oversight

The Housing Authority of the City of Camden, NJ, 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 2011-07-19.

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

                                                               Issue Date
                                                                      July 19, 2011
                                                               Audit Report Number
                                                                      2011-PH-1013




TO:        Balu K. Thumar, Acting Director, Office of Public Housing, Newark Field
            Office, 2FPHI

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

SUBJECT:   The Housing Authority of the City of Camden, NJ, 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 Housing Authority of the City of Camden’s 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. The audit objective
           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 17 units inspected, 16 did not meet HUD’s housing quality
           standards. Moreover, 10 of the 16 units were in material noncompliance with
           housing quality standards. The Authority spent $29,791 in program and
           administrative funds for these 10 units. In addition, it did not properly identify
           life-threatening violations, conduct timely reinspections or maintain
           documentation to show that owners made repairs within specified time limits, and
           abate assistance payments to owners for units that did not meet housing quality
           standards.

What We Recommend


           We recommend that HUD require the Authority to (1) ensure that housing units
           inspected during the audit are repaired to meet HUD’s housing quality standards;
           (2) reimburse its program from non-Federal funds for the improper use of $29,791
           in program and administrative funds for units that materially failed to meet
           HUD’s housing quality standards; and (3) develop and implement adequate
           controls to ensure that program units meet housing quality standards, inspectors
           are periodically provided training, quality control inspections are thorough, and
           the results are used to improve the program. We also recommend that HUD
           require the Authority to revise and update its administrative plan to ensure that
           violations are properly categorized and repairs are completed within the
           prescribed time limits and that it abates housing assistance payments in
           accordance with HUD requirements.

           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 June 13,
           2011. We discussed the audit results with the Authority and HUD officials
           throughout the audit and at an exit conference on June 22, 2011. The Authority
           provided a written response to our draft report on June 29, 2011. It agreed with
           the recommendations in the report. The complete text of the Authority’s 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                                                    13

Internal Controls                                                        15

Appendixes
   A. Schedule of Questioned Costs                                       17
   B. Auditee Comments                                                   18




                                           3
                       BACKGROUND AND OBJECTIVE

The Housing Authority of the City of Camden was established in 1938 under Federal and State
housing laws for the purpose of engaging in the development, acquisition, and administrative
activities of the low-income housing program and other programs with similar objectives for
low- and moderate-income families residing in Camden, NJ. The Authority is governed by a
five-member board of commissioners. The board appoints an executive director to manage the
day-to-day operations of the Authority. The executive director is Dr. Maria Marquez. The
Authority’s main administrative office is located at 2021 Watson Street, Camden, NJ.

Under the Section 8 Housing Choice Voucher program, the U.S. Department of Housing and
Urban Development (HUD) authorized the Authority to provide leased housing assistance
payments to 1,255 eligible households. HUD authorized the Authority the following financial
assistance for housing choice vouchers for fiscal years 2008 through 2010:

                                         Number of
                          Authority       vouchers       Annual budget
                          fiscal year    authorized        authority
                             2008           1,255          $9,218,366
                             2009           1,255           8,004,880
                             2010           1,255          10,342,595
                             Total                        $27,565,841

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 17 program
housing units inspected, 16 did not meet HUD’s housing quality standards, and 10 materially
failed to meet housing quality standards. The Authority’s inspectors did not observe or report
151 violations, which existed at the units when they conducted their inspections. In addition, the
Authority did not properly identify life-threatening violations, conduct timely reinspections or
maintain documentation to show that owners made repairs within specified time limits, and abate
assistance payments to owners for units that did not meet housing quality standards. This
condition occurred because the Authority’s inspectors had not received formal training since
May 2000, its quality control inspection process was insufficient, its inspectors relied on
certificates of occupancy issued by the City of Camden rather than conducting thorough unit
inspections, and its administrative plan needed to be updated. As a result, the Authority spent
$29,791 in program and administrative funds for 10 units that materially failed to meet HUD’s
housing quality standards, subjected program participants to unsafe living conditions, and paid
owners for units that did not meet HUD’s minimum housing quality standards.



    Housing Units Did Not Meet
    HUD’s Housing Quality
    Standards

                  We statistically selected 22 units from unit inspections passed by the Authority’s
                  inspectors during the period January 1 to June 30, 2010. The 22 units were
                  selected to determine whether the Authority ensured that the units in its program
                  met housing quality standards. We inspected 171 of the selected units between
                  September 1 and September 3, 2010.

                  Of the 17 units inspected, 16 (94 percent) had 151 housing quality standards
                  violations. Additionally, 10 of the 16 units (63 percent) were considered to be in
                  material noncompliance since they had many violations that predated the
                  Authority’s last inspection and were not identified by the Authority’s inspectors,
                  thus creating unsafe living conditions. The 10 units had 87 violations 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 151 housing quality standards violations in the 16 units that
                  failed the housing quality standards inspections.


1
 We inspected only 17 units because the tenants or owners failed to show up for the inspections of 2 units, a tenant
had moved from 1 unit, and we did not inspect 2 units because of time constraints.
                                                          5
                                                                   Number of        Number         Percentage
                          Category of violations                   violations       of units        of units2
                   Illumination and electricity                        67              13             76%
                   Structure and materials                             33               6             35%
                   Access                                              17               7             41%
                   Site and neighborhood conditions                    13               7             41%
                   Space and security                                   7               6             35%
                   Smoke detectors                                      6               6             35%
                   Food preparation and refuse disposal                 4               2             12%
                   Sanitary facilities                                  2               2             12%
                   Sanitary conditions                                  1               1              6%
                   Thermal environment                                  1               1              6%
                   Total                                              151

                 We presented our inspection results to the Authority and the Director of HUD’s
                 Office of Public Housing, Newark field office, 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 at the Authority’s leased
                 housing units.




                 Inspection #16 - The double keyed deadbolt lock poses a trapping hazard. This
                 violation was not identified during the Authority’s March 23, 2010, inspection.

2
 The percentage is calculated by dividing the number of units by 17 units. For example, illumination and electricity
13 units/17units = 76 percent.
                                                         6
Inspection #7 - There is no railing, no handrail, and no cover over the basement
steps. This violation was not identified during the Authority’s June 7, 2010,
inspection.




Inspection #14 - There is a hole above the rear door. The hole allows
vermin/wind into the wall. This violation was not identified during the
Authority’s April 28, 2010, inspection.




                                       7
           Inspection #18 - The broken concrete walk to the unit is a tripping hazard. This
           violation was not identified during the Authority’s March 2, 2010, inspection.




           Inspection #10 - The missing junction box cover is a potential shocking hazard.
           This violation was not identified during the Authority’s April 1, 2010,
           inspection.


Violations Were Not Properly
Identified and Corrected Within
Prescribed Time Limits

           The Authority did not properly categorize violations and ensure that corrections
           were made within the required timeframe. HUD regulations at 24 CFR 982.404
           require that owners correct all life-threatening violations within no more than 24
                                              8
           hours. The Authority’s administrative plan reiterated this requirement. We
           analyzed the inspection reports for 11 of the 22 units in our discovery sample that
           had failed the Authority’s previous inspection initially before passing inspection
           and determined that the Authority’s inspectors did not properly categorize 16 life-
           threatening violations related to 7 units, such as missing and inoperable smoke
           alarms, missing outlet covers, inoperable oven, and exposed wires in a bathroom
           light, as 24-hour violations. Consequently, repairs were not made within 24 hours
           as required, which unnecessarily subjected program participants to unsafe living
           conditions.

           Additionally, HUD regulations at 24 CFR 982.404 require that owners correct all
           non-life-threatening violations within no more than 30 calendar days or any
           authority-approved extension. HUD’s Housing Choice Voucher Guidebook
           7420.10G states that reinspection or housing authority verification that failed
           items have been corrected is required. Promptly following inspection, notices to
           correct routine violations should be issued and should state a date for compliance
           that allows time for corrections to be made and verification can be obtained
           within a 30-day timeframe. Our analysis of the series of inspection reports for the
           11 units showed that in all 11 instances, the Authority did not schedule the
           reinspection within 30 days and the inspection files contained no documentation
           to demonstrate that the owners completed the necessary repairs within the 30-day
           period or an Authority-approved extension. The Authority stated that scheduling
           had been a problem because it had only two inspectors and they had been
           spending an increasing amount of time commuting between inspections because
           voucher holders had been seeking housing outside of the city limits.

The Authority Did Not Abate
Housing Assistance Payments as
Required


           In the 11 files noted above, the Authority did not abate the housing assistance
           payment to the owners, although 30 calendar days had passed since the
           Authority’s inspection failed the unit and there was no evidence that the Authority
           had approved an extension. HUD regulations at 24 CFR 982.404 state that a
           housing 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 housing authority and the housing authority
           verifies the correction. The Authority’s administrative plan stated that when a
           unit failed to meet housing quality standards and the owner was responsible for
           completing the necessary repairs in the period specified by the Authority, the
           assistance payment to the owner would be abated for every day of
           noncompliance. The administrative plan also stated that abatement would be
           effective from the day after the date of the failed inspection. As a result, the
           Authority made housing assistance payments totaling $6,600 to the owners for the
           11 units when they did not meet housing quality standards.
                                            9
The Authority Did Not Have
Adequate Procedures and
Controls Over Its Inspection
Program


            Although HUD regulations at 24 CFR 982.401 and the Authority’s administrative
            plan required the Authority to ensure that its program units met housing quality
            standards, it failed to do so because its inspectors had not received formal training
            since May 2000, its quality control inspection process was insufficient, and it
            relied on certificates of occupancy issued by the City rather than conducting
            thorough unit inspections. In addition, its administrative plan needed to be
            revised and updated.

            Inspectors Needed Training

            The Authority did not ensure that its two housing inspectors were equipped with
            the knowledge they needed to perform complete inspections to assess compliance
            with HUD’s housing quality standards. The inspectors had last received formal
            training in May 2000. Since that time, the HUD Office of Inspector General
            (OIG) had issued many reports addressing problems with compliance with
            housing quality standards. As a result, the inspectors were unaware of trends in
            the program, and they overlooked violations. The inspectors stated that they
            overlooked some violations that we identified because they were unaware that the
            deficiencies were violations of the standards. For example, the inspectors stated
            that in some instances, they noted the double-keyed deadbolt locks but did not
            identify them as violations.

            The Quality Control Inspection Process Was Not Sufficient

            The Authority’s quality control inspector did not thoroughly reinspect units.
            Rather than perform a thorough reinspection, the quality control inspector
            followed up on deficiencies identified on the most recent inspection report.
            Section 10.9 of HUD’s Housing Choice Voucher Guidebook 7420.10G states that
            units must be reinspected. As a result of the Authority’s failure to thoroughly
            reinspect its units, violations that were not detected by the inspector were also not
            detected in the quality control inspection. Also, although the quality control
            inspector stated that feedback was given to the inspectors on their work, the
            Authority did not maintain documentation to demonstrate that the results were
            used to improve the program.

            Inspectors Relied on Certificates of Occupancy Issued by the City

            The Authority’s inspectors relied on certificates of occupancy issued by the City
            rather than conducting thorough unit inspections. The City inspected rental units
            before each new tenancy, and the Authority inspected the units after the City
                                             10
             issued its certificate. The inspectors stated that because the City passed the units
             and issued a certificate, they did not thoroughly inspect the units. As a result,
             violations of housing quality standards were undetected.

             The Authority’s Administrative Plan Needed To Be Updated

             The Authority’s administrative plan was incomplete and needed to be updated.
             For example, the plan stated that the Authority would reinspect inoperable smoke
             detectors the day after it informed either the owner or the family of the violation.
             It did not address the Authority’s reinspection of other emergency repair items.
             The administrative plan did not delineate the Authority’s process for determining
             when a reinspection was not necessary because it could document verification of
             repairs through other means and in those instances, what documentation it would
             accept as adequate to demonstrate that the repairs were made. HUD’s Housing
             Choice Voucher Guidebook 7420.10G states that reinspection or housing
             authority verification that failed items have been corrected is required.

The Authority Began Taking
Corrective Action


             We discussed these issues with the Authority during the audit. It agreed with our
             audit results and began initiating corrective action. It began updating its
             administrative plan and created an abatement log and a more detailed quality
             control inspection log. It also informed us that it planned to hire a part time
             housing inspector to assist with housing quality standards compliance and
             reorganize its Section 8 Housing Choice Voucher program department in July
             2011. Because the Authority was taking corrective action to improve its program,
             based on the results of our discovery sample of inspections, we decided not to
             perform any additional unit inspections.

Conclusion



             The Authority’s program participants were subjected to many 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
             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 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 $28,635 in housing assistance payments to owners and
             received $1,156 in program administrative fees for the 10 units that materially
                                              11
         failed to meet HUD’s housing quality standards. The Authority needs to (1)
         develop and implement controls to ensure that program units meet housing quality
         standards, inspectors are periodically provided training, quality control
         inspections are thorough, and the results are used to improve the program; (2)
         revise and update its administrative plan; and (3) develop a plan to augment its
         team of inspectors to meet demand as needed.


Recommendations


         We recommend that the Acting Director of HUD’s Office of Public Housing,
         Newark field office, require the Authority to

         1A.      Certify that the housing quality standards violations have been corrected in
                  the 16 units cited in this finding.

         1B.      Reimburse its program $29,791 from non-Federal funds ($28,635 for
                  housing assistance payments and $1,156 in associated administrative fees)
                  for the 10 units that materially failed to meet HUD’s housing quality
                  standards.

         1C.      Develop and implement controls to ensure that program units meet
                  housing quality standards, inspectors are periodically provided training,
                  quality control inspections are thorough, and the results are used to
                  improve the program.

         1D.      Revise and update its administrative plan to address controls for ensuring
                  that violations are properly categorized and repairs are completed within
                  the prescribed time limits, and it abates housing assistance payments in
                  accordance with HUD requirements. Also, address procedures for
                  reinspecting emergency repair items other than inoperable smoke
                  detectors, and delineating the basis for accepting owner verification of
                  repairs rather than reinspection and the types of documentation needed to
                  support owner verification of repairs.

         1E.      Develop and implement controls to ensure that it complies with its revised
                  administrative plan.

         1F.      Develop a plan to augment its team of inspectors so that inspections are
                  conducted when the full-time inspectors are unavailable or when there is a
                  surge in inspection workload.




                                           12
                         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 Guidebook
       7420.10G.

       The Authority’s inspection reports, computerized databases including housing quality
       standards inspection data and housing assistance payment data, accounting records, annual
       audited financial statements for 2008 and 2009, tenant files, policies and procedures, board
       meeting minutes, and organizational chart.

       HUD’s monitoring reports for the Authority.

We also interviewed the Authority’s employees, HUD staff, and program households.

To achieve our audit objective, we relied in part on computer-processed data in the Authority’s
database. We used the computer-processed data to select a sample of housing units to inspect.
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 22 of the Authority’s program units as a discovery sample to inspect from a
universe of 455 units that passed the Authority’s housing quality standards inspections between
January 1 and June 30, 2010. We used the U.S. Army Audit Agency Statistical Sampling System
software to determine the size of our discovery sample. We selected the sample units using the U.S.
Department of Health and Human Services Rats-Stats Sampling System software. We selected 22
units to determine whether the Authority’s program units met housing quality standards. The
sampling criteria for the discovery sample used a 90 percent confidence level and a 10 percent
estimated error rate.

We inspected only 17 units because the tenants or owners failed to show up for the inspections of
2 units, a tenant had moved from 1 unit, and we did not inspect 2 units because of time
constraints. We inspected the units between September 1 and September 3, 2010. Of the 17
units inspected, 16 failed and 1 passed our inspection. We considered 10 of the 16 failed units to
be in material noncompliance with housing quality standards. We determined that the 10 units
were in material noncompliance because they had 87 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 line. We did not test additional samples
because the Authority was taking corrective action to improve its program based on the results of
our discovery sample.

We performed onsite audit work from July 15 through September 16, 2010, and temporarily
suspended our audit work from September 2010 to January 2011 due to the need to reallocate
audit resources to address other emerging high-priority audit issues. We resumed the onsite
                                               13
audit work on January 31, 2011, and it continued through June 3, 2011, at the Authority’s office
located at 114 Boyd Street, Camden, NJ. The audit covered the period January 2009 through
June 2010 but was expanded when necessary to include other periods.

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
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective. The audit included tests of internal controls that
we considered necessary under the circumstances.




                                                14
                              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
               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 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.



                                                 15
Significant Deficiency


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

                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, violations were properly identified, and
                assistance payments to owners of units that did not meet housing quality
                standards were properly abated.




                                             16
                                   APPENDIXES


Appendix A

                SCHEDULE OF QUESTIONED COSTS

                          Recommendation
                              number                 Ineligible 1/
                                  1B                     $29,791


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.




                                            17
Appendix B

             AUDITEE COMMENTS




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