oversight

The Memphis Housing Authority, Memphis, TN, Did Not Always Ensure That Its Housing Choice Voucher Program Units Met HUD's Housing Quality Standards

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-09-30.

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

OFFICE OF AUDIT
REGION 4
ATLANTA, GA




               The Memphis Housing Authority
                      Memphis, TN

               Housing Choice Voucher Program
                 Housing Quality Standards




2014-AT-1014                              SEPTEMBER 30, 2014
                                                        Issue Date: September 30, 2014

                                                        Audit Report Number: 2014-AT-1014




TO:            Marcia E. Lewis, Director of Public Housing, Memphis, TN, 4KPH

               //signed//
FROM:          Nikita N. Irons, Regional Inspector General for Audit, Atlanta Region, 4AGA

SUBJECT:       The Memphis Housing Authority, Memphis, TN, Did Not Always Ensure That Its
               Housing Choice Voucher Program Units Met HUD’s Housing Quality Standards


    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 Memphis Housing Authority’s
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 8M, 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 404-
331-3369.
                                            September 30, 2014
                                            The Memphis Housing Authority, Memphis, TN, Did Not
                                            Always Ensure That Its Housing Choice Voucher
                                            Program Units Met HUD’s Housing Quality Standards




Highlights
Audit Report 2014-AT-1014


 What We Audited and Why                     What We Found

We audited the Memphis, TN, Housing       The Authority’s inspections were not adequate for
Authority’s Housing Choice Voucher        enforcing HUD’s housing quality standards. Of 90
program as part of the activities in our  program units statistically selected for inspection, 77
fiscal year 2014 audit plan. We           failed to comply with HUD’s minimum housing
selected the Authority because it had a   quality standards, and 58 were in material
large program, receiving about $40        noncompliance with the standards. For the 58 units in
million in yearly funding, and was part   material noncompliance, the Authority’s inspectors
of the OIG’s annual audit plan. Our       failed to observe or report 443 violations that existed
objective was to determine whether the    when they conducted their last inspections. The
Authority’s inspection process            excessive violations occurred because the Authority’s
adequately ensured that its units were in quality control inspection program did not effectively
material compliance with housing          detect that its inspectors lacked sufficient knowledge
quality standards.                        of HUD’s housing quality standards and missed
                                          opportunities to improve inspector performance. As a
                                          result, some tenants lived in inadequately maintained
  What We Recommend
                                          units, and the Authority disbursed $61,949 in housing
                                          assistance payments and received $6,209 in
We recommend that HUD require the         administrative fees for the 58 units in material
Authority to (1) reimburse its program noncompliance with the standards. Unless the
$68,158 ($61,949 for housing assistance Authority improves its inspection program and ensures
payments and $6,209 for administrative that all of its units materially meet minimum housing
fees) from non-Federal funds for the 58 quality standards, we estimate that over the next year,
units that materially failed to meet      HUD will pay about $34 million in housing assistance
HUD’s housing quality standards and       for units in material noncompliance with the standards.
(2) improve its quality control
inspection program to help ensure that
program units meet housing quality
standards. These measures will better
ensure that $34 million in program
funds will be expended for units that are
decent, safe, and sanitary.
                            TABLE OF CONTENTS

Background and Objective                                                     3

Results of Audit
      Finding: The Authority Did Not Always Ensure That Its Housing Choice   4
               Voucher Program Units Met HUD’s Housing Quality Standards

Scope and Methodology                                                        16

Internal Controls                                                            18

Appendixes
A.    Schedule of Questioned Costs and Funds To Be Put to Better Use         20
B.    Auditee Comments and OIG’s Evaluation                                  21




                                            2
                      BACKGROUND AND OBJECTIVES

The United States Housing Act of 1937 established the Federal framework for Government-
owned housing and was amended by the Quality Housing and Work Responsibility Act of 1998.
The Memphis, TN, Housing Authority was established in 1935 by the Tennessee General
Assembly under Chapter 595 of the Private Acts of 1935. The Authority’s mission is to drive
community revitalization through a seamless system of supportive services, affordable housing,
and new business development. The U.S. Department of Housing and Urban Development
(HUD) provides funding for rental subsidies for those tenants eligible for the Section 8 Housing
Choice Voucher program.

The Authority is governed by a seven-member board of commissioners. Board members are
appointed by the mayor and confirmed by city council. The executive director is appointed by
the board and has the responsibility of carrying out board’s policies and the Authority’s day-to-
day operations.

In October 2000, the Authority contracted with Quadel Consulting Corporation to administer all
aspects of its Section 8 Housing Choice Voucher program. The current contract runs through
June 30, 2015. Although the Authority contracted out the administration of its program, it
remained responsible for the implementation and overall performance of the program.

The Authority administers about 6,800 housing choice vouchers. It received more than $203.6
million in program funding for fiscal years 2009 through 2013.

                  Fiscal year                                   Program funding
                     2009                                          $29,517,611
                     2010                                          $41,253,704
                     2011                                          $46,659,044
                     2012                                          $43,759,947
                     2013                                          $42,462,932
                     Total                                        $203,653,238

Our audit objective was to determine whether the Authority’s inspection process adequately
ensured that its units were in material compliance with housing quality standards.




                                                3
                                 RESULTS OF AUDIT


Finding: The Authority Did Not Always Ensure That Its Housing
Choice Voucher Program Units Met HUD’s Housing Quality Standards
The Authority’s inspections were not adequate for enforcing HUD’s housing quality standards.
Of 90 program units statistically selected for inspection, 77 failed to comply with HUD’s
minimum housing quality standards, and 58 were in material noncompliance with the standards.
For the 58 units in material noncompliance, the Authority’s inspectors failed to observe or report
443 violations that existed when they conducted their last inspections. The excessive violations
occurred because the Authority’s quality control inspection program did not effectively detect
that its inspectors lacked sufficient knowledge of HUD’s housing quality standards and missed
opportunities to improve inspector performance. As a result, some tenants lived in inadequately
maintained units, and the Authority disbursed $61,949 in housing assistance payments and
received $6,209 in administrative fees for the 58 units in material noncompliance with the
standards. Unless the Authority improves its inspection program and ensures that all of its units
materially meet minimum housing quality standards, we estimate that over the next year, HUD
will pay about $34 million in housing assistance for units in material noncompliance with the
standards.


 Housing Units Did Not Meet
 HUD’s Housing Quality
 Standards

               We statistically selected 90 units from a universe of 1,928 program units that had
               passed an Authority housing quality inspection between January 1 and March 31,
               2014. The 90 units were selected to determine whether the Authority ensured that
               its program units met minimum housing quality standards. We inspected the units
               from April 29 to May 21, 2014. The Authority’s supervisory inspector
               accompanied us during our inspections and was made aware of the results of each
               inspection.

               Of the 90 program units inspected, 77 (about 85 percent) failed to meet minimum
               housing quality standards (550 individual fail items). Additionally, 58 of the 90
               units (about 64 percent) were in material noncompliance with housing quality
               standards. We considered these units to be in material noncompliance because
               they had at least five health and safety violations or at least one 24-hour violation
               that predated the Authority’s last inspection and resulted in unsafe living
               conditions. The 58 units had a total of 494 individual fail items, and 443 of those
               predated the Authority’s last inspection.

               HUD regulations at 24 CFR (Code of Federal Regulations) 982.401(a)(3) require
               that all program housing meet housing quality standards performance

                                                 4
                     requirements both at commencement of assistance and throughout the assisted
                     tenancy. In accordance with 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 correctly or adequately perform administrative responsibilities such as
                     enforcing housing quality standards. The Authority disbursed $61,949 in housing
                     assistance payments and received $6,209 in program administrative fees for the
                     58 units that materially failed to meet HUD’s housing quality standards. Based
                     on the results of the statistical sample of 90 units, we estimate that over the next
                     year, HUD will pay about $34 million in housing assistance for units in material
                     noncompliance with the standards unless the Authority takes action to improve its
                     inspection process. 1

                     The following table categorizes the 494 housing quality standards violations in
                     the 58 units that materially failed our housing quality standards inspections.

    Type of deficiency               Number of violations             Number of units           Percentage of units 2
    Exterior, foundation,
    and site conditions                          103                           42                         47%
    Doors and door locks                          71                           39                         43%
    Windows and window
    locks                                        65                            29                         32%
    Baths, sinks, showers,
    toilets, and vents                           55                            34                         38%
    Electrical                                   44                            25                         28%
    Kitchen sinks,
    cabinets, stoves,
    countertops, and
    refrigerators                                33                            24                         27%
    Water heaters                                30                            24                         27%
    Other                                        24                            18                         20%
    Interior debris and
    unsafe storage                               19                            18                         20%
    Stairs, rails, and
    porches                                       17                           15                         17%
    Ceilings and walls                            13                           11                         12%
    Floors                                        11                           10                         11%
    Smoke detectors                                9                            8                          9%
    Total                                        494

                     In addition, 64 of the 90 units (71 percent) had life-threatening health and safety
                     violations, which HUD requires to be corrected within 24 hours. Examples of
                     such health and safety violations included unsecured electrical panel covers,


1
    The sampling methodology and calculations are shown in the Scope and Methodology section of this report.
2
    Percentage of units with cited housing quality standards fail items for the 90 statistically sample units inspected.

                                                              5
improperly wired ground fault circuit interrupters, exposed electrical wiring, and
completely blocked emergency egress.

Throughout the inspection process, we kept the Authority staff aware of the life-
threatening health and safety violations. Regulations at 24 CFR 982.404 require
that owners correct life-threatening defects within no more than 24 hours.

The 58 units that materially failed our housing quality standards inspections had
202 24-hour violations that are categorized in the table below.

      Type of           Number of 24-      Number of units        Percentage of
    deficiency          hour violations                               units
Security –                    50                   32                 55%
windows and
doors
Fire exits –                  45                   24                  41%
blocked egress
Electrical                    42                   26                  45%
Other interior                33                   23                  40%
hazards – fire
hazard
Other hazards                 23                   19                  33%
Smoke detectors                9                    8                  14%
       Total                 202

Types of Deficiencies

The following photographs illustrate some of the violations noted during housing
quality standards inspections of the 58 units that materially failed to meet HUD’s
housing quality standards.

Exterior, Foundations, and Site Conditions
103 violations were found in the 58 units that materially failed HQS. The
following items are examples of this type of violation: deteriorated or rotted
fascia and siding, missing handrails on exterior steps, and long-term deferred yard
maintenance. The following pictures illustrate some examples.




                                   6
The picture above shows rotted fascia and soffit.




The picture above shows rotted and deteriorated fascia.




The picture above shows an unsecured and damaged crawl space door.




                                    7
The picture above shows a missing exterior handrail on exterior steps.

Doors and Door Locks
71 violations were found in the 58 units that materially failed HQS. The
following items are examples of door and door lock violations: keyed dead-bolt
locks on exterior doors, inadequately installed exterior doors, using interior type
doors for exterior door use, and damaged door frames. The following pictures
show some examples.




The picture above shows an exterior storm door frame pulling away from
the exterior of the unit.




                                    8
The picture above shows an entry door frame severely damaged, not
allowing for adequate unit security.




The picture above shows a keyed dead-bolt lock on an exterior door. If the
tenant cannot find the key, egress is blocked in case of emergency, such as
fire.

Windows and Window Locks
65 violations were found in the 58 units that materially failed HQS. The
following items are examples of window and window lock violations: missing or
broken window locks, keyed window bars, broken windows, and deteriorated or
rotted window frames. The following pictures show examples of window- and
window lock-related violations.


                                    9
The picture above shows a bedroom window screwed shut, blocking egress
from room in the event of emergency, such as fire.




The picture above shows iron bars on the bedroom window, which is locked
with a keyed padlock, potentially blocking egress in case of emergency,
including fire.




                                 10
The picture above shows a broken first floor window lock (missing piece
of lock on window frame).

Bathrooms
55 violations were found in the 58 units that materially failed HQS. The
following items are examples of bathroom violations listed in the table: cracked
or peeling finish on tubs and sink, leaking faucets, inadequately installed faucets,
and excess mold or mildew buildup. The following pictures show examples of
bathroom-related violations.




The picture above shows a severely deteriorated bathroom window frame,
including peeling paint and mold and mildew buildup.




                                  11
The picture above shows a damaged and rusted tub drain with peeling and
chipped tub finish

Electrical
44 violations were found in the 58 units that materially failed HQS. The
following items are examples of electrical violations listed in the table:
inadequately installed electrical outlets, exposed wiring, inoperable ground fault
outlets, and missing cover plates. The following pictures show examples of
electrical-related violations.




The picture above shows an incorrectly installed high-voltage outlet, which
is hanging from its electrical wiring.




                                   12
                 The picture above shows exposed wiring on an inappropriately installed
                 electrical outlet.




                 The picture above shows an incorrectly wired ground fault circuit interrupter.


    The Authority Needs To
    Improve Its Inspection Process


                 The Authority’s Quality Control Inspection Program was Ineffective
                 Although the Authority was performing its supervisory quality control inspections
                 as required by the regulations and HUD’s housing choice voucher program
                 guidebook, the results of our audit indicate that the Authority’s quality control
                 inspection program was ineffective in improving inspector performance. 3



3
  HUD regulations at 24 CFR 982.405(b) require public housing agencies to perform supervisory quality control
inspections, and chapter 10 of HUD’s housing choice voucher program guidebook details the methodology for
selecting program units for supervisory quality control inspection.

                                                       13
Some units that failed our inspections due to material violations had been passed
by Authority inspectors. Many of the violations that caused these units to fail
existed at the time of the Authority’s inspection. Examples include exposed
wiring, unsecured entry doors, missing window locks, missing or improperly
installed water heater discharge lines, and unacceptable locking mechanisms on
doors and windows. Of the 550 total fail items for the 90 units inspected, 486 (88
percent) existed at the time of the Authority’s last inspection. Several of these
preexisting fail items are shown in the photographs above.

The Authority should use the quality control inspections to provide feedback on
each inspector’s work to determine whether it needs to address individual
performance or general housing quality standards training needs. Strengthening
its quality control program to ensure that its inspection staff is aware of all HUD
requirements with respect to the conditions that represent housing quality
standards violations should effectively improve inspector performance and better
ensure that its units meet housing quality standards.

The Authority Had Taken Action
Because of our audit, the Authority reported that it had taken or planned to take
several actions to improve its housing quality standards inspection program to
better ensure that its units are in material compliance with housing quality
standards. The Authority reported that it

•   Sent a notice to all tenants and owners explaining what the Authority
    considers life-threatening violations,
•   Passed a board resolution officially expanding the list of life-threatening
    violations that fail units during housing quality standards inspections,
•   Changed the makeup of its inspection staff from three full-time and two part-
    time inspectors to five full-time and one part-time inspectors,
•   Sent its inspection staff members to both a housing quality standards
    inspection refresher course and an advanced course to ensure that they were
    up to date on all HUD requirements,
•   Began discussions with the City of Memphis’ code enforcement department to
    conduct “windshield” surveys of housing choice voucher-assisted properties,
•   Planned to instruct the Authority’s compliance department to begin
    performing random quality housing quality control inspections to further
    ensure compliance, and
•   Conducted housing quality standards workshops for both program participants
    and owners.




                                 14
Conclusion

             The Authority’s failure to ensure that its program units met housing quality
             standards subjected some program participants to conditions that presented
             undesirable or unsafe living conditions. HUD prohibits housing assistance
             payments for units that are not decent, safe, and sanitary. Unless the Authority
             continues to improve its inspection program and ensures that all of its units
             materially meet minimum housing quality standards, we estimate that over the
             next year, HUD will pay about $34 million in housing assistance for units in
             material noncompliance with the standards.

Recommendations

             We recommend that the Director, Office of Public Housing, Memphis, TN,
             require the Authority to

             1A.    Reimburse the program $68,158 from non-Federal funds ($61,949 for
                    housing assistance payments and $6,209 for administrative fees) for the 58
                    units that materially failed to meet HUD’s housing quality standards.

             1B.    Certify that all health and safety violations cited for the 77 units failing
                    housing quality standards inspections were corrected within 24 hours, and
                    that all other violations were corrected within 30 days.

             1C     Improve its quality control inspection program to allow for the
                    performance of complete and adequate inspections to ensure that program
                    units meet housing quality standards, thereby ensuring that $34,024,752 in
                    program funds is expended for units that are decent, safe, and sanitary.

             1D     Implement policies and procedures to provide new inspection staff
                    training on HUD’s HQS requirements, and periodically provide ongoing
                    training to all inspectors to ensure that they are up to date on all HUD
                    requirements. In addition, the Authority should use the results of the audit
                    to supplement the inspectors’ training to help ensure that its units meet
                    HUD’s housing quality standards.




                                             15
                         SCOPE AND METHODOLOGY

Our audit objective was to determine whether the Authority’s Housing Choice Voucher
program’s inspection process adequately ensured that its units were in material compliance with
housing quality standards. We performed our fieldwork from January to May 2014 at the
Authority’s office at 700 Adams Avenue, Memphis, TN.

To accomplish our objective, we

   •   Reviewed Authority housing quality standards inspection reports, housing assistance
       payment registers, and tenant files and data and HUD documents related to the
       Authority’s program, including program criteria (Federal regulations, HUD handbooks,
       and guidebooks and notices);

   •   Interviewed HUD and Authority staff; and

   •   Reviewed Authority board minutes, financial records relevant to the program, Section 8
       Management Assessment Program reports, and independent public accountant reports for
       fiscal years 2011 and 2012.

To achieve our objective, 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 performed a minimal level of testing and found the data to be adequate for our purposes.

We inspected a statistical sample of 90 program units. The units were selected from a universe
of 1,928 units that passed the Authority’s inspections from January 1 through March 31, 2014.
We selected recently completed inspections to determine whether the Authority’s inspection staff
adequately inspected and correctly passed program units.

Based on the statistical sample of 90, we found that an average of 64.24 percent of our weighted
sample of Section 8 units had material failures. Deducting for a statistical margin of error, we
can say, with a one-sided confidence interval of 95 percent, that 56.03 percent of the units had
material failures. Extrapolating this amount to the monthly count of 6,800 occupied program
rental units yields at least 3,809 units that would have material failures, despite being passed by
Authority inspectors.

Based on the statistical sample of 90 units, we found that a weighted average of $474.32 per unit
went to substandard housing. Deducting for a statistical margin of error, we can say, with a one-
sided confidence interval of 95 percent, that the average amount per unit was $416.97.
Extrapolating this amount to 6,800 units over 12 months yields at least $34 million in housing
assistance paid on substandard housing (funds to be put to better use) that passed a housing
quality standards inspection.



                                                16
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(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                               17
                              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:

               •    Effectiveness and efficiency of operations – Policies and procedures that
                    have been implemented to reasonably ensure that procurement, expenditure,
                    and financial reporting activities are conducted in accordance with applicable
                    laws and regulations.

                •   Compliance with applicable laws and regulations – Policies and procedures
                    that have been implemented to reasonably ensure that payments to vendors
                    and procurement activities comply with applicable laws and regulations.

               •    Safeguarding of 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.



                                                18
Significant Deficiency

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

            •     The Authority’s quality control inspection program was ineffective in
                  improving the inspectors’ performance. (finding).




                                             19
                                   APPENDIXES

Appendix A

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


                Recommendation                                Funds to be put to
                       number            Ineligible 1/             better use 2/

                  1A
                  1B                    $68,158                 $34,024,752




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 stop incurring 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 more than $34 million in program funds to better use. Once the Authority
     successfully improves its inspection program this will be a recurring benefit. Our
     estimate reflects only the initial year of this benefit.




                                            20
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         21
Comment 1




            22
23
Comment 2




            24
Comment 3




            25
26
Comment 4




            27
28
29
Comment 5




Comment 6




            30
Comment 7




Comment 8




Comment 9




            31
Comment 10




             32
Comment 9

Comment 11




             33
Comment 9




            34
35
Comment 12




             36
Comment 13




Comment 14




             37
38
Comment 15



Comment 16




             39
Comment 16




Comment 11




Comment 9




             40
41
42
Comment 9




Comment 14




Comment 9
Comment 17




             43
Comment 18




             44
Comment 18




             45
46
47
                         OIG Evaluation of Auditee Comments

Comment 1   The Authority’s comments state that we gave them only 7 business days to
            comment on and respond to the draft report, which was not sufficient time. In our
            August 26, 2014 letter transmitting the draft report, we asked the Authority to
            provide written comments by September 10, 2014. However, the Authority asked
            for extra time during the exit conference and was granted a deadline extension
            until September 15, 2014. The Authority had 21 days to provide comments;
            therefore, we believe that we provided sufficient time for the Authority to respond
            to the draft report.

Comment 2   The Authority’s comments state that it provided information regarding the
            efficiency and adequacy of its on-going inspections program, HQS quality control
            program, and the Authority’s overall performance, since the draft audit makes no
            mention of this information.

            OIG’s report gives the Authority credit for performing quality control inspections
            as required by the regulations. However, although the Authority performed the
            required number of quality control inspections, we questioned the quality of those
            inspections and whether the Authority used the results to improve inspector
            performance. Improving inspector performance and housing quality is the reason
            behind HUD’s requirement for quality control inspections. In our opinion, the
            Authority’s quality control inspection process needs to be strengthened
            (Recommendation 1C) as an overall part of the Authority’s efforts to provide
            program participants with decent, safe, and sanitary housing.

Comment 3   The Authority’s comments state that it has been a high performing agency three
            consecutive years and five of the last six years.

            The Section Eight Management Assessment Program (SEMAP) is a self-
            certifying performance program that does not address the quality of the
            Authority’s inspections or the overall quality of the program’s housing stock.
            Although a high performing SEMAP score may indicate positive performance for
            the factors it assesses, it does not indicate support for the Authority’s assertion
            that its inspection program and individual inspections are adequate.

Comment 4   The Authority’s comments state that since the conclusion of the OIG Audit, it has
            further strengthened its HQS processes.

            OIG’s report acknowledges the actions taken by the Authority to improve its
            overall inspection program. We believe those actions are a positive start in
            addressing the significant deficiencies outlined in the report and commend the
            Authority for taking action. The Authority’s statement that we refused to provide
            a written inspection report during the audit is not accurate; the completed
            inspection reports were not available during the audit field work. We provided
            both the summary section of each inspection report and a criteria key outlining

                                            48
            what criteria was used by the HUD OIG inspector during the inspections. We
            also provided the staff an explanation of how to locate the criteria used for each
            fail item cited in the summaries. The inspection summaries included the HQS
            inspection item number (specifying what area was inspected, bedroom, bathroom,
            exterior, etc.) and a description of the fail item noted. We believe this is adequate
            information to determine what items failed and why. In addition, the Authority’s
            supervisory inspector was present at every inspection performed. During or
            immediately following the inspections, the supervisory inspector asked questions
            regarding our inspection results, took his own photographs of the fail items cited,
            and discussed the inspection deficiencies, including the 24-hour violations.

Comment 5   The Authority contends that, due to the passage of time, some of the conditions
            noted may not have been present at the time the Authority last inspected the units.
            We reviewed the Authority’s latest inspection reports and professional knowledge
            and experience was used to determine whether a housing quality standard
            violation existed at the time of the Authority’s last inspection. As a practice when
            conducting housing quality standard inspections, we are very conservative in our
            determination of preexisting conditions. As discussed at the exit conference,
            some fail conditions that were originally designated as preexisting during the OIG
            HQS inspections were treated as current fail items for reporting purposes (i.e.,
            furniture blocking egress of bedroom windows, and missing smoke detector
            batteries).

Comment 6   The Authority’s comments state that the door jamb pictured in the report may
            easily be the result of domestic violence or a recent break-in. Tenants often try
            “make shift” repairs and do not report this kind of damage for fear of repair costs
            or loss of deposit.

            We removed the photograph of the entry door jamb cited by the Authority in the
            comments and as discussed at the exit conference. We removed the photograph
            based on the Authority’s contention that the tenant stated that the damage
            occurred after the Authority’s latest inspection. This type of deficiency occurred
            in multiple units where, based upon our inspections, we had no indications that
            the damage occurred after the Authority’s most recent inspection We replaced the
            original photograph with a photograph of a similar condition at a different unit.

Comment 7   The Authority’s comments state that, “The 220 volt dryer or range receptacle
            could have been knocked off of the conduit recently. It may well have been in
            place at the time of the last inspection. We acknowledge the coupling was not up
            to code but must also point out that an HQS inspection is not a code inspection.”

            Although the Authority states that the coupling was not up to code and states that
            an HQS inspection is not a code inspection, it completely ignores the fact that the
            receptacle is hanging from its wires and is not securely attached as required.
            Rather than trying to inspect via photographs, we relied on the experience of
            actually being present during the inspection to make a determination as to whether

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            the violations noted were more than likely present at the time of the Authority’s
            latest inspection. We found no evidence to suggest that the fail items occurred
            since the Authority’s latest inspection.

Comment 8   The Authority’s comments state that, “One can observe from the picture that there
            is some dirt and a small amount of debris surrounding the receptacle box yet the
            interior of the box appears to be clean and the receptacle itself appears to be new.
            No doubt the missing cover is an HQS defect but the evidence suggests that this
            may be the result of a recent repair.”

            As stated above, rather than trying to inspect via photographs, we relied on the
            experience of actually being present during the inspection to make a
            determination as to whether the violations noted were more than likely present at
            the time of the Authority’s latest inspection. We also do not agree that the interior
            of the receptacle box appears clean. One can see as much dust inside the
            receptacle box as can be seen on the floor, and there are no obvious signs of a
            recent repair.

Comment 9   The Authority is concerned about what it terms “inconsistencies between the
            OIG’s reported deficiencies with HUD’s housing quality standards.” The
            regulations can’t address all possible situations where unit deficiencies exist;
            hence, the regulations include categories such as “Other Interior Hazards”. As is
            our practice, we endeavor to err on the side of tenant safety and the unit meeting
            decent and sanitary conditions when performing inspections.

            Water Heaters
            The Authority’s comments state that, “Hot water heater violations included OIG
            comments that stated the violation was “standard in the plumbing housing
            industry”. MHA has not adopted standards beyond HQS and should not be held
            to other standards.” However, the Authority gives no specific examples of why
            OIG’s determination of water heater violations was invalid.

            The criteria used included the following found in the HCV program guidebook
            page 10-11. The acceptability criteria in the section titled “Water Supply” reads
            in part, “Water-heating equipment must be installed safely and must not present
            safety hazards to families. Fuel burning equipment must have proper clearance
            from combustible materials and be properly vented.” The water heaters in
            question did not meet the acceptability criteria. Examples include missing
            pressure relief discharge lines, the lines being reduced from ¾’ to ½’ increasing
            the possibility of rupture and seriously injuring tenants with scalding water or
            steam. In addition, there were instances of combustible materials located near gas
            water heaters, and improperly installed or completely missing gas water heater
            venting.




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Entry Doors
The Authority’s comments state that, “OIG comments that a main entry hollow
door is not “an acceptable standard in the housing industry, is designed for
interior use only and not HUD approved, or that an acceptable exterior door must
be solid, secure, fire rated and fire retardant.” HQS Section 1.4 does not mention
the type of door that must be used, only that the door have a working lock and is
secure in the frame. Local fire codes also do not mention that an exterior door to
residential units be fire retardant or fire rated.”

The criteria used also included the following found in the HCV program
guidebook page 10-6. The performance requirement under the section “Space and
Security” reads, “The dwelling unit must provide adequate space and security for
the family.” We believe using hollow wooden interior doors as exterior entry
doors does not allow for adequate security. These doors are easily broken and
pulled from their frames. The Authority states that participants’ health and safety
are of paramount importance, yet the Authority appears to be arguing that the use
of insecure hollow wooden interior doors in place of secure exterior entry doors is
acceptable.

Door and Window Locks
The Authority’s comments state that, “Neither HUD guidance nor regulation
prescribe what kind of locks are allowable on exterior doors. Nevertheless,
certain types of locks were cited as violations. Under “tenant preference”, the
guidebook states “The family is also responsible for deciding the acceptability of
the type of door and window locks.” If OIG had used the correct standard in this
area, then the number of OIG’s findings regarding egress from units would be
reduced.”

The housing inspection manual reads in part, “The goal of the Section 8 Existing
Housing Program is to provide decent, safe, and sanitary housing.” (page 2);
“Some criteria focus on health and safety concerns and require the PHA to
determine unit acceptability regardless of the tenant’s possible willingness to
accept any deficient condition.” (page 5); and, “The inspector is required to
exercise good judgment in difficult situations.” (page 9) In the case of the keyed
locks and keyed window bars, there is a danger of the tenants, especially children
and the elderly, being trapped in the unit during a fire if the key(s) can’t be
located. The Authority’s acceptance of such locks exposes the tenants to
unnecessary health and safety hazards and the Authority to potential litigation.

Deferred Yard Maintenance
The Authority’s comments state that, “Though cited as a violation, “deferred yard
maintenance” is not a performance requirement in HQS.”

Criteria used for the fail items cited can be found in HUD’s HCV program
guidebook under “Site and Neighborhood”. The performance requirement reads,
“The site and neighborhood must be reasonably free from disturbing noises and

                                51
              reverberations or other dangers to the health, safety, and general welfare of the
              occupants.”, and the acceptability criteria reads, “The site and neighborhood may
              not be subject to serious adverse natural or manmade environmental conditions,
              such as dangerous walks or steps, instability, flooding, poor drainage, septic tank
              back-ups or sewer hazards, mudslides, abnormal air pollution, smoke or dust,
              excessive noise, vibration, or vehicular traffic, excessive accumulations of trash,
              vermin, or rodent infestation, or fire hazards. (page 10-13). Further, HQS item
              8.4 asks, “Is the unit free from heavy accumulation of garbage or debris inside
              and outside?”, and defines heavy accumulation as “large piles of trash and
              garbage, discarded furniture, and other debris (not temporarily stored awaiting
              removal that might harbor rodents”, and HQS item 8.10 asks, “Are the site and
              immediate neighborhood free from conditions which would seriously and
              continuously endanger the health or safety of the residents?” (HUD Form 52580-
              A) We believe the fail conditions cited fall within this criteria.

              Soffits
              The Authority’s comments state that, “The pictures of the soffits in the OIG
              report, though cosmetically unappealing, are not necessarily HQS deficiencies if
              the unit is dry (rain is not getting inside) and there is no evidence of infestation.
              Neither of those conditions was reported by the OIG for those units. HUD’s
              Housing Inspection Manual 6.3 Condition of Roofs and Gutters states
              “Deterioration that does not affect the interior of the unit should pass…”

              HQS item 6.3 covers the soffits, and the description reads in part, “Unsound and
              hazardous” means: The roof has serious defects such as serious buckling or
              sagging, indicating the potential of structural collapse; large holes or other defects
              that would result in significant air or water infiltration.”, and “The gutters,
              downspouts and soffits (area under the eaves) shows serious decay and have
              allowed the entry of significant air or water into the interior of the structure.” In
              this case, the serious decay of the soffits represents long term deferred
              maintenance which has allowed entry of significant air, and from the obvious
              bulging of the soffit, most likely water, into the interior of the structure. The
              infiltration of excess moisture increases the probability of the buildup of mold and
              mildew. This type of air and water intrusion is not always visible since it would
              most likely begin in the attic and attic insulation.

Comment 10 The Authority’s comments state that, “Although the obligations to maintain
           housing at HQS is the owner’s, HUD regulations at 24 CFR 982.405 require
           MHA to confirm such compliance at specific points in time, namely, prior to
           initial leasing, annually, at other special times as needed, and during quality
           control inspections.” The Authority appears to imply that it’s needs only to
           ensure that units are in compliance with HQS during required inspections.
           However, they also cite the regulations at 24 CFR 982.401(a)(3) which require
           that “all program housing must meet the HQS performance requirements both at
           commencement of assisted occupancy, and throughout the assisted tenancy.” The
           Authority appears to have a misunderstanding of their ongoing responsibility to
           ensure that its HCVP units are in compliance with HQS while the unit is
                                                52
              occupied. The inspection process is the way in which the Authority achieves
              keeping its units in compliance at all times. This responsibility exists despite the
              inability of inspectors to be there every day.

              The Authority further asserts that by inspecting units that were inspected within
              the last 90 days, HUD OIG is attempting to apply a more rigorous HQS standard.
              However, because all units must be in compliance with HQS throughout assisted
              tenancy, the 90 day window is irrelevant. In fact, if the Authority’s inspection
              program was effective in ensuring that its units were in compliance with the HQS
              requirements cited above, one would expect the results of the OIG re-inspections
              to be the best possible representation not only the Authority’s housing stock, but
              of the Authority’s inspector’s performance (and by extension, the Authority’s
              inspection program), given the relatively minimal passage of time. See also
              comment 5.

Comment 11 The Authority disagreed with many of the 24-hour life threatening health and
           safety violations we identified. It stated that HUD guidance does not specifically
           define emergency fail items, and many of the OIG-identified 24-hour violations
           are not defined in the Authority’s administrative plan. We agree that the HUD
           guidance does not specifically identify all life threatening health and safety
           violations; however, the examples the Authority cited, double keyed locks and
           burglar bars on windows, can trap family members within their home in case of
           an emergency such as a fire. As recommended in this report, improved policies,
           procedures and inspector training will help the Authority’s inspectors identify
           such conditions and provide a safer environment for program participants.

Comment 12 The Authority’s comments state that we used an arbitrary definition of five fail
           items to categorize a housing unit as being in material noncompliance. Our
           determination of materiality was not arbitrary as we only considered units to be in
           material noncompliance when they had at least five health and safety violations or
           at least one 24-hour violation that predated the Authority’s last inspection and
           resulted in unsafe living conditions.

Comment 13 The Authority’s comments state that the amount of funds to be put to better use
           and the amounts due to HUD cited in the report are significantly overstated.
           Based on the conservative manner in which we identified units considered to be in
           material noncompliance, we believe the figure to be reasonable, if not
           understated.

Comment 14 The Authority’s comments state that the housing assistance payment amounts
           (Recommendation 1A) calculated by the OIG are overstated because our findings
           do not reflect standards set forth by HUD, the Memphis Housing Authority
           Administrative Plan, and the guiding clarifications and documents. We do not
           agree (See Comment 9). Authority officials also assert that the administrative fee
           figure used to calculate a portion of ineligible costs was not accurate. During the
           audit, we requested the administrative fees paid per unit per month for 2014, and

                                               53
              the Authority was unable to provide that information. The Authority had the
              opportunity to provide the information at the exit conference and in its official
              response but did not. As a result, we were forced to use the 2013 reconciled
              figure for administrative fees paid per unit per month. If the Authority can
              provide HUD with the actual administrative fees paid on behalf of units that were
              found to be in material noncompliance with HQS, that figure can be recalculated
              and the amount paid back with nonfederal funds adjusted accordingly. However,
              when the administrative fee reconciliation for 2014 is performed, if the amount
              paid per unit per month is found to be higher, HUD should require those unearned
              administrative fees to be repaid.

Comment 15 The Inspection Group, Inc. (TIG) acknowledges that its analysis is based only
           upon a review of field notes from the HCV department’s inspections supervisor
           who accompanied the OIG inspector and a limited review of the OIG’s
           inspections summaries. Although TIG’s analysis was limited as stated above, and
           we didn’t have a copy of the Authority’s notes (and none were provided in their
           comments to the draft audit report), we attempted to respond to specific
           comments and concerns (see comment 9). Since no notes were provided, we were
           unable to respond to the more general comments and concerns found in the report.

Comment 16 TIG’s report asserts that HUD OIG overstated the fail items because it did not
           follow applicable criteria. We disagree. We provided the Authority citations to
           the criteria used during our inspections (HQS requirements, housing inspection
           manual requirements, housing choice voucher program handbook requirements,
           etc.).

              The report asserts that HUD OIG only supplied the Authority with the inspection
              summaries rather than a list of all defects. Each inspection summary included a
              list of the all fail items cited by HQS item number and a description of the fail
              item. The supervisory inspector accompanied us on all inspections and the results
              were discussed both during and after the performance of the inspections. In
              addition, the Authority’s supervisory inspector took his own pictures of the fail
              items cited.

              The report contends that the Authority instructed the supervisory inspector not to
              be argumentative, and concluded that this prevented him from obtaining sufficient
              information for rebuttal or being able to identify what we cited as fail items. As
              discussed above, this was not the case.

              The report asserts that there is no way to determine what the HUD OIG inspector
              cited and why, and which units were in material noncompliance. As discussed
              above, we provided a summary of all inspection results which included an HQS
              item number, a description of the failure and we also provided citations of the
              criteria used to determine that the item was a failure. In addition, we also defined
              what constituted a material failure of HQS in the report.



                                               54
Comment 17 The Authority’s comments state that it corrected all of the OIG-identified health
           and safety violations within 24 hours and all other violations within 30 days. We
           commend the Authority for taking actions to improve its program. During the
           audit resolution process, the Authority can provide HUD the documentation
           showing the corrected violations and the measures it has taken to improve the
           quality of its inspections and program.

Comment 18 The Authority’s comments state that it has taken steps to improve the quality of
           its inspections and the quality control program. We commend the Authority on its
           efforts, and HUD will work with the Authority to ensure that these actions are
           adequate to address the report’s recommendations.




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