oversight

The St. Charles Parish Housing Authority, Boutte, LA, Mismanaged Its Section 8 Housing Choice Voucher Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-07-02.

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

OFFICE OF AUDIT
REGION 6
FORT WORTH, TX




               St. Charles Parish Housing Authority
                            Boutte, LA

        Section 8 Housing Choice Voucher Program




2014-FW-1003                                      July 2, 2014
                                                        Issue Date: July 2, 2014

                                                        Audit Report Number: 2014-FW-1003



TO:            Cheryl J. Williams, Director, Office of Public Housing, 6HPH

               //signed//
FROM:          Gerald Kirkland, Regional Inspector General for Audit, Ft. Worth Region, 6AGA

SUBJECT:       The St. Charles Parish Housing Authority, Boutte, LA, Mismanaged Its Section 8
               Housing Choice Voucher Program


    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 St. Charles Parish Housing
Authority’s Section 8 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 me at
817-978-9309.
                                            July 2, 2014

                                            The St. Charles Parish Housing Authority, Boutte, LA,
                                            Mismanaged Its Section 8 Housing Choice Voucher
                                            Program


Highlights
Audit Report 2014-FW-1003


 What We Audited and Why                     What We Found

We audited the St. Charles Parish           The Authority did not operate its program in
Housing Authority based upon our            accordance with HUD’s requirements. Specifically, it
regional risk analysis and as part of our   (1) did not ensure that housing assistance and utility
annual audit plan to review public          reimbursement payments were eligible and supported,
housing agencies’ operations. Our           (2) did not maintain adequate documentation to
objective was to determine whether the      support subsidy payments, and (3) did not review its
Authority operated its Section 8            utility allowance standards annually. In addition, it did
Housing Choice Voucher program in           not enforce HUD’s housing quality standards. These
accordance with the U.S. Department of      conditions occurred because the Authority (1) lacked
Housing and Urban Development’s             adequate written procedures and controls, (2) failed to
(HUD’s) requirements and its                exercise proper supervision and oversight, and (3) did
administrative plan.                        not ensure that it adequately trained its staff on
                                            program requirements and systems. As a result, the
 What We Recommend                          Authority made $16,350 in ineligible overpayments
                                            and $1,325 in underpayments, paid $18,391 for
                                            properties that did not meet HUD’s housing quality
We recommend that the Director of           standards and could not support $570,834 of housing
HUD’s New Orleans Office of Public          assistance and utility reimbursement payments. These
Housing require the Authority to (1)        errors also caused an underutilization of the
repay $34,741 from non-Federal funds,       Authority’s vouchers, preventing it from using
(2) support or repay $570,834 from          program funds to better serve program participants and
non-Federal funds, and (3) implement        provide assistance to households on its waiting list.
controls and procedures and train staff.    Additionally, the Authority may have placed an undue
Additionally, the Director should (1)       burden on participants for increased utility costs and
adjust the Authority’s Section 8            could not provide reasonable assurance that it used
Management Assessment Program               HUD funds effectively and efficiently or to fully
scores and (2) consider new                 benefit program participants. Lastly, the Authority
management strategies to improve the        subjected program participants to substandard living
Authority’s operations to ensure that       conditions for those units not in compliance with
program funds are better used to assist     HUD’s housing quality standards.
the Authority’s program participants
and households on the waiting list.
                           TABLE OF CONTENTS

Background and Objective                                                          3

Results of Audit
      Finding 1: The Authority Did Not Ensure Payments Were Eligible and Supported 4
      Finding 2: The Authority Did Not Enforce HUD’s Housing Quality Standards    10

Scope and Methodology                                                            16

Internal Controls                                                                18

Appendixes
A.    Schedule of Questioned Costs                                               20
B.    Auditee Comments and OIG’s Evaluation                                      21
C.    Summary of Payment Deficiencies                                            27
D.    Summary of File Documentation Deficiencies                                 30




                                           2
                      BACKGROUND AND OBJECTIVE

The St. Charles Parish Housing Authority is a public agency, chartered under the laws of the
State of Louisiana to provide safe and sanitary dwelling accommodations and administer
affordable housing programs to the citizens of St. Charles Parish, LA. The Authority manages
129 public housing units and is authorized 400 Section 8 vouchers. The Authority’s mission is
to provide decent, safe, sanitary, and drug-free housing for low- to moderate-income families
throughout the Parish. The Authority is governed by a five-member board of commissioners
appointed by the Parish council members. The Authority’s executive director manages the
Authority’s day-to-day operations. The Authority is located at 200 Boutte Estates Drive, Boutte,
LA.

Congress authorized the Section 8 Housing Choice Voucher program in 1974 to provide rental
subsidies for eligible families, including single persons, residing in newly constructed,
rehabilitated, and existing rental and cooperative apartment projects. The program assists very
low-income families, the elderly, and the disabled in affording decent, safe, and sanitary housing
in the private market.

The U.S. Department of Housing and Urban Development (HUD) provides program funding to
the Authority in the form of rental subsidies to owners on behalf of eligible families. The
Authority relies on the Federal subsidies and administrative fees it receives from HUD as a
primary source of funding to pay the landlords, provide utility reimbursements to participants,
and administer the program. HUD provided funding for the Authority’s program as shown in
table 1.

Table 1:
     Fiscal year           Authorized funds          Disbursed funds       Administrative fees
         2011                     $1,895,464                $1,895,464               $158,131
          2012                       1,601,460                1,601,460                 137,450
          2013                         477,408                  421,590                 131,611
 Total                              $3,974,332               $3,918,514                $427,192

In operating its program, the Authority must comply with its consolidated annual contributions
contract, HUD regulations, and its administrative plan.

Our objective was to determine whether the Authority operated its program in accordance with
HUD requirements and its administrative plan.




                                                 3
                                     RESULTS OF AUDIT


Finding 1: The Authority Did Not Ensure Payments Were Eligible and
Supported

The Authority did not properly administer program assistance. Specifically, it (1) did not ensure
that housing assistance and utility reimbursement payments were eligible and supported, (2) did
not maintain adequate documentation to support subsidy payments, and (3) did not review its
utility allowance standards annually. These conditions occurred because the Authority did not
have adequate internal controls. Specifically, it did not (1) have adequate written procedures for
calculating housing assistance and utility reimbursement payments and maintaining supporting
documentation, (2) perform sufficient quality control reviews of participant files, (3) follow its
written standards when determining subsidy and utility amounts, (4) adequately train its staff on
program requirements and associated computer systems, and (5) provide adequate oversight to
ensure that it complied with program requirements. As a result, the Authority overpaid $16,350,
underpaid $1,325, and paid $570,834 in unsupported payments for housing assistance and utility
reimbursements. In addition, these errors caused an underutilization of the Authority’s vouchers,
preventing it from using program funds to better serve program participants and provide
assistance to households on its waiting list seeking program assistance. Further, the Authority
may have placed an undue burden on participants for increased utility costs and could not
provide reasonable assurance that it used HUD funds effectively and efficiently or to fully
benefit program participants.


    The Authority Made Ineligible
    and Unsupported Payments

                 Review of the reexaminations for 85 sampled monthly housing assistance
                 payments found that all 85 payments contained errors. The Authority is required
                 to verify the accuracy of the income information received from program
                 households and change the amount of the total household payment, household
                 rent, or program housing assistance payment or terminate the housing assistance,
                 as appropriate, based on this information. 1

                 However, for 10 of the sampled payments, the Authority either did not use the
                 correct payment and utility allowance amounts or miscalculated income, resulting
                 in $16,350 in ineligible overpayments and $1,325 of underpayments. In one
                 instance, contrary to HUD’s requirements, 2 the Authority excluded overtime pay

1
     24 CFR (Code of Federal Regulations) 5.240(c)
2
     24 CFR 5.609(b)(1)

                                                     4
                  and used only the average hours worked times the base rate of pay, causing an
                  overpayment of $342 each month during the reexamination period.

                  For the remaining 75 sampled payments, the Authority did not maintain 1 or more
                  documents 3 needed to support $426,310 in subsidy payments. Specifically, the
                  Authority did not

                     •   Verify income or obtain income or expense documentation for 34 payments.
                     •   Conduct annual or interim reexaminations for nine participants.
                     •   Keep the files after participants stopped receiving program benefits for four
                         participants.
                     •   Complete an annual housing quality standards inspection of 56 units. For
                         one, the Authority received a letter from a participant on July 11, 2013,
                         complaining of substandard and dangerous living conditions and the lack of
                         a housing quality standards inspection for 3 years. 4 For example, the
                         participant’s letter stated that the air conditioner had been broken for 100
                         days, the home was infested with insects, the door frames were rotted, the
                         house piers had sunk (causing the house to lean to one side), and the
                         sheetrock was falling from the ceiling. The Authority conducted a special
                         inspection on July 12, 2013; however, on July 30, 2013, it received another
                         letter from the participant stating that he had vacated the premises due to the
                         living conditions. The Authority did not take actions against the landlord to
                         improve the participant’s living conditions as required by HUD. 5

                  See appendix C for a summary of all of the deficiencies for each participant file
                  reviewed.

    The Authority Did Not
    Maintain Adequate
    Documentation

                  We reviewed an additional 14 participant files to determine whether the Authority
                  maintained complete documentation. For these 14 files, the Authority did not
                  maintain 1 or more documents 6 needed to support $144,524 in subsidy payments.




3
     24 CFR 982.158
4
     For this unit, the Authority passed the unit during the initial inspection in 2010 and did not conduct an
     inspection for 2011 or 2012.
5
     HUD Guidebook, section 10.7
6
     24 CFR 982.158

                                                           5
                  Specifically, the Authority

                      •    Paid for units that failed its housing quality standards inspection 7 and did
                           not require the landlord to repair the deficiencies identified, 8
                      •    Did not perform annual reexaminations or obtain appropriate income
                           documentation 9,
                      •    Did not use third-party sources to verify household income.
                      •    Did not document annual housing quality standards inspection 10 for 1 or
                           more years,
                      •    Did not maintain documentation showing that it conducted an annual
                           reexamination, 11
                      •    Did not document a rent reasonableness assessment, or
                      •    Did not document housing assistance payments contract and lease.

                  The Authority also did not ensure that it always

                  •       Conducted rent reasonableness assessments before executing the lease or
                          housing assistance payments contract. 12 For one participant, the Authority
                          conducted the assessment almost 3 months after it executed the agreements.
                  •       Issued a housing voucher to participants to ensure compliance with occupancy
                          standards. 13
                  •       Ensured that the voucher size corresponded to its occupancy standards. 14 In
                          one instance, the Authority issued a three-bedroom voucher for a one-person
                          household.
                  •       Ensured that it executed the housing assistance payments contract within 60
                          calendar days from the beginning of the lease term. 15
                  •       Performed or obtained criminal background checks on household members. 16

                  See appendix D for a summary of the deficiencies identified for each participant
                  file reviewed.




7
     24 CFR 982.305(a)(2)
8
     24 CFR 982.404(a)
9
     24 CFR 982.516
10
     24 CFR 982.405(a)
11
     24 CFR 982.516
12
     24 CFR 982.305(a)(4)
13
     Authority’s Section 8 administrative plan
14
     Authority’s Section 8 administrative plan
15
     24 CFR 982.305(c)
16
     24 CFR 982.553

                                                       6
     The Authority Did Not Review
     Utility Allowance Standards
     Annually

                 The Authority is required to review its schedule of utility allowances annually to
                 ensure that rates remained in line with the normal patterns of consumption and the
                 current utility rates. Any change of 10 percent or more required a revision to the
                 Authority’s policy. HUD also required the Authority to maintain documentation
                 supporting that it performed this annual review and any revisions made. 17

                 However, the Authority had not reviewed its utility allowance standard schedule
                 since 2010. Considering the rising costs of living over the past 4 years, the
                 Authority may have placed an undue burden on participants by making them pay
                 more than required for utility costs.

     The Authority Lacked
     Adequate Procedures and
     Controls

                 The Authority lacked adequate written procedures and controls to ensure that it
                 calculated payments correctly and maintained adequate documentation. It did not
                 follow its utility and payment standard policies. In addition, its administrative
                 plan, which had not been updated since 2004, did not include procedures for (1)
                 closing or reopening the waiting list and (2) establishing and revising its payment
                 standards. 18 It also did not establish controls for processing checks, determining
                 rent reasonableness, calculating income, and determining the required frequency
                 for performing criminal background checks on participants. The Authority’s only
                 written program policy was its administrative plan, which did not include
                 necessary procedures and controls.

                 Further, the executive director failed to exercise proper oversight. Specifically,
                 she failed to perform adequate supervisory quality control reviews of files. 19 The
                 executive director used a one sheet checklist to check only for specific documents
                 in randomly reviewed files, causing the executive director to miss the errors
                 identified in this finding. Including an area to document verifications of income
                 and other calculations; and to check for compliance with program requirements,
                 would improve the adequateness and effectiveness of the reviews. In addition, the
                 executive director had not established a written policy for the reviews that
                 included procedures such as how to detect errors, the required frequency of the
                 reviews, or the number of files or elements that should be reviewed.

17
      24 CFR 982.517
18
      24 CFR 982.54
19
      HUD Guidebook, section 22.3

                                                  7
                  Lastly, the Authority did not ensure that its staff received adequate training on
                  program requirements or systems. When asked why the utility policy had not
                  been updated, the executive director did not know that the Authority is required to
                  perform an annual documented review and update as applicable. The executive
                  director also did not have access to the Authority’s Housing Choice Voucher
                  program system, PHA-web, 20 and did not know how to use the system. To add to
                  this problem, the program manager had not attended housing quality standards
                  training since 2007.

     Conclusion

                  As a result of its procedural and control weaknesses, the Authority made $16,350
                  in ineligible overpayments and $1,325 in underpayments for 10 participants, and
                  $570,834 in unsupported housing assistance and utility reimbursement payments
                  for 89 participants. All of the errors made by the Authority contradict its perfect
                  score of 100 for its 2012 Section Eight Management Assessment Program
                  (SEMAP) score.

                  In addition, overpaying for and not adequately supporting housing and utility
                  reimbursement payments prevented it from freeing up additional funds to use for
                  program assistance and fully utilizing its authorized vouchers. Specifically, the
                  Authority had 400 authorized vouchers to subsidize rents for eligible households.
                  As of March 27, 2013, the Authority had 1,093 households on its waiting list for
                  program assistance. However, between October 2012 and September 2013, it
                  used an average of only 198 vouchers per month 21, thereby causing a significant
                  underutilization of its vouchers and preventing it from better using program funds
                  to assist program participants and households on the waiting list. In addition, the
                  Authority could not provide HUD with reasonable assurance that it used program
                  funds effectively and efficiently or to fully benefit program participants.




20
      PHA-web is Web-based software to assist housing authorities in managing their programs.
21
      This amount is averaged over 12 months between October 2012 and September 2013.

                                                         8
                   Recommendations

                 We recommend that the Director of HUD’s New Orleans Office of Public
                 Housing require the Authority to

                     1A.      Reimburse its program $16,350 from non-Federal funds for the
                              overpayment of housing assistance and utility reimbursement
                              payments.

                     1B.      Reimburse the appropriate households $1,325 from program funds for
                              the underpayment of housing assistance and utility reimbursement.

                     1C.      Support or reimburse its program $570,834 from non-Federal funds for
                              payments that lacked supporting documentation.

                     1D.      Implement a written policy that ensures compliance with requirements
                              to include, but not limited to, procedures and controls to ensure (1)
                              subsidy payments are eligible and supported, (2) that appropriate
                              documentation is obtained and maintained, (3) that supervisory quality
                              control reviews are adequately conducted and documented, and (4)
                              that program staff is adequately trained on the program requirements
                              and systems.

                     1E.      Review its schedule of utility allowances and develop and implement
                              policies to conduct this review annually.

                 The Director should also

                     1F.      Review the Authority’s SEMAP 22 scores and adjust them as necessary
                              based upon the deficiencies identified in this report.

                     1G.      Evaluate new management strategies for improving the Authority’s
                              Housing Choice Voucher program, including options such as possibly
                              consolidating the Authority’s program with that of another housing
                              authority through an executed interagency agreement or hiring a
                              contract specialist to execute the program.




22
     SEMAP measures the performance of the public housing agencies that administer the Housing Choice Voucher
     program in 14 key areas. SEMAP helps HUD target monitoring and assistance to agencies’ programs that need
     the most improvement.


                                                       9
Finding 2: The Authority Did Not Enforce HUD’s Housing Quality
Standards
The Authority did not conduct adequate inspections to enforce HUD’s housing quality standards.
Of 14 units inspected, 13 did not meet HUD’s housing quality standards, and 12 materially failed
to meet HUD’s standards. The Authority’s inspector did not identify 191 housing quality
standards violations that existed in the 12 units when they conducted their inspections. The
violations occurred because the Authority did not (1) have adequate procedures and controls to
ensure that it met housing quality standards requirements, (2) conduct independent quality
control reviews of housing quality inspections after the program manager’s assessment, and (3)
ensure that its staff had recent training on how to conduct housing quality standards inspections.
As a result, the Authority spent $18,391 on units that did not meet HUD’s housing quality
standards and subjected program participants to substandard living conditions, because of the
housing quality standard violations that created unsafe living conditions.


     Housing Units Did Not Meet
     HUD’s Housing Quality
     Standards

                 We selected 14 units from a universe of 32 units that passed an Authority housing
                 quality inspection between August 1 and October 31, 2013. The 14 units were
                 selected to determine whether the Authority ensured that the units in its program
                 met housing quality standards. We inspected the units from November 19 to
                 November 21, 2013.

                 Of the 14 units inspected, 13 (93 percent) had a total of 191 housing quality
                 standards violations, of which 185 predated the Authority’s last inspections. Of
                 these, 12 units had 184 violations and were considered to be in material
                 noncompliance with housing quality standards, since they had exigent health and
                 safety violations, multiple violations that predated the Authority’s previous
                 inspections, or a combination of both, creating unsafe living conditions. The
                 Authority is required to ensure that all program-assisted housing meet housing
                 quality standards requirements both at commencement of and throughout the
                 assisted tenancy. 23 Table 2 categorizes the 191 housing quality standards
                 violations in the 13 units that failed our housing quality standards inspections.




23
      24 CFR 982.401


                                                 10
Table 2:
 Violation category                Number of violations       Number of units
 Other interior                             47                       12
 Electrical                                 34                       10
 Security                                   12                        7
 Heating equipment                          12                        8
 Window                                     11                        7
 Water heater                               11                        7
 Wall                                        9                        7
 Plumbing/sewer/ water supply                8                        3
 Sink                                        6                        3
 Exterior surface                            5                        3
 Smoke detector                              5                        4
 Fire Exits                                  5                        3
 Tub/shower                                  4                        3
 Stair/rail/porch                            4                        4
 Site/neighborhood                           3                        2
 Floor                                       2                        2
 Toilet                                      2                        2
 Roof/gutter                                 2                        2
 Garbage/debris/ refuge disposal             2                        2
 Interior Air Quality                        2                        2
 Ceiling                                     1                        1
 Range/refrigerator                          1                        1
 Food preparation/storage                    1                        1
 Foundation                                  1                        1
 Manufactured Home Tie Downs                 1                        1
                Total                      191


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

        The following pictures depict some of the violations we noted in the 12 units that
        materially failed to meet HUD’s housing quality standards.




                                        11
Inspection #1: Leaking J trap caused mold and mildew to form
under the sink.




Inspection #11: Top and sides of the hot water heater were
corroded due to improper installation.




Inspection #2: Closet heat system was surrounded by personal
items posing a fire hazard.



               12
                        Inspection #4: Heating and electrical systems had exposed
                        electrical wiring.




                        Inspection #13: Lightweight extension cord stretched from the
                        main home to the storage shed to supply power posing a potential
                        electrical hazard.

The Authority Lacked
Adequate Procedures and
Controls


           The Authority did not have adequate procedures to ensure compliance with
           HUD’s requirements. The Authority only had one inspector, the program
           manager, who was responsible for conducting the housing quality inspections.
           Although the program manager used the HUD created housing quality standard
           checklist and the Authority’s program administrative plan stated that it would



                                           13
                  comply with HUD’s requirements, 24 the program manager did not perform
                  adequate inspections to ensure that units met HUD requirements. Further, the
                  program manager has not attended housing quality standards training since 2007.

                  In addition, the executive director failed to exercise proper oversight by not
                  conducting independent quality control reviews. Although the executive director
                  randomly inspected units in an attempt to ensure compliance, the program
                  manager who conducted the inspections accompanied her, thus preventing
                  independence. In addition, the checklist used by the executive director did not
                  have adequate steps for checking and identifying missed noncompliance items.
                  As related to procedures for those follow-up reviews, the administrative plan did
                  not outline steps to ensure the detection of errors, the frequency of the
                  inspections, or the number of inspections to be conducted.

     Conclusion

                  The Authority’s program participants were subjected to substandard living
                  conditions because of the housing quality standard violations that created unsafe
                  living conditions. Due to the Authority not having adequate controls and
                  procedures, it inspected and passed program units that did not meet HUD’s
                  housing quality standards. Additionally, the Authority did not properly use the
                  $18,391 in housing assistance payments disbursed for the 12 units that materially
                  failed to meet HUD’s housing quality standards.

     Recommendations

                  We recommend that the Director of HUD’s New Orleans Office of Public Housing
                  require the Authority to

                       2A.   Certify, along with the owners, that the applicable housing quality
                             standards violations have been corrected for the 13 units cited in this
                             finding.

                       2B.   Reimburse its program $18,391 from non-Federal funds for the 12 units
                             that materially failed to meet HUD’s housing quality standards.

                       2C.   Implement procedures and controls to ensure that all program units meet
                             HUD’s housing quality standards.

                       2D.   Implement procedures and controls to ensure that supervisory quality
                             control inspections are appropriately conducted and documented.

24
      24 CFR 982.401

                                                   14
2E.   Ensure that its inspection staff attends training and understands housing
      quality standard requirements.




                            15
                              SCOPE AND METHODOLOGY

We conducted our audit at the Authority’s office in Boutte, LA, and the HUD Office of Inspector
General’s (OIG) office in New Orleans, LA, between November 2013 and March 2014. Our
audit scope covered the Authority’s Section 8 Housing Choice Voucher program for the period
April 1, 2011, through November 30, 2013. We expanded the scope as necessary to accomplish
our audit objective.

To accomplish our objective, we

     •   Reviewed relevant regulations and program guidance.
     •   Reviewed the Authority’s organizational chart and written policies for the program.
     •   Reviewed the Authority’s audited financial statements, HUD monitoring reports, and
         board meeting minutes.
     •   Interviewed Authority staff.
     •   Reviewed the Authority’s program participant files.

Housing assistance and utility reimbursement payment review - Using the Authority’s housing
assistance payment registers and a stratified random sample with a 95 percent confidence level,
we statistically selected a sample of 85 of the Authority’s monthly housing assistance payments
from a universe of 6,399 payments, totaling more than $3.7 million, made during the audit
period. We reviewed the corresponding participant files for these 85 payments to determine
whether the Authority appropriately calculated the housing assistance and utility reimbursement
payments. For questioned costs, we applied the error to the most recent reexamination through
the end of the eligibility period. Through the file reviews, we assessed the reliability of the
computer-processed housing assistance payment data and determined that the data were
generally reliable.

Comprehensive file review - Using HUD’s Public and Indian Housing Information Center 25
data as of September 30, 2013, we selected a nonstatistical sample of 14 of the Authority’s 196
current program participants for a comprehensive file review. We reviewed the files for the 14
program participants to determine whether the Authority maintained documentation to support
subsidy payments. For questioned costs, we applied the error to the scope of our audit period as
applicable. Through file reviews, we assessed the reliability of the computer-processed tenant
data and determined that the data were generally reliable.

Housing quality standards inspections - Using the Authority’s housing quality standards
inspection reports, we selected a nonstatistical sample of 14 from a total of 32 housing quality
standards inspections completed and passed by the Authority between August 1 and October 31,

25
     HUD’s Public and Indian Housing Information Center maintains and gathers data about all of HUD’s public
     and Indian housing inventory of housing agencies, developments, buildings, units, housing authority officials,
     HUD offices and field staff, and its users.

                                                         16
2013. Between November 19 and 21, 2013, we inspected the 14 units to determine whether the
Authority ensured that its program units complied with HUD’s housing quality standards. We
used the results documented in the inspection reports to identify the severity of the violations and
units that were in material noncompliance. For units that failed and were considered in material
noncompliance, we questioned assistance from the date of the Authority’s inspection through
November 30, 2013. Through unit inspections, we assessed the reliability of the computer-
processed housing quality standards inspection data and determined that the data were generally
reliable.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                                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
               objectives:

                  •   Effectiveness and efficiency of operations - Policies and procedures in
                      place to reasonably ensure that program activities were conducted in
                      accordance with applicable laws and regulations; specifically, policies and
                      procedures intended to ensure that the Authority complied with HUD
                      regulations and its administrative plan in operating its Section 8 Housing
                      Choice Voucher program.

                  •   Relevance and reliability of information - Policies and procedures in place
                      to reasonably ensure that participant file and housing assistance payment
                      errors were reduced and housing quality standards were enforced.

                  •   Compliance with applicable laws and regulations - Policies and
                      procedures in place to reasonably ensure that housing assistance payment
                      disbursements, housing quality standards, and participant file
                      documentation were complete and accurate and complied with applicable
                      laws and regulations.

               We assessed the relevant controls identified above.

               A deficiency in internal control exists when the design or operation of a control does
               not allow management or employees, in the normal course of performing their
               assigned functions, the reasonable opportunity to prevent, detect, or correct (1)
                                                 18
             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.

Significant Deficiencies

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

                •   The Authority lacked adequate controls to ensure that housing assistance
                    and utility reimbursement payments were always accurate, properly
                    calculated, eligible, and supported (see finding 1).
                •   The Authority did not have adequate controls in place to ensure that
                    HUD’s housing quality standards were identified and enforced (see
                    finding 2).
                •   The Authority lacked adequate policies and procedures to administer its
                    program, and its policies did not always comply with applicable laws and
                    regulations (see findings 1 and 2).




                                              19
                                   APPENDIXES

Appendix A

                 SCHEDULE OF QUESTIONED COSTS
        Recommendation                                               Funds to be put
                               Ineligible 1/        Unsupported 2/   to better use 3/
            number
              1A                       $16,350
              1B                                                              $1,325
              1C                                         $570,834
              2B                        18,391
             Total                     $34,741           $570,834             $1,325


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.

3/   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.




                                               20
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                          21
Ref to OIG Evaluation   Auditee Comments




Comment 2




                          22
Ref to OIG Evaluation   Auditee Comments

Comment 3




Comment 1




                          23
Ref to OIG Evaluation   Auditee Comments




                          24
Ref to OIG Evaluation   Auditee Comments




                          25
                         OIG Evaluation of Auditee Comments

Comment 1   The Authority generally agreed with our conclusions and stated that it has been
            working towards improving its programs through a series of agency process and
            procedures improvements. The Authority asserted that it has implemented
            various new policies and procedures, hired new staff, is training its staff, and has
            plans for further improvement. The Authority also asserted that it has completed
            the re-inspection of the 13 failed units cited in the report and will certify along
            with the landlords that the violations have been corrected. With its written
            response, the Authority provided its written policies for HQS, rent reasonableness
            and rent calculation. However, we did not assess the validity or adequacy of these
            policies, as these policies will be evaluated by HUD staff. We appreciate the
            Authority’s efforts in improving its processes and resolving the errors identified
            in the report. The Authority should work with HUD to resolve recommendations
            1A, 1B, 1C, 1D, 1E, 2A, 2B, 2C, 2D, and 2E.

Comment 2   We agree that there were duplications in the missing files cited in the report. Due
            to the voluminous nature of the Authority’s participant files, we did not review or
            confirm the existence of the file that the Authority stated that it had located in
            storage. Therefore, we revised the number of missing participant files from 7 to
            4, instead of 3, in finding 1 and Appendix C. The Authority should work with
            HUD to resolve this issue.

Comment 3   The Authority asserted that its financial auditor reviewed three files during the
            same period as our review. The Authority asserted that the financial auditor
            identified similar issues to that which was reported, but the issues did not affect
            the housing assistance payments HAP or tenant’s portion of the rent. However,
            the Authority did not provide documentation or further detail to substantiate this
            claim.




                                             26
        Appendix C

                            SUMMARY OF PAYMENT DEFICIENCIES


Count    Missing     Incorrect   Incorrect    Missing     Incorrect     Missing     Missing    Annual or    No file      Excess
         housing       utility   payment     income or     income       lease or    voucher     interim                payments
          quality    allowance   standard     expense    calculation    housing               reexaminati              made after
        standards       used                 documents                 assistance                on not               termination
        inspection                                                     payments                complete
                                                                        contract
 1                                                                                                            X
 2          X           X           X           X            X                        X
 3          X           X           X                        X             X
 4                                              X                                     X
 5                      X           X           X                          X
 6                      X           X                        X
 7          X                                   X                                                                         X
 8                      X                       X
 9                      X           X           X
 10                     X           X           X
 11         X           X           X           X
 12                     X           X                        X
 13         X                                                                                     X
 14                                                                                                           X
 15         X                                   X                          X          X
 16                     X           X                        X
 17
 18         X           X           X                        X
 19                     X           X                        X                                                            X
 20         X                                   X                          X
 21         X                                   X            X
 22         X                                   X
 23         X           X           X
 24                                                                                                           X
 25         X           X           X
 26         X           X           X
 27         X           X           X                        X
 28         X           X           X           X                          X
 29         X                                                              X
 30                     X           X           X            X

                                                                 27
Count    Missing     Incorrect   Incorrect    Missing     Incorrect     Missing     Missing    Annual or    No file      Excess
         housing       utility   payment     income or     income       lease or    voucher     interim                payments
          quality    allowance   standard     expense    calculation    housing               reexaminati              made after
        standards       used                 documents                 assistance                on not               termination
        inspection                                                     payments                complete
                                                                        contract

 31         X                                   X                          X          X
 32         X           X           X           X
 33         X           X           X
 34         X           X           X                        X
 35                     X           X
 36                     X           X           X            X             X                                              X
 37         X           X           X           X
 38                     X           X           X
 39         X           X           X
 40                     X           X           X            X
 41         X                                                                                     X
 42         X                                                                                     X
 43         X           X           X
 44         X                                                              X
 45                     X           X                        X
 46         X                                                                                     X
 47         X           X           X           X                                     X
 48         X                                   X                          X
 49                     X           X           X            X
 50         X                                                                                     X
 51                                                                                                           X
 52         X           X           X           X
 53         X                                                              X
 54                     X           X           X
 55         X           X           X           X
 56         X           X           X
 57         X
 58         X                                   X
 59         X           X           X
 60         X           X           X           X            X
 61         X           X           X
 62         X                                   X
 63         X           X           X           X                                                                         X
 64         X           X           X           X            X
 65         X           X           X                        X
 66                     X           X                        X

                                                                 28
Count     Missing     Incorrect   Incorrect    Missing     Incorrect     Missing     Missing    Annual or    No file      Excess
          housing       utility   payment     income or     income       lease or    voucher     interim                payments
           quality    allowance   standard     expense    calculation    housing               reexaminati              made after
         standards       used                 documents                 assistance                on not               termination
         inspection                                                     payments                complete
                                                                         contract
 67          X
 68          X                                                              X                      X
 69          X           X           X
 70          X                                                                                     X
 71          X           X           X
 72          X           X           X
 73                      X                       X            X
 74
 75          X           X           X           X
 76          X           X           X
 77                      X           X                        X
 78          X           X           X                        X
 79          X           X           X                                      X
 80          X           X           X                        X                        X
 81          X                                                                         X           X
 82          X                                                              X          X           X
 83                      X           X           X                          X          X
 84
 85          X           X                       X            X
Totals      57           54          51          35           24           15          9           9           4           4




                                                                   29
Appendix D

    SUMMARY OF FILE DOCUMENTATION DEFICIENCIES



                           Types of deficiencies (see legend below table)

           Count       1      2      3      4      5      6      7     8     9     10    11
             1         X      X      X
             2                       X      X
             3                X      X             X
             4         X      X                           X
             5                       X      X
             6         X      X      X
             7         X      X                    X            X     X
             8                       X      X                                X
             9         X      X      X      X
            10         X      X      X      X
            11         X      X      X
            12                X      X
            13         X      X                                                    X
            14                      X                                                     X
           Totals      8      10    11      5      2      1      1     1     1     1      1

Deficiencies legend:

       1. Housing quality standards inspection was not completed and passed before the execution of
           the lease or housing assistance payments contract.
       2. Rent reasonableness assessment was not conducted before the execution of the lease or
           housing assistance payments contract.
       3. Annual housing quality standards inspection was not conducted.
       4. Reexaminations of family income and composition were not conducted annually.
       5. Copy of voucher was not maintained.
       6. Voucher size did not correspond to occupancy standards.
       7. Housing assistance payments contract was not executed within 60 calendar days from the
           beginning of the lease term.
       8. No criminal background check of the family was conducted.
       9. Landlord did not make repairs, and the unit did not pass inspection after the unit initially
           failed the housing quality standards inspection.
       10. Rent was not reasonable.
       11. There was no verification of income from a third-party source.

                                                  30