comply with
                     notifications to correct HQS deficiencies with the specified time period:
                     24 hours or 30-days depending on the nature of the deficiency. For valid
                     reasons, the PHA may extend the time period. Placement of abatement
                     must occur by the first of the month following expiration of the notice.
                     Except in the case of life threatening violations requiring corrections
                     within 24 hours, the owner must receive 30-day written notification of the
                     abatement. Therefore, it is important that PHAs include the 30-day notice
                     to abate in the original violations notice.
WHA Admin Plan: 8-II.G
                   The WHA will make all HAP abatements effective the day after the WHA
                   specified correction period (including any extension).

Finding 3
24CFR984.303(b)(4)
                     The head of the FSS [Family Self-Sufficiency program] family shall be
                     required under the contract of participation to seek and maintain suitable
                     employment during the term of the contract and any extension thereof.
                     Although other members of the FSS family may seek and maintain
                     employment during the term of the contract, only the head of the FSS
                     family is required to seek and maintain suitable employment.




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24CFR984.305(a)(2)(i)
                    The total of the combined FSS account funds will be supported in the
                    PHA accounting records by a subsidiary ledger showing the balance
                    applicable to each FSS family. During the term of the contract of
                    participation, the PHA shall credit periodically, but not less than annually,
                    to each family’s FSS account.

24CFR984.305(a)(3)
                      Each PHA will be required to make a report, at least once annually, to
                      each FSS family on the status of the family’s FSS account. At a
                      minimum, the report will include: (i) the balance at the beginning of the
                      reporting period; (ii) the amount of the family’s rent payment that was
                      credited to the FSS account, during the reporting period; (iii) any
                      deductions made from the account for amounts due the PHA before
                      interest is distributed; (iv) the amount of interest earned on the account
                      during the year; and (v) the total in the account at the end of the reporting
                      period.

24CFR984.305(f)(2)(ii)
                    FSS account funds forfeited by the FSS family will be treated as program
                    receipts for payment of program expenses under the PHA budget for the
                    applicable Section 8 program, and shall be used in accordance with HUD
                    requirements governing the use of program receipts.

HUD 7420.10G 23.4
                      The contract lists the family’s current annual income, the amount of
                      earned income, included in the annual income and the family’s total tenant
                      payment when the family begins its FSS participation. During the term of
                      the contract, increases in earned income and total tenant payment are
                      compared to the amounts listed in calculating escrow credits.

24CFR982.633(c)
                      Before commencement of homeownership assistance, the family must
                      execute a statement of family obligations in the form prescribed by HUD.
                      In the statement, the family agrees to comply with all family obligations
                      under the homeownership option.

24CFR982.635(a)
                      While the family is residing in the home, the PHA shall pay a monthly
                      homeownership assistance payment on behalf of the family that is equal to
                      the lower of: (1) the payment standard minus the total tenant payment; or
                      (2) the family’s monthly homeownership expenses minus the total tenant
                      payment.




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WHA Admin Plan 18-III.E
                  The sales contract/purchase agreement must provide for two home
                  inspections. The first inspection will be completed by the Housing
                  Authority to certify that the home has passed the housing quality standards
                  inspection. The second inspection needs to be completed by an
                  independent inspector. The sales contract/purchase agreements must state
                  that the purchaser is not obligated to pay for repairs unless the repairs are
                  approved by the Authority.




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