oversight

The Charleston-Kanawha Housing Authority, Charleston, WV, Needs To Improve Its Housing Quality Standards Inspections and Apply Correct Payment Standards When Calculating Housing Assistance Payments

Published by the Department of Housing and Urban Development, Office of Inspector General on 2013-07-17.

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

 OFFICE OF AUDIT
 REGION 3
 PHILADELPHIA, PA




         Charleston-Kanawha Housing Authority,
                    Charleston, WV

               Housing Choice Voucher Program




2013-PH-1005                                    JULY 17, 2013
                                                        Issue Date: July 17, 2013

                                                        Audit Report Number: 2013-PH-1005




TO:            William D. Tamburrino, Director, Baltimore Public Housing Program Hub, 3BPH
               //signed//
FROM:          John P. Buck, Regional Inspector General for Audit, Philadelphia Region, 3AGA


SUBJECT:       The Charleston-Kanawha Housing Authority, Charleston, WV, Needs To
               Improve Its Housing Quality Standards Inspections and Apply Correct Payment
               Standards When Calculating Housing Assistance Payments

    Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG) final results of our review of the Charleston-Kanawha Housing
Authority’s administration of its housing quality standards inspections and housing assistance
payment calculations for its Housing Choice Voucher program.

    HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.

    The Inspector General Act, Title 5 United States Code, section 8L, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.

   If you have any questions or comments about this report, please do not hesitate to call me at
215-430-6729.
                                            July 17, 2013
                                            The Charleston-Kanawha Housing Authority,
                                            Charleston, WV, Needs To Improve Its Housing Quality
                                            Standards Inspections and Apply Correct Payment
                                            Standards When Calculating Housing Assistance
                                            Payments

Highlights
Audit Report 2013-PH-1005


 What We Audited and Why                     What We Found

We audited the Charleston-Kanawha           The Authority did not conduct adequate inspections to
Housing Authority’s Housing Choice          ensure that its program units met housing quality
Voucher program because (1) it              standards as required. Of 66 program units statistically
received more than $13.7 million in         selected for inspection, 47 did not meet HUD’s
program funding in fiscal year 2012, (2)    housing quality standards. Further, 20 of the 47 units
it is the largest assisted housing agency   were in material noncompliance with housing quality
in the State of West Virginia, and (3)      standards. The Authority disbursed $22,025 in
we had never audited its Housing            housing assistance payments and received $857 in
Choice Voucher program. The audit           administrative fees for these 20 units. We estimate
objectives were to determine whether        that over the next year if the Authority does not
the Authority ensured that its Housing      implement adequate procedures to ensure that its
Choice Voucher program units met U.S.       program units meet housing quality standards, HUD
Department of Housing and Urban             will pay more than $3.2 million in housing assistance
Development (HUD) housing quality           for units that materially fail to meet those standards.
standards and whether it applied the
appropriate payment standard when       The Authority did not always apply the correct
calculating housing assistance.         payment standard when calculating housing assistance
                                        payments. It made ineligible housing assistance
                                        payments totaling $14,505 for 34 tenants that it
  What We Recommend
                                        recertified using its new software program from
                                        September 2012 to January 2013. By implementing
We recommend that HUD require the       our recommendations, the Authority can avoid making
Authority to (1) reimburse its program overpayments of $228,473 in future housing
$22,882 from non-Federal funds for the assistance.
20 units that materially failed to meet
HUD’s housing quality standards, (2)
implement procedures and controls to
ensure that program units meet housing
quality standards, (3) reimburse its
program $14,505 from non-Federal
funds for the ineligible overpayment of
housing assistance, and (4) ensure that
the flaw in its new software program is
corrected so that the software program
determines the payment standard
properly.
                            TABLE OF CONTENTS

Background and Objectives                                                        3

Results of Audit
      Finding 1: Housing Quality Standards Inspections Were Inadequate            4
      Finding 2: Housing Assistance Payments Were Not Always Calculated Correctly 12

Scope and Methodology                                                            14

Internal Controls                                                                17

Appendixes
A.    Schedule of Questioned Costs and Funds To Be Put to Better Use             19
B.    Auditee Comments                                                           20




                                            2
                       BACKGROUND AND OBJECTIVES

The Charleston and Kanawha Housing Authorities reorganized and began operations as the
Charleston-Kanawha Housing Authority on August 2, 2006. The goal of this new agency was to
assist low-income families in every community in the West Virginia counties of Kanawha,
Putnam, and Clay in a more cost-effective way, while providing a high standard of customer
service. The Authority’s mission is to provide every resident with a decent, safe, affordable place
to live, while linking residents to programs that will assist them on their journey to self-sufficiency.
The Authority is the largest assisted housing agency in the State of West Virginia. Its leased
housing department administers the Housing Choice Voucher program through funds provided by
the U.S. Department of Housing and Urban Development (HUD). The Authority is governed by a
five-member board of commissioners appointed by the mayor of Charleston, with two board
members recommended by the Kanawha County Commission. The Authority’s chief executive
officer is Mark Taylor. Its offices are located at 1525 Washington Street West, Charleston, WV.

Under the Housing Choice Voucher program, HUD authorized the Authority to provide leased
housing assistance payments to 2,980 eligible households in fiscal year 2012. HUD authorized the
Authority the following financial assistance for housing choice vouchers for fiscal years 2010
through 2012:

                        Fiscal    Number of vouchers          Annual budget
                         year        authorized                 authority
                        2010           2,930                   $13,380,551
                        2011           2,960                   $14,989,905
                        2012           2,980                   $13,759,359

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. HUD regulations at 24 CFR 982.503 require the Authority to adopt a
payment standard schedule that establishes voucher payment standards based on the number of
bedrooms. HUD regulations at 24 CFR 982.402 require the payment standard used in the housing
assistance payment calculation for a family to be the lower of the payment standard for the number
of bedrooms shown on the voucher or the payment standard for the size of the unit leased by the
family.

Our audit objectives were to determine whether the Authority ensured that its Housing Choice
Voucher program units met HUD’s housing quality standards and whether it applied the
appropriate payment standard when calculating housing assistance payments.




                                                   3
                                 RESULTS OF AUDIT

Finding 1: Housing Quality Standards Inspections Were Inadequate
The Authority did not conduct adequate inspections to enforce HUD’s housing quality standards.
Of 66 program housing units inspected, 47 did not meet HUD’s housing quality standards, and
20 materially failed to meet HUD’s standards. The Authority’s inspectors did not observe or
report 319 violations that existed at the 20 units when they conducted their inspections. This
condition occurred because the Authority did not implement procedures and controls to ensure
that program units met housing quality standards. Its inspectors inspected too many units in a
day, missed some violations during their inspections, and were not aware that some deficiencies
were violations. As a result, the Authority disbursed $22,025 in housing assistance payments
and received $857 in administrative fees for the 20 units that materially failed to meet HUD’s
housing quality standards. Unless the Authority improves its inspection program and ensures
that all units meet housing quality standards, we estimate that it will pay at least $3.2 million in
housing assistance for units that materially fail to meet HUD’s standards over the next year.


 Housing Units Did Not Meet
 HUD’s Housing Quality
 Standards

               We statistically selected 66 units from a universe of 149 units that passed an
               Authority housing quality standards inspection between November 1 and
               December 31, 2012. The 66 units were selected to determine whether the
               Authority ensured that the units in its Housing Choice Voucher program met
               housing quality standards. We inspected the 66 units from February 20 to
               March 6, 2013.

               Of the 66 housing units inspected, 47 (71 percent) had 545 housing quality
               standards violations. Additionally, 20 of the 66 units (30 percent) were in
               material noncompliance with housing quality standards because they had 319
               violations that predated the Authority’s last inspection and were not identified by
               the Authority’s inspectors, creating unsafe living conditions. All units were
               ranked according to the severity of the violations, and we used auditor’s judgment
               to determine the material cutoff point. HUD regulations at 24 CFR 982.401
               require that all program housing meet housing quality standards performance
               requirements both at commencement of assisted occupancy and throughout the
               assisted tenancy. The following table categorizes the 545 housing quality
               standards violations in the 47 units that failed our housing quality standards
               inspections.




                                                 4
                                                                     Number of         Number         Percentage
                                Key aspect 1                         violations        of units        of units
                  Structure and materials                               201               43              65
                  Illumination and electricity                          165               32              48
                  Site and neighborhood                                  48               24              36
                  Interior air quality                                   42               15              23
                  Sanitary facilities                                    27               21              32
                  Smoke detectors                                        19               12              18
                  Space and security                                     14                9              14
                  Food preparation and refuse disposal                   13               10              15
                  Thermal environment                                     8                5               8
                  Access                                                  7                6               9
                  Sanitary condition                                      1                1               2
                  Total                                                 545

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

                 The following pictures illustrate some of the violations we noted while
                 conducting housing quality standards inspections in the 20 units that materially
                 failed to meet HUD’s housing quality standards.




                 Inspection #16: The breaker box on the unit’s exterior was not secure and had
                 exposed electrical contacts with high voltage. The Authority did not identify this
                 violation during its November 26, 2012, inspection.



1
 Regulations at 24 CFR 982.401 categorize housing quality standards performance and acceptability criteria into 13
key aspects. Only 11 key aspects are listed in the table because we identified no violations for 2 key aspects.

                                                         5
Inspection #20: The exterior staircase was missing a handrail. The Authority did
 not identify this violation during its November 9, 2012, inspection.




Inspection #21: The skirting on the mobile home exterior was loose and had
sharp edges. The Authority did not identify this violation during its November 9,
2012, inspection.




                                       6
Inspection #22: There was a hole in the wall and possible mold and mildew under the
bathroom vanity. The Authority did not identify this violation during its
November 9, 2012, inspection.




Inspection #32: The vent on the hot water heater had a negative slope, which
prohibited gases from venting properly. The Authority did not identify this
violation during its November 5, 2012, inspection.




                                       7
Inspection #32: The stairwell to the basement was missing a handrail. The
Authority did not identify this violation during its November 5, 2012, inspection.




Inspection #40: The window in the bedroom was screwed closed. The Authority
did not identify this violation during its November 7, 2012, inspection.




                                        8
           Inspection #54: The electrical outlet in the hallway was missing a cover. The
           Authority did not identify this violation during its November 8, 2012, inspection.




           Inspection #76: The soffit on the unit’s exterior was missing. The Authority did
           not identify this violation during its November 8, 2012, inspection.


The Authority Needs To
Improve Its Housing Quality
Standards Inspections

           Although HUD regulations at 24 CFR 982.401 and the Authority’s administrative
           plan required the Authority to ensure that its program units met housing quality
           standards, it failed to do so because it lacked procedures and controls. Its
           inspectors inspected too many units in a day. They inspected up to 15 units in an

                                                   9
             8-hour workday. As a result, the inspectors did not thoroughly inspect the units
             and missed some violations during their inspections. For instance, the inspectors
             did not check all windows and electrical outlets in every unit; therefore, they did
             not identify inoperable window locks and missing covers on switches and outlets.
             The inspectors also missed unsecured fuse boxes, missing soffits and downspouts,
             missing striker plates on door locks, missing handrails, and improperly sloped
             flue pipes. Additionally, the inspectors were not aware that some deficiencies
             were violations. For example, they did not identify and report missing knockout
             plugs in junction boxes, which were electrical hazards; deteriorated and broken
             concrete steps and walkways, which were tripping hazards; and windows that
             were permanently sealed closed, which violated the standards.

The Authority Began Taking
Action

             The Authority took action to improve its housing quality standards inspection
             program during the audit. It reduced the number of inspections performed each
             workday to eight. The inspectors had also begun inspecting windows to
             determine whether they functioned as designed and ensuring that all electrical
             outlets were properly wired and junction boxes did not have open knockout plugs.

Conclusion

             The Authority’s program participants were subjected to housing quality standards
             violations that created unsafe living conditions during the participants’ tenancy.
             The Authority did not properly use its program funds when it inspected and
             passed program units that did not meet HUD’s housing quality standards. 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
             $22,025 in housing assistance payments and received $857 in program
             administrative fees for the 20 units that materially failed to meet HUD’s housing
             quality standards. If the Authority implements controls to ensure that all units
             meet housing quality standards and reduces the number of inspections conducted
             each day, we estimate that at least $3.2 million in future housing assistance
             payments will be spent for units that are decent, safe, and sanitary. Our
             methodology for this estimate is explained in the Scope and Methodology section
             of this report.

Recommendations

             We recommend that the Director of the Baltimore Office of Public Housing direct
             the Authority to


                                              10
1A.   Certify, along with the owners of the 47 units cited in this finding, that the
      applicable housing quality standards violations have been corrected.

1B.   Reimburse its program $22,882 from non-Federal funds ($22,025 for
      housing assistance payments and $857 in associated administrative fees)
      for the 20 units that materially failed to meet HUD’s housing quality
      standards.

1C.   Implement procedures and controls to ensure that program units meet
      housing quality standards and provide inspectors with adequate time to
      perform inspections, thereby ensuring that an estimated $3,203,676 in
      program funds is expended for units that are decent, safe, and sanitary.




                                11
Finding 2: Housing Assistance Payments Were Not Always Calculated
Correctly
The Authority did not always apply the correct payment standard when calculating housing
assistance payments. This condition occurred because the Authority had implemented a new
software program for calculating housing assistance payments, which did not apply the correct
payment standard when recertifying active tenants whose voucher showed a smaller number of
bedrooms than the number of bedrooms in the assisted unit. The Authority did not adequately
test the new software program before putting it into service, and its leased housing specialists did
not verify the accuracy of the payment standard used by the new software program in its
calculations. As a result, the Authority made ineligible housing assistance payments totaling
$14,505 for 34 tenants that it recertified using the new software program from September 2012
through January 2013. Unless the Authority corrects the flaw in the new software program and
uses the correct payment standard in its housing assistance payment calculations, we estimate
that it will overpay approximately $228,473 in housing assistance.


    The Authority Installed a New
    Software Program That Had a
    Flaw Resulting in Overpayments

                The Authority installed a new software program in September 2012 to manage its
                Housing Choice Voucher program. 2 The new software program contained a flaw
                in the logic for selecting the payment standard for some active tenants. It
                determined the payment standard based on the number of bedrooms in the assisted
                unit rather than the number of bedrooms shown on the voucher in instances in
                which the number of bedrooms shown on the voucher was smaller than the
                number of bedrooms in the unit. The flaw affected only active tenants whose
                information was transferred from the old software program to the new software
                program. HUD regulations at 24 CFR 982.402 require the payment standard used
                in the housing assistance payment calculation for a family to be the lower of the
                payment standard for the number of bedrooms shown on the voucher or the
                payment standard for the size of the unit leased by the family. The Authority did
                not identify this problem because it did not adequately test the new software
                program to ensure that it produced accurate results before putting it into service
                and its leased housing specialists relied on the output from the new software
                program and did not verify factors used in the housing assistance payment
                calculation. As a result, the Authority made ineligible housing assistance
                payments totaling $14,505 for 34 tenants that it recertified using the new software
                program from September 2012 through January 2013.




2
 The Authority purchased the new software program from a company known as HAB Housing Software Solutions
and replaced the Authority’s old software program that it purchased from a company known as Tenmast.

                                                   12
The Authority Took Action
Based on the Audit Results

             The Authority acknowledged the problem with the new software program and
             took action to correct the flaw. In December 2012, after we brought this issue to
             its attention, the Authority discussed the issue with the software developer. The
             software developer reviewed the Authority’s automated data files and identified
             347 active tenants for whom the Authority potentially would have made
             overpayments on or after February 1, 2013, and corrected the flaw for those
             tenants. The Authority informed us that it’s leased housing occupancy manager
             will review the tenant files identified by the developer to ensure that the payment
             standard is applied correctly as the Authority recertifies the tenants.

Conclusion

             The Authority installed a new software program in September 2012 to manage its
             Housing Choice Voucher program; however, the new software program contained
             a flaw. The program erroneously determined the payment standard for some
             active tenants based on the number of bedrooms in the unit rather than the number
             of bedrooms shown on the voucher in instances in which the number of bedrooms
             shown on the voucher was smaller than the number of bedrooms in the unit. The
             Authority overpaid $14,505 in housing assistance for 34 tenants that it recertified
             using the new software program from September 2012 through January 2013.
             The Authority acknowledged the problem with the new software program and
             took action in December 2012 to correct the flaw. If the Authority verifies that
             the new computer software determines the correct payment standard for the
             remaining active tenants, it will avoid making overpayments of approximately
             $228,473 in housing assistance. Our methodology for this estimate is explained
             in the Scope and Methodology section of this report.

Recommendations

             We recommend that the Director of the Baltimore Office of Public Housing direct
             the Authority to

             2A.    Reimburse its program $14,505 from non-Federal funds for the
                    overpayment of housing assistance for the 34 tenants found during our
                    review.

             2B.    Verify that the new computer software determines the correct payment
                    standard for the remaining active tenants for which the number of
                    bedrooms shown on the voucher is smaller than the number of bedrooms
                    in the unit and thereby avoid overpaying $228,473 in future housing
                    assistance.


                                              13
                         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, HUD’s Housing Choice Voucher Guidebook
       7420.10G, and other guidance.

   •   The Authority’s inspection reports; computerized databases including housing quality
       standards inspection, housing assistance payment, and tenant data; annual audited financial
       statements for fiscal years 2011 and 2012; 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 objectives, we relied in part on computer-processed data from the
Authority’s computer system. 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 66 of the Authority’s program units to inspect from a universe of 149
program units that passed an Authority-administered housing quality standards inspection
between November 1 and December 31, 2012. These inspections were conducted by any of
three inspectors, all of whom played an active role in the program. We selected the sample
based on a confidence level of 90 percent, an estimated error rate of 50 percent, and a precision
level of plus or minus 10 percent. We inspected the selected units between February 20 and
March 6, 2013, to determine whether the Authority’s program units met housing quality
standards. The Authority’s leased housing services manager for its Housing Choice Voucher
program or one of its three inspectors accompanied us on all of the inspections.

Our sampling results determined that 20 of the 66 units (30 percent) materially failed to meet
HUD’s housing quality standards. We determined that the 20 units were in material
noncompliance because they had 319 violations that existed before the Authority’s last
inspection, which created unsafe living conditions. All units were ranked according to the
severity of the violations, and we used auditors’ judgment to determine the material cutoff point.

We estimate, with a one-sided confidence interval of 95 percent, that at least 20.98 percent of the
149 units passed by inspectors during the 2-month sample period were in material
noncompliance with housing quality standards. By averaging the housing assistance payments
made for substandard housing across all 149 units that passed an Authority inspection and
deducting for a statistical margin of error, we estimate, with a one-sided confidence interval of
95 percent, that the amount of monthly housing assistance payment dollars spent on substandard
housing passed by the Authority during the sample period was at least $90.53 per unit. There

                                                14
were 2,949 active rental units when the statistical sample was determined. Multiplying the 2,949
units by the $90.53 per unit monthly housing assistance payment for substandard housing yields
a total of $266,973 per month. Multiplying the monthly amount of $266,973 by 12 yields an
annual total of $3,203,676 in housing assistance payments for substandard housing that passed
an Authority inspection. This amount is presented solely to demonstrate the annual amount of
program funds that could be put to better use on decent, safe, and sanitary housing if the
Authority implements our recommendations. While these benefits would recur indefinitely, we
were conservative in our approach and included only the initial year in our estimate.

We nonstatistically selected and reviewed housing assistance payment calculations for 90 tenants
from a universe of 136 tenants whose recertified housing assistance payment may have been
overstated because of the flaw in the new software program between September 1, 2012, the date
the new software program was implemented, and January 31, 2013, since the flaw in the program
was fixed effective February 1, 2013. We reviewed these files to determine whether the flaw in
the software program caused an overstatement of the housing assistance payment. We used a
risk-based approach to select the 90 files. We selected files with the largest difference in the
potentially overstated monthly assistance payment amount and those with the greatest difference
between the number of bedrooms in the assisted unit and the number of bedrooms shown on the
voucher. We determined that in 34 of the 90 files, the flaw in the new computer software
program caused an overstated assistance payment to be made. The flaw in the new computer
software did not affect the assistance payment in the other 56 files because either the tenant had
an increase in family size; the tenant had a reasonable accommodation for medical reasons; the
tenant’s rent and utility assistance was less than the correct payment standard; or the leased
housing specialist, based on our notification to the Authority, ensured that the correct payment
standard was used in the recertification calculations. The Authority overpaid $14,505 in housing
assistance from September 2012 through March 2013 for the 34 tenants. The Authority would
have overpaid $42,936 for these 34 tenants annually.

The Authority’s software developer reviewed the Authority’s automated data files and
determined that there were 347 active tenants who would have had their assistance payment
recertified on or after February 1, 2013, for whom the Authority potentially would have made
overpayments of housing assistance due to the flaw in the new software program. We reviewed
the Authority’s automated data files and identified 35 additional tenants that the software
developer had not identified in its review of the data. We reviewed the automated data for each
of these 382 tenants. We determined that had the Authority not taken action to correct the flaw
in the new software program, it would have applied an incorrect payment standard and
overstated housing assistance payments for 253 of these 382 active tenants. We calculated the
difference in the potentially overstated monthly assistance payment amount for these 253
tenants. We multiplied the overstated monthly assistance amount by the number of months
during which the Authority would make a housing assistance payment between the date of the
tenant’s next recertification and January 31, 2014 (the end of the 1-year period after the flaw in
the new software program was fixed). We estimated that the Authority would have made
overstated housing assistance payments totaling $185,537 during the next year for these 253
tenants. Therefore, the total estimated funds to be put to better use because the Authority took
action to correct the flaw in the new software program is $228,473.



                                                15
We performed our onsite audit work from October 2012 through May 2013 at the Authority’s
office located at 1525 Washington Street West, Charleston, WV. The audit covered the period
November 2011 through January 2013 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
objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




                                               16
                              INTERNAL CONTROLS

Internal control is 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 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.

               •      Safeguarding resources – Policies and procedures that management has
                      implemented to reasonably ensure that resources are safeguarded against
                      waste, loss, and misuse.

               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.

                                                 17
Significant Deficiencies

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

                •   The Authority did not implement procedures and controls to ensure that
                    program units met housing quality standards and provide inspectors with
                    adequate time to perform inspections (see finding 1).

                •   The Authority did not implement adequate controls to ensure that its
                    conversion to the new software program resulted in the selection of the
                    correct payment standard when calculating housing assistance payments
                    for active tenants (see finding 2).




                                              18
                                    APPENDIXES

Appendix A

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

                 Recommendation                              Funds to be put
                                         Ineligible 1/
                     number                                  to better use 2/
                       1B                    $22,882
                       1C                                      $3,203,676
                       2A                      14,505
                       2B                                         228,473
                      Totals                 $37,387           $3,432,149


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

2/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an Office of Inspector General (OIG) recommendation is
     implemented. These amounts include reductions in outlays, deobligation of funds,
     withdrawal of interest, costs not incurred by implementing recommended improvements,
     avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
     that are specifically identified. In this instance, if the Authority implements our
     recommendations, it will cease to incur program costs for units that are not decent, safe,
     and sanitary and, instead, will expend those funds for units that meet HUD’s standards,
     thereby putting approximately $3.2 million in program funds to better use. Once the
     Authority successfully improves its controls and ensures that inspectors are given
     adequate time to perform inspections, this will be a recurring benefit. Additionally, if the
     Authority implements our recommendations, it will stop making overpayments of
     housing assistance due to the flaw in its new software program used to calculate housing
     assistance payments for some active tenants, thereby putting approximately $228,473 in
     program funds to better use. Once the Authority ensures that the flaw has been corrected
     for these tenants, this will be a recurring benefit. Our estimates reflect only the initial
     year of these benefits.




                                              19
Appendix B

             AUDITEE COMMENTS




                    20
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