OFFICE OF AUDIT
REGION VI
FORT WORTH, TX
Summit Bradford Apartments, Tulsa, OK
Section 8 Project-Based Program
2014-FW-1001 April 9, 2014
Issue Date: April 9, 2014
Audit Report Number: 2014-FW-1001
TO: Kelly M. Haines
Hub Director, Fort Worth Multifamily Hub, 6AHMLAS
//signed//
FROM: Gerald R. Kirkland
Regional Inspector General for Audit, Fort Worth Region, 6AGA
SUBJECT: Summit Bradford Apartments, Tulsa, OK, Did Not Comply With the
Requirements of Its Housing Assistance Payments Contract
Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG), final results of our review of Summit Bradford Apartments’ Section 8
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 me at
817-978-9309.
April 9, 2014
Summit Bradford Apartments, Tulsa, OK, Did
Not Comply With the Requirements of Its
Housing Assistance Payments Contract
Highlights
Audit Report 2014-FW-1001
What We Audited and Why What We Found
We audited the Section 8 program Bradford received more than $81,000 in Section 8
administered by Summit Bradford rental subsidies for units with questionable occupancy
Apartments in Tulsa, OK. We selected and that did not meet HUD requirements. In addition,
Bradford because we were informed HUD may have paid more than $96,000 for over
that its management agent may have subsidized units. These conditions occurred because
received Section 8 subsidies for vacant the management agent did not establish effective
units. Our objective was to determine control systems for its onsite manager, who did not
whether Summit Bradford Apartments, keep accurate or complete records. As a result,
LP, the owner, and Summit Housing Bradford did not effectively and efficiently operate its
Partners, LLC, the management agent, Section 8 program and incurred questioned costs
administered Bradford’s Section 8 totaling more than $177,000. Bradford’s owner
program in compliance with its housing benefited from these conditions because it may have
assistance payments contract with the received more Section 8 subsidies than allowed.
U.S. Department of Housing and Urban
Development (HUD).
What We Recommend
We recommend that the Director of the
Fort Worth Office of Multifamily
Housing Programs require the owner to
either support or repay HUD more than
$177,000 spent on vacant, substandard,
or over subsidized units. Further, the
management agent should implement
controls to prevent future questionable
payments.
TABLE OF CONTENTS
Background and Objective 3
Results of Audit
Finding: The Management Agent Did Not Administer Bradford’s
Section 8 Program in Accordance With Requirements 4
Scope and Methodology 14
Internal Controls 16
Appendixes
A. Schedule of Questioned Costs 18
B. Auditee Comments and OIG’s Evaluation 19
2
BACKGROUND AND OBJECTIVE
Summit Bradford Apartments is located at 564 East 32nd Street North, Tulsa, OK. The property
is a 191-unit rental housing project. The U.S. Department of Housing and Urban Development
(HUD) provided Section 8 housing assistance payments to subsidize the tenants’ rents in
accordance with the United States Housing Act of 1937. HUD regulated the property’s rent
amounts and operating methods.
HUD controlled the property through a housing assistance payments contract that was renewed
with Summit Bradford Apartments, LP, the owner, on September 23, 2007, for 20 years. The
agreement summarized the terms and conditions for the Section 8 housing assistance payment
amounts, including establishing the initial contract rents. The agreement also provided that
housing assistance payments would be made only for decent, safe, and sanitary units occupied by
eligible families.
The property’s management agent, Summit Housing Partners Management, LLC, was an
identity-of-interest management agent. A majority of the property’s day-to-day activities were
managed at the property, while most of the financial operations were managed at the agent’s
home office in Montgomery, AL. The owner was responsible for any action taken by the agent
at the property.
The Oklahoma Housing Finance Agency was the contract administrator of Bradford’s Section 8
program. The Agency had an annual contributions contract with HUD identifying it as
Bradford’s contract administrator. However, due to litigation between HUD and other parties,
HUD amended the latest contract on October 1, 2011. The amended contract did not allow the
Agency to monitor Bradford. As a result, it had not performed an onsite monitoring review of
Bradford since June 6, 2011.
As contract administrator, the Agency reviewed and approved the housing assistance payment
vouchers before sending them to HUD for payment. The vouchers contained information on the
subsidies requested for the occupied units. Between August 1, 2011, and July 31, 2013,
Bradford received more than $2.3 million in Section 8 subsidies.
According to program rules, HUD expected residents to contribute to their rent and utility
payments. The lease agreements required residents to maintain their own utility accounts. As
part of the housing assistance payment calculation, HUD included a utility allowance, which was
to be passed through to the resident by Bradford.
Our objective was to determine whether the owner and its agent administered Bradford’s Section
8 program in compliance with its housing assistance payments contract with HUD.
3
RESULTS OF AUDIT
Finding: The Management Agent Did Not Administer Bradford’s
Section 8 Program in Accordance With Requirements
Summit Housing Partners, LLC, Bradford’s management agent, did not adequately manage its
Section 8 program as required by its housing assistance payments contract. It billed HUD for
vacant or substandard units. The units did not have electricity and therefore, were substandard.
Further, the agent did not maintain adequate records. In addition, the agent ignored its and
HUD’s occupancy standards when Bradford over subsidized families by housing them in units
with more bedrooms than they were authorized based upon the family composition. Further, it
should improve the physical conditions of the units to better comply with its housing assistance
payments contract. These conditions occurred because the agent did not comply with HUD’s
and its own requirements and establish effective control systems for its onsite manager, who did
not keep accurate or complete records. As a result, Bradford did not effectively and efficiently
operate its Section 8 program and incurred questioned costs totaling more than $177,000.
Bradford Apartments Received
Section 8 Subsidies for Vacant
or Substandard Units
Contrary to HUD regulations, Bradford improperly submitted housing assistance
payment vouchers to HUD for 17 substandard units that did not have electricity or
were vacant. 1 As a result, HUD paid Bradford $70,497 in ineligible housing
assistance. Sixteen of the units did not have electricity, and one unit’s electricity
account was in Bradford’s name. The improper payments occurred because the
agent ignored HUD requirements for managing its Section 8 housing. Further,
Bradford’s controls did not always follow requirements, and management
officials did not keep accurate or complete records. They failed to establish
controls to determine when tenants moved out or did not have electricity.
Bradford’s owner benefited from these conditions because it received more
Section 8 subsidies than allowed.
Bradford improperly reported occupancy and collected housing assistance
payments for units that did not have electricity. According to HUD requirements,
Bradford was required to bill only for occupied units that were decent, safe, and
sanitary. For 30 unit utility records reviewed, 2 Bradford incorrectly reported
occupancy for 17 units (57 percent) that either did not have electricity or the
1
According to section 4d(2) of its housing assistance payments contract, Bradford could accept housing
assistance payments only for occupied units that were decent, safe, and sanitary.
2
In response to a subpoena, American Electric Power provided the utility records for the 30 units.
4
electricity was in Bradford’s name during periods when Bradford claimed
occupancy. Three units did not have electricity during the entire time that
Bradford claimed they were occupied.
Bradford’s agent should have known that 4 of the 30 units were vacant because it
maintained the electric utility accounts for these units when it claimed they were
occupied. According to management officials, Bradford did not maintain the
utility accounts for its units unless the units were vacant. Unit 585D had
electricity in Bradford’s name for the entire 8 months during which Bradford
claimed the unit was occupied. The remaining three units did not have electricity
during all or part of the periods for which Bradford certified occupancy and
received housing assistance payments. Table 1 shows the number of months in
which Bradford collected housing assistance payments for these units and the
number of months the units did not have electricity.
Table 1: Subsidized units with Bradford utility accounts
Months covered by
Unit number housing assistance funds Months without electricity
506D 11 4
551D 7 1
573B 17 4
585D 8 0
593D 11 1
Bradford improperly billed HUD and kept the rental income for units in which the
electricity was in Bradford’s name and for units that did not have electricity.
HUD authorized Bradford’s gross rent, which included utility allowances.
Bradford’s policies required the property manager to review and approve all
utility reimbursements paid to tenants. However, a review of Bradford’s check
register confirmed that HUD paid Bradford utility allowances for electricity that
was in its name. 3 For example, Bradford held the electric account for unit 585D
in its name for 8 months, claiming that a tenant lived in the unit. Utility
allowance checks written to the tenant for the months of November 2011 through
February 2012 were voided nearly a year later. After the checks went unclaimed,
Bradford certified and continued receiving housing assistance payments for this
unit through March 2, 2012.
Bradford also collected and kept utility allowance funds for units that did not have
electricity and were vacant. For example, Bradford collected HUD utility
allowance funds for 5 months after a tenant moved out of unit 518C, although the
unit did not have electricity. Bradford later voided the checks that it had written
to the tenant. In both instances, Bradford did not repay the utility allowances to
HUD. Bradford’s voiding of the utility allowance checks further demonstrated
3
According to section 7 of the lease agreements, Bradford did not maintain utility accounts for its occupied units.
5
that the tenants did not pick up their checks and cash them, indicating that the
units were vacant during those months.
Two Apparently Occupied Units Did Not Have Electricity
During site visits of 22 units in August 2013, 2 of the 11 (18 percent) units that
were listed on the housing assistance payment vouchers as occupied did not have
electricity as required. 4 The two units, units 506A and 585B, were infested with
flies. On the week of the visit, the heat index reached as high as 110 degrees,
which could lead to dangerous conditions for a resident. Despite substandard
conditions that violated HUD regulations and the lease agreements, Bradford
claimed and received $10,516 in housing assistance for these units when they did
not always have electricity.
Bradford reported that unit 506A had been rented since February 1, 2013. 5 The
December 2013 housing assistance payment voucher showed that the resident still
lived in the unit. Management officials did not ensure that the occupied unit was
habitable as it did not have electricity on the day of the visit.
Bradford reported that a resident had rented unit 585B on July 3, 2013, and still
lived there in December 2013. Since the unit did not have electricity, food in the
refrigerator had spoiled, producing a foul smell throughout the unit. The utility
records for this unit showed that the resident had opened a utility account but had
made no payments, including the required utility deposit. On July 31, 2013, less
than a month after the resident opened the account, the utility company sent a
disconnect notice.
Bradford should not have collected housing assistance payments for these two
units that did not have electricity because they were not decent, safe, and
sanitary. 6
Bradford Maintained
Substandard Records
Management officials should have known that Bradford’s units did not have
electricity or were vacant. They asserted that they walked the property daily and
looked for tagged electric meters. 7 However, if they did so, they failed to either
identify units without electricity, confirm whether the units were occupied, or
4
24 CFR (Code of Federal Regulations) 5.703 required the owner to keep the kitchen, lighting, outlets, switches,
and electrical systems of the units free of health and safety hazards, functionally adequate, and operable.
5
This unit was not included in the utility subpoena.
6
The management agent continued billing for the units through at least its December 2013 housing assistance
payment voucher, which it submitted on October 29, 2013.
7
The utility company also placed yellow 4.25” by 11” disconnect notices on the front doors. Management
officials should have seen these as they walked around the property.
6
remove the units from Bradford’s housing assistance payment vouchers because
they were either vacant or not in decent, safe, and sanitary condition. As a result,
Bradford collected improper rent subsidies and utility allowances for ineligible
units.
The improper payments occurred because Bradford did not have adequate
controls and did not follow requirements.
• Bradford did not have controls in place to follow up on tenants when they
did not pick up their utility allowance checks. Thus, management officials
took an average of 257 days to void unclaimed utility checks.
• Bradford did not comply with HUD requirements. When the units did not
have electricity or Bradford’s tenants vacated units, management officials
continued billing HUD and receiving housing assistance payments for the
units. Contrary to Bradford’s practice, HUD required that Bradford stop
billing for units that did not have electricity 8 or when vacancies were
discovered. 9
• Oklahoma State law 10 required the owner to store the property in a place
of safekeeping. However, the housing assistance payment contract did not
authorize the owner to charge HUD for vacant units. Instead of moving
the tenants’ abandoned property to a storage unit, the owner elected to
keep the abandoned property in the units and inappropriately billed HUD
for the subsidies. For example, a site visit showed that unit 510C was
clearly vacant on August 27, 2013. However, management officials
reported on Bradford’s housing assistance payment voucher that the tenant
moved out on September 16, 2013, 20 days later.
Due to the significant control deficiencies, Bradford may have received improper
housing assistance payments for other vacant or substandard units not included in
the 30 units sampled.
Management Officials May
Have Placed Tenants into Units
That Were Larger Than
Authorized
HUD required the owner to establish proper occupancy standards to identify
whether a unit was the appropriate size. Further, Bradford was to certify annually
that each family was in the proper unit, 11 maintain a transfer list for families that
8
24 CFR 5.703 required the owner to keep the property decent, safe, sanitary, and in good repair.
9
HUD Handbook 4350.3, REV-1, Occupancy Requirements of Subsidized Multifamily Housing Programs,
effective August 1, 2009, paragraph 9-12(E)
10
Oklahoma Residential/Non-Residential Landlord and Tenant Acts, title 41, section 130C
11
HUD Handbook 4350.3, REV-1, Occupancy Requirements of Subsidized Multifamily Housing Programs,
effective August 1, 2009, chapter 7
7
requested or needed a move, 12 and give families currently living in units that were
not of the appropriate size priority to transfer into appropriate-size units before
renting units to families that did not live at Bradford. 13
Management officials may have inappropriately placed tenants into units that
were larger than they were authorized. This condition occurred because
Bradford’s agent did not follow Bradford’s occupancy standards or HUD
requirements for housing tenants. Specifically, it did not
• Keep its records updated,
• Maintain appropriate transfer lists,
• Document annual recertifications,
• Follow appropriate procedures, and
• Implement proper controls to ensure tenants were living in proper size
housing.
As a result, Bradford may have collected $96,249 14 in improper subsidies 15 for
units that exceeded its and HUD’s occupancy requirements. 16
Generally, Bradford’s written occupancy standards did not allow one person to
have two or three bedrooms. 17 If Bradford placed the family into a unit that was
larger than defined in the occupancy standards, the lease agreement required the
family to move to a smaller unit as it became available.
Data Analysis Results
Based upon analysis of Bradford’s September 12, 2013, data, Bradford may have
incorrectly claimed and HUD paid $87,173 18 in excess housing assistance for the
46 occupied units that were larger than Bradford’s occupancy standards
authorized.
12
HUD Handbook 4350.3, REV-1, Occupancy Requirements of Subsidized Multifamily Housing Programs,
effective August 1, 2009, paragraph 7-16(C)
13
Required by Bradford Apartment Homes Tenant Selection Plan
14
The $96,249 consisted of $87,173 from the data analysis and $9,076 from a review of the tenant files. Of this
amount, $7,947 was ineligible and $88,302 was unsupported.
15
The total questioned costs were $102,230. However, $5,981 of the costs was included as questioned costs due
to a lack of electricity. So as to not duplicate costs, the $5,981 was removed from this calculation.
16
HUD Handbook 4350.3, REV-1, Occupancy Requirements of Subsidized Multifamily Housing Programs,
effective August 1, 2009, paragraph 3-23(A), required Bradford to develop and follow occupancy standards that
took into account the size and number of bedrooms based on the family size.
17
Bradford Apartment Homes Tenant Selection Plan
18
This amount consisted of $2,735 in ineligible costs and $84,438 in unsupported costs.
8
Tenant File Review Results
Based on a review of tenant files for 25 units, Bradford housed families in 5
HUD-subsidized units that were larger than allowed by its occupancy plan and
HUD requirements. 19
For these five units, management officials ignored the forms HUD-50059 that
listed the family members, did not follow up on expected changes in family size,
and did not follow up on questionable custodies.
• For more than a year, management officials inappropriately billed HUD
for a two-bedroom unit, unit 509C, that was occupied by one tenant and
his 18-year-old son, as reported on the form HUD-50059, which the
management agent signed. This was improper because Bradford required
children that age to enter into a lease agreement and HUD required them
to submit consent forms and verification documents. Further, Bradford
policies required the onsite manager to immediately include the son’s
income in the family’s income. However, due to mismanagement, the son
remained in the unit for 6 months without signing any of the required
documents. The father wrongly continued to live in the unit by himself
after the son moved out despite submitting an updated form HUD-50059,
which management signed.
• Management officials allowed a family with temporary custody of
children to remain in unit 585B after the children left, although the signed
forms HUD-50059 showed that two family members lived in the three-
bedroom unit. The family wrongly remained in the unit for more than 2
years.
• For units 585D and 534D, management officials did not follow up on
expected changes in family size. The two families were provided
additional bedrooms for expected children, but the tenant files did not
contain evidence that the children had lived in the units. Unit 534D did
not have electricity for 4 months after the expected birth of twins.
Management officials should have attained evidence from the families
following the births, such as copies of birth certificates, Social Security
numbers, or other evidence to support occupancy of the larger units.
• Management officials did not follow up on reported discrepancies
regarding child custody. For nearly 7 years, a single father claimed
custody of three children to live in unit 522D, a three-bedroom unit.
However, the tenant file showed that the father had visitation rights only.
If the father reported incorrect occupancy information on the application,
certification, or recertification, the lease agreement required him to repay
19
HUD Handbook 4350.3, REV-1, Occupancy Requirements of Subsidized Multifamily Housing Programs,
effective August 1, 2009, paragraph 3-23(A), required Bradford to develop and follow occupancy standards that
took into account the size and number of bedrooms based on the family size.
9
Bradford excess rent paid, and Bradford would then reimburse HUD. 20
The management agent did not have documentation to show that it
followed up on this discrepancy.
Bradford should have transferred these five families to smaller units because there
were an adequate number of available appropriate-size units. The tenant files did
not contain documented reasons for keeping the families in the larger units or
Bradford’s notification that the families needed to move to smaller units. Further,
Bradford could not support that it used a transfer list to keep track of families that
needed to move and followed up on its progress in moving them. As a result,
HUD paid Bradford $9,076 21 in excess housing assistance on these five units.
Bradford collected $96,249 in improper Section 8 subsidies because its
management agent did not have the controls needed to ensure that it placed
families into the proper sized units. In addition, Bradford gave larger units to
families that had questionable temporary custody of children, even when the
forms HUD-50059 showed that the families were smaller than authorized for the
units. The owner benefited from these improper controls because it received
more Section 8 subsidies than allowed.
Bradford’s Management Agent
Should Improve the Unit
Conditions.
Bradford’s management agent should improve the unit conditions at the property.
HUD’s latest physical inspection on February 19, 2013, rated the property at
67c*. 22 During site and unit observations with staff in August 2013, 6 of the 11
occupied units did not appear to meet HUD requirements. 23 As previously
discussed, two of the occupied units did not have electricity. Deficiencies in the
occupied units included
• Safety and sanitation violations inside the properties, including foul smells
from spoiled food due to no electricity, defective electrical switches, insect
and rodent infestation, unsecured or damaged water heaters, missing
window screens, and damaged or leaking ceilings.
• Visible signs of damage such as holes in walls; damaged walls, doors, and
knobs; and cracks in tiles.
20
HUD Handbook 4350.3, REV-1, Occupancy Requirements of Subsidized Multifamily Housing Programs,
effective August 1, 2009, section 8-20
21
This amount consisted of $5,212 in ineligible costs and $3,864 in unsupported costs.
22
The c in the score meant that HUD noted life threatening issues. Specifically, 5 of 24 units inspected (21
percent) had life threatening issues. A 60 is considered a passing score.
23
24 CFR 5.703 required the owner to keep the property decent, safe, sanitary, and in good repair.
10
• Damaged or low-performing appliances and fixtures, such as kitchen
range burners, garbage disposals, and faucets.
Additionally, 10 of the 11 vacant units visited were in poor condition. It appeared
that some of these units would need major repairs as a possible result of the agent
not making repairs in a timely manner. According to the October 2013 housing
assistance payment voucher, 24 Bradford showed 28 vacant units at the complex.
Bradford would need to make significant repairs to provide acceptable living
conditions before tenant occupancy.
Based on observations of the units and discussions with tenants, it appeared that
Bradford did not always conduct unit site visits as required. One tenant stated
that he felt rushed into moving in and management officials did not conduct a
proper site visit of the property. The unit included a bathroom ceiling that leaked
when his neighbor upstairs used the facilities (figure 1). Another occupied unit
had a rodent infestation according to the tenant and a hole in the pantry closet
wall (figure 2). Another tenant complained that her unit had outlets and switches
that emitted electrical sparks and her flooring included several pieces of cut up
carpeting. Another occupied unit had a cracked and damaged water heater.
Figure 1: Leaking bathroom ceiling Figure 2: Hole from rodent infestation
Bradford asserted that it spent significant funds on security. However, some
residents indicated that they did not feel safe living at Bradford, despite onsite
private security. As a result, some residents stated that they barricaded their front
door at night due to fear of break-ins. Some did not leave their units if possible
due to potentially dangerous individuals loitering around the property. Others
stated that they had reason to suspect that there were drug dealers and users on the
property.
24
The management agent certified this voucher on September 3, 2013.
11
Conclusion
Bradford violated its housing assistance payments contract with HUD for its
Section 8 program by charging HUD for vacant or substandard units and units
that exceeded its and HUD-authorized occupancy standards. Further, it did not
maintain complete records in its tenant files or maintain the property in a decent,
safe, and sanitary condition in accordance with requirements. These conditions
occurred because its agent had not implemented effective controls. As a result,
HUD paid Bradford at least $177,262 for ineligible and unsupported housing
assistance payment subsidies and utility allowances.
Recommendations
We recommend that the Director of the Fort Worth Office of Multifamily
Housing Programs require Bradford to
1A. Repay $70,497 to HUD for units that either did not have electricity or were
vacant. Repayment should be from non-Federal funds.
1B. Provide documentation to support $10,516 in housing assistance payments
for two units that did not have electricity during an August 2013 site visit or
repay any unsupported amounts to HUD from non-Federal funds.
1C. Repay $7,947 to HUD from non-Federal funds for subsidies on units
exceeding HUD’s occupancy standards.
1D. Provide documentation to support $88,302 in housing assistance payments
for apparently over subsidized units or repay any unsupported amounts to
HUD from non-Federal funds.
1E. Implement adequate written procedures and effective controls to ensure that
it administers its Section 8 program in accordance with requirements.
Minimally, the procedures and controls should ensure that
• Units are occupied; the appropriate size; and decent, safe, and
sanitary;
• Family composition is verified, including ensuring that all reported
family members live in the units and are eligible;
• Families in over subsidized units are transferred to appropriate-size
units in compliance with HUD requirements;
• Bradford maintains waiting lists and transfer lists that are current
and available to all staff members who process move-ins and
move-outs;
12
• Bradford maintains and frequently updates tenant files and
processes known changes in family composition within HUD-
required timeframes;
• Bradford maintains accurate records in the tenant files supporting
reasons for allowing families to reside in units that exceed the
published occupancy standards; and
• Housing standard deficiencies are identified and corrected in a
timely manner.
1F. Submit a monthly paper voucher in addition to the electronic voucher
submitted in HUD’s tenant rental assistance certification system. The paper
voucher documentation should include the corresponding form HUD-50059
for each individual rental assistance payment requested and an active
property rent roll that provides a date stamp that corresponds with the
submission date of the electronic voucher. This documentation should be
submitted to the Tulsa staff on or about the 15th of each month for review.
1G. Perform a 100 percent tenant file review within 45 days from the issuance of
the audit report. This should include a certification to the HUB upon
completion and should include confirmation of compliance with HUD rules
and regulations.
1H. Certify that it corrected the physical deficiencies identified in the units
during our site visits in August 2013.
We also recommend that the Director
1I. Perform a standard management and occupancy review, including site visits
of the 161 units that were not included in our sample, to ensure that
Bradford has implemented adequate procedures and has corrected the
deficiencies identified in this report.
1J. Compare the occupancy noted in the housing assistance payment vouchers
to the actual occupancy noted during the site visits of the 161 units that were
not included in our sample.
13
SCOPE AND METHODOLOGY
We performed our fieldwork at Bradford’s office located in Tulsa, OK, and our offices in Fort
Worth, TX, and Oklahoma City, OK, from July through November 2013. Our audit scope was
August 2011 through July 2013. However, in one instance, we expanded our scope to
May 1, 2011. Also, we expanded our scope through December 31, 2013, for all over subsidized
units and the two units without electricity that we visited in August 2013.
To accomplish our objective, we
• Reviewed relevant HUD guidance and requirements.
• Reviewed the agent’s policies and procedures.
• Reviewed and analyzed the owner’s housing assistance payments contract with HUD.
• Reviewed Bradford’s December 31, 2011, and 2012, audited financial statements.
• Reviewed the contract administrator’s management review report for Bradford, dated
July 5, 2011.
• Reviewed Bradford’s February 19, 2013, physical inspection report.
• Subpoenaed American Electric Power’s policies and its utility records for 30 of
Bradford’s units.
• Interviewed agent, contract administrator, and HUD officials.
• Selected a nonstatistical sample of 25 of 191 (13 percent) subsidized units to verify that
the tenant files supported the vouchers. The results were not projected to the population.
• Selected a nonstatistical sample of 30 of 191 (16 percent) subsidized units to review for
occupancy. We compared subpoenaed utility records provided by American Electric
Power to housing assistance payment vouchers. The results were not projected to the
population.
• Selected and visited a nonstatistical sample of 22 units.
• Analyzed the September 12, 2013, tenant unit voucher data provided by the owner for
335 records. We identified 50 potentially over subsidized tenants in 46 units and selected
a nonrepresentative sample of 7 tenant files for testing. For the remaining 43 tenants, we
calculated the difference between unit gross rents for the family’s actual household size
and the housing assistance payment voucher amounts Bradford charged for the actual unit
size reported. We validated tenant move-in and move-out dates based on Bradford’s
housing assistance payment vouchers through December 2013. We did not project the
results to the population.
To achieve our audit objective, we relied in part on computer-processed data from the agent. We
analyzed the computer-processed data to determine whether the agent housed tenants in
potentially over subsidized units and whether it complied with procedures for tenant utility
allowance checks. We did not perform a detailed assessment of the reliability of the data.
However, we assessed the reliability of data adequate for the analysis conducted.
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
14
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.
15
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:
• Policies and procedures that Bradford’s management agent had
implemented to ensure that its Section 8 program met its objectives.
• Policies and procedures that Bradford’s management agent had
implemented to ensure that it complied with laws and regulations.
• Policies and procedures that Bradford’s management agent had
implemented to ensure that its resource use was consistent with laws and
regulations and that its resources were 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.
16
Significant Deficiencies
Based on our review, we believe that the following items are significant deficiencies:
Bradford did not establish effective systems and controls to ensure that it
• Requested housing assistance payments only for occupied units that were
in decent, safe, and sanitary condition;
• Maintained adequate documentation in its tenant files;
• Housed families in appropriate-size units; and
• Maintained its units in decent, safe, and sanitary condition (finding).
17
APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
Recommendation Ineligible 1/ Unsupported 2/
number
1A $ 70,497
1B $ 10,516
1C 7,947
1D 88,302
Totals $ 78,444 $ 98,818
1/ Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
that the auditor believes are not allowable by law; contract; or Federal, State, or local
policies or regulations.
2/ Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
or activity when we cannot determine eligibility at the time of the audit. Unsupported
costs require a decision by HUD program officials. This decision, in addition to
obtaining supporting documentation, might involve a legal interpretation or clarification
of departmental policies and procedures.
18
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1
19
Comment 2
20
Comment 1
Comment 3
21
Comment 4
Comment 4
Comment 5
Comment 6
22
Comment 6
Comment 7
Comment 8
Comment 9
Comment 4
23
Comment 10
Comment 11
Comment 12
Comment 13
24
Comment 14
25
Comment 14
26
Comment 15
27
Comment 16
Comment 16
Comment 4
Comment 16
Comment 15
28
Comment 6
Comment 5
Comment 14
Comment 17
Comment 4
Comment 15
Comment 4
Comment 15
Comment 18
29
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OIG Evaluation of Auditee Comments
Comment 1 On December 9, 2013, OIG sent Bradford a list of the tenants that did not have
electricity and the dates that electricity was not in an individual’s name. Further,
OIG provided Bradford copies of the subpoenaed records in Bradford’s name.
Contrary to the management agent’s response it is not unusual for OIG to
subpoena information, especially when that information contains personally
identifiable information.
Comment 2 The report shows that either HUD paid Bradford $70,497 in ineligible housing
assistance for 17 units that did not have electricity, or the electricity was in
Bradford’s name. During a site visit, units 506A and 585B also did not have
electricity, resulting in an additional $10,516 unsupported costs. Besides not
having electricity, the two allegedly occupied units were questionable in other
ways. Unit 506A had some furniture in it, but appeared to be vacant. Two
unauthorized people who were not on the lease occupied unit 585B. They
claimed to have temporarily moved into the unit to housesit and babysit three
children, who were 1, 4, and 7 years old. However, none of the children were in
the unit during the visit. Management agent staff was present during these visits.
Comment 3 We disagree. We did not change the classification from ineligible to unsupported
as requested because the criteria, 24 CFR 5.703 states electrical systems must be
operable and in good repair. It is not feasible to check the safety of the electrical
system and whether it is operable if there is no electricity. For example, Ground
Fault Circuit Interrupter and outlets must be checked to ensure they are properly
grounded and working. With no electricity, this cannot be done. Without
electricity, the refrigerator, ventilation systems and some other appliances cannot
be checked to see they are operable. These appliances are required to be
operating in the unit.
Comment 4 The criteria, 24 CFR 5.703 clearly supports that units without electricity were not
decent, safe, and sanitary.
Comment 5 We have modified the language in the body of the report regarding the condition
of the units. We stand by our observations made and reiterate that management
agent staff was present for the visits.
Comment 6 When Bradford identifies a unit with no electricity, it should require the tenant to
immediately reinstate their account. If the tenant refuses or if the instance is
repeated, the lease should be terminated as the lease specifically requires. If
management performed quarterly inspections as it asserts, it should have found
that 8 of the 17 units reviewed did not have electricity for more than 3 months.
Comment 7 The finding did not imply that management should know instantaneously when
tenants vacate their units without notice or if tenant-provided utilities are
terminated. However, when management changes the utility account from the
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tenant’s name to the property, or when tenant utility checks go uncashed for
months, management should at a minimum determine if the tenant still occupies
the unit and that the unit meets basic HUD requirements.
Comment 8 HUD’s statement about alerting the multifamily owner to problems, as referred to
by Bradford, was a response to a comment concerning tenant-paid utilities that
were shut off shortly before HUD’s physical inspection of any HUD-subsidized
property. The commenter stated that the property owner had no time to take
action. HUD responded that, under statute and contract, it was the owner’s
responsibility to schedule regular housekeeping and preventative maintenance site
visits to ensure that its units met the required physical condition standards.
Comment 9 We did not suggest that Bradford inspect all 191 tenant units monthly. However,
with onsite management, maintenance, and security, it is not unreasonable for
them to have seen disconnect notices, and report and follow up on suspected
vacant units. Further, the onsite manager claimed that she walked the property
every morning and looked for the electric company’s shut off notices on the front
doors of the units, indicating that someone may have left without notice. She also
explained that American Electric Power left red tags on the group electric meters.
When she saw those, she would call the electric company to find out which unit
had an electric shut off notice.
Comment 10 Section 2.5c of the housing assistance payments contract applies to the results of
contract administrator inspections. For the items identified in this report,
Bradford will need to work with HUD to cure violations including financial
sanctions.
Comment 11 While Oklahoma state law did not require owners to move abandoned property to
a storage unit, the owner is not entitled to HUD subsidies for vacated units. We
made clarifications in the finding.
Comment 12 We classified the costs as unsupported because the management agent’s data
indicated that occupancy violations may have occurred. Unsupported costs are
those costs charged to a HUD-financed or HUD-insured program or activity when
we cannot determine eligibility at the time of the audit. Unsupported costs require
a decision by HUD program officials. This decision, in addition to obtaining
supporting documentation, might involve a legal interpretation or clarification of
departmental policies and procedures. As stated in footnote number 18, the
$87,173 includes $2,735 in ineligible costs and $84,438 in unsupported costs.
Comment 13 Refer to the Scope and Methodology section of the report for a description of our
analysis.
Comment 14 We recognize that there are numerous factors that can affect the unit size, which
is in part why we classified the costs as unsupportable. Bradford will need to
32
provide support to HUD so that it can make a determination regarding all of the
units we questioned.
Comment 15 The report focused on deficiencies found in the occupied units. Our unit
observations were not inspections and were not intended to use the Real Estate
Assessment Center’s methodology or criteria as it was not our intent to cite every
physical deficiency. Rather, our purpose was primarily to determine whether the
units were occupied, and if so, by whom. As part of the review, we noted only
serious, readily identifiable violations of HUD requirements. We discussed the
issues with management, and management was taking notes, as we observed the
units. The problems that we noted were major deficiencies that management
should have noted.
Comment 16 We modified the report as needed.
Comment 17 The HUD Handbook 4350.3, REV-1, effective August 1, 2009, is the correct
criterion for the audit period of August 1, 2011, through July 31, 2013.
Comment 18 As discussed in footnote 14, the total questioned costs were $96,249, including
costs for the data analysis and from the tenant files. Of the $96,249, $7,947 was
ineligible and $88,302 was unsupported.
33
Summit Bradford Apartments, Tulsa, OK, Did Not Comply With the Requirements of Its Housing Assistance Payments Contract
Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-04-09.
Below is a raw (and likely hideous) rendition of the original report. (PDF)