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 49 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. 50 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. 55
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)