oversight

The Newark Housing Authority, Newark, NJ, Did Not Ensure That Units Met Housing Quality Standards and That It Accurately Calculated Abatements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2018-09-28.

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

             Newark Housing Authority,
                   Newark, NJ
                  Housing Choice Voucher Program




Office of Audit, Region 2          Audit Report Number: 2018-NY-1008
New York, NY                                       September 28, 2018
To:            Theresa Arce, Director, Office of Public and Indian Housing, Newark Field
               Office, 2FPH

               //SIGNED//
From:          Kimberly S. Dahl, Regional Inspector General for Audit, 2AGA
Subject:       The Newark Housing Authority, Newark, NJ, Did Not Ensure That Units Met
               Housing Quality Standards and That It Accurately Calculated Abatements




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 Newark Housing Authority’s Housing Choice
Voucher Program.
HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.
The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG website. 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
212-264-4174.
                    Audit Report Number: 2018-NY-1008
                    Date: September 28, 2018

                    The Newark Housing Authority, Newark, NJ, Did Not Ensure That Units Met
                    Housing Quality Standards and That It Accurately Calculated Abatements




Highlights

What We Audited and Why
We audited the Newark Housing Authority’s Housing Choice Voucher Program. We selected the
Authority for review because the U.S. Department of Housing and Urban Development (HUD)
authorized more than $111 million in program funding for its Housing Choice Voucher Program in
fiscal years 2016 and 2017 and based on our risk analysis of public housing agencies located in the
State of New Jersey. The objective of the audit was to determine whether the Authority ensured
that its program units met HUD’s housing quality standards and whether it abated housing
assistance payments when required.

What We Found
The Authority did not ensure that its program units met housing quality standards, and it did not
accurately calculate housing assistance payment abatements. Of 29 program units inspected, 25
did not meet HUD’s housing quality standards, and 23 of those units materially failed to meet
HUD’s standards. Further, the Authority incorrectly calculated the abatement amount for 4 of
the 20 abated units reviewed. These conditions occurred because the Authority’s inspectors did
not apply their housing quality standards training to thoroughly inspect units and it did not have
adequate controls over the calculation of abatements. As a result, the Authority disbursed
$110,943 in housing assistance payments for units that materially failed to meet HUD’s housing
quality standards and paid its contractor $708 in fees to inspect these units. Additionally, it
disbursed $4,459 for housing assistance payments that should have been abated. Unless the
Authority improves its inspection program and controls over the calculation of abatements, it
will continue to pay housing assistance for units that materially fail to meet housing quality
standards. Further, its program participants will continue to be subjected to unsafe living
conditions.

What We Recommend
We recommend that HUD require the Authority to (1) certify, along with the owners of the 25
units cited in the finding, that the applicable housing quality standards violations have been
corrected; (2) reimburse its program $111,651 for the 23 units that materially failed to meet
housing quality standards; (3) improve controls over its inspection program; (4) reimburse its
program $4,459 for housing assistance payments that were not properly abated; and (5) improve
controls over the calculation of abatements.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................4
         Finding: Housing Quality Standards Inspections Were Inadequate and
         Abatement Amounts Were Not Accurately Calculated ............................................... 4

Scope and Methodology .........................................................................................13

Internal Controls ....................................................................................................15

Appendixes ..............................................................................................................16
         A. Schedule of Questioned Costs .................................................................................. 16

         B. Auditee Comments and OIG’s Evaluation ............................................................. 17




                                                             2
Background and Objective
The Newark Housing Authority was established in 1938 after the passage of the Federal Housing
Act of 1937 to build and manage public housing developments for residents of Newark, NJ. The
Authority owns 8,067 public housing units, assists an additional 6,907 families through the
Section 8 program, and operates various urban renewal programs. The Authority’s board of
commissioners is comprised of seven members who serve 5-year terms. One member is
appointed by the mayor, five members are appointed by the mayor with city council approval,
and one member is appointed by the New Jersey Department of Community Affairs as delegated
by the governor.

Under the Housing Choice Voucher Program, the U.S. Department of Housing and Urban
Development (HUD) authorized the following financial assistance for the Authority’s housing
choice vouchers for fiscal years 2016 and 2017.

                             Fiscal year              Budget authority
                                2016                     $55,256,823
                                2017                      56,324,900


HUD regulations at 24 CFR (Code of Federal Regulations) 982.405(a) require public housing
agencies to perform unit inspections before the initial move-in and at least biennially. The
Authority must inspect the unit leased to the family before the term of the lease, at least
biennially during assisted occupancy, and at other times as needed to determine whether the unit
meets housing quality standards. HUD regulations at 24 CFR 982.404(a) require the Authority
to ensure that housing units and premises are maintained in accordance with HUD’s housing
quality standards, and if not, the Authority is required to abate housing assistance payments to
the owners until the requirements are met.

In October 2014, the Authority contracted with a service provider to perform housing quality
standards inspections for its Housing Choice Voucher Program. The contract was for a 3-year
period, with an option to renew for up to two additional 1-year periods at the sole option of the
Authority. Specifically, the contract required the contractor to perform all of the duties
associated with the inspection function (including scheduling, inspections, rent reasonableness,
and quality control inspections) of prospective units and units under housing assistance payments
contracts for the Authority’s Housing Choice Voucher Program in accordance with the Federal
housing quality standards.

Our audit objective was to determine whether the Authority ensured that its Housing Choice
Voucher Program units met HUD’s housing quality standards and whether it abated housing
assistance payments when required.



                                                3
Results of Audit

Finding: Housing Quality Standards Inspections Were Inadequate
and Abatement Amounts Were Not Accurately Calculated
The Authority did not ensure that its units met housing quality standards, and it did not
accurately calculate housing assistance payment abatements. Of 29 program units inspected, 25
did not meet HUD’s housing quality standards, and 23 of those units materially failed to meet
HUD’s standards. Further, the Authority incorrectly calculated the abatement amount for 4 of
the 20 abated units reviewed. These conditions occurred because the Authority’s inspectors did
not apply their housing quality standards training to thoroughly inspect units and it did not have
adequate controls over the calculation of abatements. As a result, the Authority disbursed
$110,943 in housing assistance payments for units that materially failed to meet HUD’s housing
quality standards and paid its contractor $708 in fees1 to inspect these units. Additionally, it
disbursed $4,459 for housing assistance payments that should have been abated. Unless the
Authority improves its inspection program and controls over the calculation of abatements, it
will continue to pay housing assistance for units that materially fail to meet housing quality
standards. Further, its program participants will continue to be subjected to unsafe living
conditions.

Housing Units Did Not Meet HUD’s Housing Quality Standards
We statistically selected 29 units from a universe of 2,116 program units that passed an
Authority-administered housing quality standards inspection between October and December
2017. The units were selected to determine whether the Authority ensured that the units in its
Housing Choice Voucher Program met housing quality standards. We inspected the 29 units
from April 3 to April 10, 2018.

Of the 29 housing units inspected, 25 (86 percent) had 302 housing quality standards violations,
including 81 violations that needed to be corrected within 24 hours because they posed a serious
threat to the safety of the tenants. Additionally, 23 of the 29 units (79 percent) were in material
noncompliance with housing quality standards because their violations predated the Authority’s
last inspection. For most of these cases, the violations were not identified by the Authority’s
contracted inspectors, creating unsafe living conditions. HUD regulations at 24 CFR 982.401
require that all program housing meet housing quality standards performance requirements, both
at the beginning of the assisted occupancy and throughout the assisted tenancy. The regulations
categorize housing quality standards performance and acceptability criteria into 13 key aspects.
These key aspects are used to detect a variety of violations, such as electrical problems, fire



1
    Calculations were based on the Authority’s internal cost fee schedule for housing quality standards inspections,
    which varied from $15 to $34 per inspection, depending on inspection type (annual-initial inspection, reinspection,
    etc.).




                                                             4
hazards, heating and cooling issues, tripping hazards, whether the tenant has adequate access to
the home, whether there is a safe space to prepare food, and pest and vermin infestations.

The following table categorizes the 302 housing quality standards violations in the 25 units that
failed our inspections.

       Seq.                                              Number of         Number of          Percentage3 of
                            Key aspect2
       no.                                               violations          units                units
         1        Illumination and electricity                 80                18                   62
         2           Structure and materials                   59                20                   69
         3           Site and neighborhood                     26                10                   34
         4            Thermal environment                      22                10                   34
                  Food preparation and refuse
         5                                                     22                11                   38
                           disposal
         6              Space and security                     20                12                   41
         7               Smoke detectors                       20                11                   38
         8                     Access                          19                 7                   24
         9              Sanitary facilities                    14                 7                   24
        10              Interior air quality                   13                 5                   17
        11              Sanitary condition                      5                 5                   17
        12                 Water supply                         2                 2                   7
        13               Lead-based paint                       0                 0                   0
                                Total                          302

During the audit, we provided our inspection results to the Authority and the Director of HUD’s
Newark Office of Public Housing.

The following photographs illustrate some of the violations noted during our housing quality
standards inspections in the 25 units that failed to meet HUD standards.




2
    The 13 key aspects are listed in descending order according to how many violations were identified.
3
    This is the percentage of the 29 sample units with identified violations. For example, the 20 units that had
    structure and materials violations made up 69 percent of the 29 sample units inspected.




                                                           5
Inspection 2: A taped smoke detector, creating a threat to health and
safety. The Authority did not identify this violation during its December
20, 2017, inspection.




Inspection 7: Excessive rat droppings in the basement, indicating a
heavy rodent infestation and creating an unsanitary condition for the
tenants. The Authority did not identify this violation during its October
23, 2017, inspection.




                                     6
Inspection 7: A broken window with shards of glass falling out of the
frame in the kitchen pantry. The Authority did not identify this violation
during its October 23, 2017, inspection.




Inspection 9: One of two open sewers in the basement, creating a health
hazard because of harmful sewer gases escaping. The Authority did not
identify this violation during its December 11, 2017, inspection.




                                     7
Inspection 9: Boot-legged wiring in the basement, creating a potential
fire hazard and threat to health and safety. The Authority did not
identify this violation during its December 11, 2017, inspection.




Inspection 9: A detached wash basin and cabinet, creating an unhealthy
sanitary facility. The Authority did not identify this violation during its
December 11, 2017, inspection.




                                      8
Inspection 15: Open and uncapped flue pipe vents, posing a potential
hazard because of carbon monoxide gas seepage. The Authority did not
identify this violation during its December 27, 2017, inspection.




Inspection 24: An open junction box in the first floor sprinkler closet,
creating a risk of electrical shock and injury. The Authority did not
identify this violation during its October 10, 2017, inspection.




                                     9
Inspection 29: Deteriorated fencing, posing a cutting and tripping hazard
with its sharp edges and protruding posts. The Authority did not identify
this violation during its November 2, 2017, inspection.




Inspection 29: A cracked rear entry door jamb, posing a threat to space
and security. The Authority did not identify this violation during its
November 2, 2017, inspection.




                                    10
The conditions identified in the pictures above and the other issues identified in units inspected
occurred because the Authority’s inspectors did not apply their housing quality standards training
to thoroughly inspect units. In some cases, the inspectors failed to identify the issues we
identified, despite their being preexisting conditions, such as inoperable smoke detectors, vermin
infestation, rotted window frames with cracked dangling glass, open sewer lines, and dangerous
electrical wiring. In other cases, the inspectors identified the deficiencies but marked them as
having been corrected, when our inspection showed that the issues still existed. As a result, the
Authority disbursed $110,943 in housing assistance payments for units that materially failed to
meet HUD’s housing quality standards and paid its contractor $708 in fees to inspect these units.
Further, the Authority’s program participants were subjected to housing quality standards
violations that created unsafe living conditions during their tenancy.

The Authority Did Not Properly Abate Housing Assistance Payments
The Authority provided data showing that it processed 907 abatement incidents related to failed
inspections between January and December 2017. From these records, we identified 191
abatements that had a full abatement cycle4 during the same period. We selected 20 of the 191
abatements by selecting every fifth abatement with a full abatement cycle. Four5 of the twenty
abatements reviewed during the audit period were incorrectly calculated and applied by the
Authority. Specifically, the Authority did not abate housing assistance payments in a timely
manner for uncorrected 24-hour housing quality standards violations related to smoke detectors
and miscalculated abated housing assistance payment amounts. The table below provides details
on the uncorrected deficiencies and the amount of ineligible housing assistance payments that
should have been abated.

                              Abatement          Amount of ineligible housing
                               sample             assistance payments that
                               number             should have been abated
                                  2                        $1,041
                                 11                          1,365
                                 14                           920
                                 16                          1,133
                                Total                        4,459

Regulations at 24 CFR 982.404(a) require the Authority to ensure that housing units and
premises are maintained in accordance with HUD’s housing quality standards, and if not, the
Authority is required to abate housing assistance payments to the owners until the requirements
are met. Section 10.6 of HUD’s Housing Choice Voucher Guidebook 7420.10G states that
abatements must begin on the first of the month following the determination that the housing
quality standards violations were not corrected within the Authority-specified period for
correction.

4
    A full abatement cycle consists of a failed inspection, an abatement, and a passed reinspection.
5
    These 4 units were not included in our sample of 29 units inspected.




                                                           11
These conditions occurred because the Authority did not have adequate controls over the
calculation of abatements. Specifically, while the Authority stated that its policy was to consider
smoke detector violations as 24-hour violations only when there was not another working
detector in the unit, and that it would allow 30 days to correct the deficiency when there was
another working detector, its written procedures did not support this statement and its abatement
procedures did not discuss circumstances in which it would allow owners 30 days to fix such
deficiencies. Further, the Authority did not follow its unwritten policy for one of the four units
with which we found abatement issues even though the unit had no working smoke detectors,
and it could not show that it had an adequate system in place to promptly identify deficiencies
that had not been corrected within the timeframe it specified. As a result, the Authority
disbursed $4,459 for ineligible housing assistance payments that should have been abated for the
four units identified.

Conclusion
The Authority’s program participants were subjected to housing quality standards violations,
which created unsafe living conditions during their tenancy. The Authority disbursed $110,943
in housing assistance payments for units that materially failed to meet HUD’s housing quality
standards and paid its contractor $708 in fees to inspect these units. Additionally, the Authority
disbursed $4,459 for housing assistance payments that should have been abated. If the Authority
does not improve controls to ensure that its program units meet housing quality standards and
improve its controls over the calculation of abatements, it will continue to pay housing assistance
for units that materially fail to meet those standards. Further, its program participants will
continue to be subjected to unsafe living conditions.

Recommendations
We recommend that the Director of HUD’s Newark Office of Public and Indian Housing require
the Authority to
       1A.     Certify, along with the owners of the 25 units cited in the finding, that the
               applicable housing quality standards violations have been corrected.
       1B.     Reimburse its program $111,651 from non-Federal funds ($110,943 for housing
               assistance payments and $708 in associated inspection service fees) for the 23
               units that materially failed to meet HUD’s housing quality standards.
       1C.     Improve controls over its inspection program to ensure compliance with HUD
               guidelines and that the results of those inspections are used to enhance the
               effectiveness of its housing quality standards inspections.
       1D.     Reimburse its program $4,459 from non-Federal funds for housing assistance
               payments that should have been abated for units that did not meet housing quality
               standards.
       1E.     Improve controls to ensure that its staff accurately calculates housing assistance
               payment abatements.




                                                  12
Scope and Methodology
We conducted the audit from February through August 2018 at the Authority’s office
located at 500 Broad Street, Newark, NJ, and our office located in Newark, NJ. The audit
covered the period January through December 2017 and was expanded as necessary to
April 2018 to include calculations of questioned costs and follow up on possible
discrepancies noted in the Authority’s accounting records, which were later cleared during
the course of the review.

To accomplish our audit objective, we interviewed the Authority’s employees, contracted
inspectors, HUD staff, and program households. We also reviewed

        Applicable laws, regulations, the Authority’s administrative plan, HUD’s program
         requirements at 24 CFR Part 982, HUD’s Housing Choice Voucher Guidebook
         7420.10G, and other guidance.

        The Authority’s inspection reports; computerized databases, including housing quality
         standards inspections, housing quality control log, housing assistance payments, and
         tenant data; annual audited financial statements for fiscal years 2015 and 2016; policies
         and procedures; board meeting minutes; contract for inspection services; and
         organizational chart.

        HUD’s monitoring and Section 8 Management Assessment Program6 reports for the
         Authority.

To achieve our audit objective, we relied in part on computer-processed data from the
Authority’s computer system. Although we did not perform a detailed assessment of the
reliability of the data, we did perform a minimal level of testing and found the data to be
adequate for our purposes. The minimal level of testing included applying verification
procedures and steps to identify potential discrepancies (such as missing records, duplicate
records, and obvious data errors) that would impact our statistical sampling and our reliance on
the financial records for reporting purposes.

We initially statistically selected 60 program units to inspect from a universe of 2,116 program
units that passed an Authority-administered housing quality standards inspection between
October 2017 and December 2017. These inspections were conducted by the Authority’s
contractor. We selected a sample size of 60 units to inspect based on a one-sided 95 percent


6
    The Section Eight Management Assessment Program measures the performance of public housing agencies that
    administer the Housing Choice Voucher Program in 14 key areas. The program helps HUD target monitoring
    and assistance to agencies that need the most improvement.




                                                      13
confidence interval and a simulated error rate ranging from 10 to 50 percent. We inspected 29
of the 60 units between April 3 and April 10, 2018, to determine whether the Authority’s
program units met housing quality standards. An Authority-contracted inspector accompanied
us on all 29 inspections, and we provided the inspection results to the Authority for corrective
action during the audit. We were unable to inspect the remaining 31 units selected due to the
unexpected unavailability of our appraiser. Although we used statistical sampling to select each
unit inspected without bias from the universe of 2,116 units and the issues identified warrant the
recommendations included in this report, we cannot project the inspection results to the entire
population because we did not complete all 60 inspections.

We determined that 23 of the 29 units (79 percent) materially failed to meet HUD’s housing
quality standards. We determined that these units were in material noncompliance because of
the 302 violations that mostly existed before the Authority’s last inspection, which created
unsafe living conditions. All units were ranked according to the severity of the violations, and
units found to have only one non-life-threatening issue were classified as not material.

The Authority provided data showing that it processed 907 abatement incidents related to failed
inspections between January and December 2017. From these records, we identified 191
abatements that had a full abatement cycle during the same period. We selected 20 of the 191
abatements by applying the minimum sample size set by selecting every fifth abatement with a
full abatement cycle. Although this sampling method did not allow us to project the results to
the population, it allowed us to review more than 10 percent of the abatements that had a full
abatement cycle during our audit period and was sufficient to meet the audit objective.

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




                                                 14
Internal Controls
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to
   effectiveness and efficiency of operations,
   reliability of financial reporting, and
   compliance with applicable laws and regulations.
Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.

Relevant Internal Controls
We determined that the following internal controls were relevant to our audit objective:

   Effectiveness and efficiency of program operations - Policies and procedures that
    management has implemented to reasonably ensure that a program meets its objectives.
   Validity and reliability of data - Policies and procedures that management has implemented
    to reasonably ensure that valid and reliable data are obtained, maintained, and fairly
    disclosed in reports.
   Compliance with applicable laws and regulations - Policies and procedures that management
    has implemented to reasonably ensure that resources use is consistent with 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) 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 Deficiency
Based on our review, we believe that the following item is a significant deficiency:

   The Authority did not ensure that inspectors applied their training to thoroughly inspect units
    and did not have adequate controls over the calculation of abatements.




                                                  15
Appendixes

Appendix A


                             Schedule of Questioned Costs
                            Recommendation
                                               Ineligible 1/
                                number
                                    1B             $111,651
                                    1D                 4,459

                                  Totals            116,110


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.




                                             16
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 1
Comment 2
Comment 3
Comment 4

Comment 5
Comment 6




                               17
Ref to OIG
Evaluation




Comment 1




             18
Ref to OIG
Evaluation




Comment 1




Comment 2




             19
Ref to OIG
Evaluation


Comment 2




             20
Ref to OIG
Evaluation


Comment 2




             21
Ref to OIG
Evaluation


Comment 2




             22
Ref to OIG
Evaluation


Comment 2




             23
Ref to OIG
Evaluation


Comment 2




             24
Ref to OIG
Evaluation


Comment 3




             25
Ref to OIG
Evaluation


Comment 3




             26
Ref to OIG
Evaluation


Comment 3




             27
Ref to OIG
Evaluation


Comment 3




             28
Ref to OIG
Evaluation


Comment 3




             29
Ref to OIG
Evaluation


Comment 3




             30
Ref to OIG
Evaluation


Comment 3




             31
Ref to OIG
Evaluation


Comment 3




             32
Ref to OIG
Evaluation


Comment 3




             33
Ref to OIG
Evaluation


Comment 4




             34
Ref to OIG
Evaluation


Comment 4




Comment 5




             35
Ref to OIG
Evaluation

Comment 5




Comments 6
and 7




             36
Ref to OIG
Evaluation




Comment 6




Comment 7




             37
Ref to OIG
Evaluation


Comment 7




             38
Ref to OIG
Evaluation


Comment 7




             39
Ref to OIG
Evaluation


Comment 7




Comment 8




             40
Ref to OIG
Evaluation


Comment 8




Comment 9




Comment 10




             41
Ref to OIG
Evaluation



Comment 11




Comment 12




Comment 13




Comment 14


Comment 15




             42
Ref to OIG
Evaluation




Comment 1




             43
                         OIG Evaluation of Auditee Comments


Comment 1   The Authority contended that we did not comply with HUD housing inspection
            guidelines because we did not reinspect units within a 3-month timeframe.
            Specifically, the Authority noted that our inspections were conducted an average
            of 147 days, or nearly 5 months, from the last inspection performed by the
            Authority and its contractor. The Authority stated that it believes that the
            timeframe is too large of gap in between inspection to conclude conditions were
            pre-existing. The Authority referred to Section 10.9 of HUD Guidebook
            7420.10G and to regulations at 24 CFR 985.3(e)(1) which required that samples
            for quality controls inspections be drawn from inspections performed during the 3
            months preceding reinspection. The Authority maintained that the 3-month
            timeframe is important because after that length of time it is often impossible to
            determine if a deficiency was present when the first inspection was performed.
            As a result of natural wear and tear, the Authority stated that it believes it is not
            reasonable to expect units that passed inspections months ago should still receive
            a passing grade when the HUD OIG inspections were conducted.

            We agree that Section 10.9 of HUD Guidebook 7420.10G and regulations at 24
            CFR 985.3(e)(1) required quality control inspections to meet the 3-month
            timeframe. However, although this is a requirement for public housing agencies
            to follow under the Section 8 Management Assessment program, our audit was
            not intended to follow the self-assessment process under that program. We
            performed our audit in much greater detail than a public housing agency does in
            its self-assessment. To determine whether the Authority ensured that units
            complied with housing quality standards requirements, we reviewed 29 units that
            were statistically selected. In conjunction with our inspections, we took
            photographs of violations, interviewed tenants, and reviewed the Authority’s
            latest inspection reports to help us determine whether a housing quality standards
            violation existed before the last passed inspection conducted by the Authority and
            its contractor or whether it was identified on the last passed inspection and not
            corrected. As shown in the photographs in the report, some deficiencies were
            easily determined to have existed at the time of the Authority’s inspection. We
            believe we were conservative in our determination of preexisting conditions.

Comment 2   The Authority stated that some of the deficiencies we cited are not fail items
            under the housing quality standards protocol or additional rules specified by its
            administrative plan. The Authority provided exhibits and details about its
            disagreements in nine areas. We discuss each of the nine areas below. While we
            reviewed the Authority’s administrative plan and cited units that failed to comply
            with it, we were not limited to the list of violations outlined in the Authority’s
            plan. We also considered other guidance such as regulations, HUD Guidebook
            7420.10G, and state and local codes. Further, in each of the cases discussed
            below, we identified additional deficiencies in the units. We based our overall



                                              44
failure designation for each unit on the aggregate of deficiencies identified for that
unit.

      Handrail concerns (see exhibit 1): The Authority stated that while we cited
       the ungraspable handrail for unit 5, it was acceptable because HUD’s
       52580-A form required handrails only on extended sections of stairs and
       there was no requirement for a handrail to be full graspable. However,
       Section 10.3 of HUD Guidebook 7420.10G stated that the condition and
       equipment of interior and exterior stairs, halls, porches, and walkways
       must not present the danger of tripping and falling. The tenant may not be
       able to keep their balance on the stair case because they cannot grab a hold
       of the railing.

      Painted outlet (see exhibit 2): The Authority stated that the outlet we cited
       as being painted over for unit 27 was functional and that there was no
       requirement prohibiting paint on an electrical outlet. However, Section
       10.3 of HUD Guidebook 7420.10G stated that electrical fixtures and
       wiring must not pose a fire hazard. We could not determine whether the
       outlet worked because the paint was caked on the slots. Painting an outlet
       poses a fire hazard because it could prevent the plug prongs from making
       full electrical contact, which could cause a fire due to heat building up.

      Broken cabinets (see exhibit 3): The Authority stated that while we failed
       unit 19 for loose cabinet doors, HUD’s 52580-A form states that broken
       cabinets are a “pass with comment” item. However, Section 10.3 of HUD
       Guidebook 7420.10G required the unit to have suitable space and
       equipment to store, prepare, and serve food in a sanitary manner. Also,
       Chapter 10.2 required the Authority to be aware of potential safety hazards
       not specifically addressed in the acceptability criteria, such as damaged
       kitchen cabinet hardware which may present a cutting hazard to small
       children. In this case, we believe the broken cabinet posed a hazard.

      Mildew (see exhibits 4 and 5): The Authority stated that we failed four
       bath areas in units 11 and 15 for having mildew when housing quality
       standards requirements did not allow inspectors to fail units for poor
       housekeeping. Further, it stated that it does not believe the condition of
       the tubs was dangerous to the air quality. However, Section 10.3 of HUD
       Guidebook 7420.10G required the unit to be free of air pollutant levels
       that threaten the occupant’s health and bathroom areas to have an
       openable window or other adequate ventilation. While we could not
       determine whether the mildew was caused by poor housekeeping or
       ventilation issues, we consider it an air pollutant that could be harmful to
       the tenant’s health. Further, the two units in question had several serious
       violations that caused them to fail our inspection, such as a gas stove




                                   45
    burner that would not ignite, an expired elevator certificate, a blocked
    egress, and exposed electrical wiring.

   Basement asbestos: The Authority stated that unit 24 was cited for having
    asbestos in the basement and noted that (1) half of the basements in
    Newark probably have asbestos in them, (2) there was no requirement that
    requires buildings containing asbestos to be failed, and (3) there was no
    reason to believe the unit had abnormally high levels of asbestos.
    However, we contend that checking the presence of asbestos in basements
    in the City of Newark was in the scope of our review because Section 10.3
    of HUD Guidebook 7420.10G required the unit to be free from dangerous
    air pollution levels from carbon monoxide, sewer gas, fuel gas, dust, and
    other harmful pollutants. In this case, a large pile of shredded and fibrous
    asbestos insulation was found in the basement that the tenants access
    regularly. In addition to the possibility for exposure while in the
    basement, the tenants could have tracked the asbestos fibers into their
    units.

   Non-working doorbells: The Authority stated that we cited two units for
    doorbells that did not work and noted that there was no requirement to fail
    non-working doorbells. However, Chapter 10 of HUD Guidebook
    7420.10G required the Authority to comply with state and local code, and
    New Jersey Administrative Code (N.J.A.C), Section 5.10 required
    multiple dwelling residences with a main entrance to have functioning
    door bells to each individual unit.

   Keyed doorknob deficiencies (see exhibits 6 through 9): The Authority
    noted that we cited several deficiencies for keyed doorknobs and locks on
    bedroom doors, including four units shown in the photos and three other
    units. It stated that while the doorknobs can be locked with a key from the
    exterior of the room, they also have a thumb turn inside of the room so
    that the door can be opened without a key. Further it noted that its local
    standard did not allow double-keyed dead bolts, but that it is not aware of
    any rules prohibiting single-keyed door knobs with thumb turns on
    bedroom doors. However, Section 10.3 of HUD Guidebook 7420.10G
    required access to alternate means of exit in case of fire be available at all
    times. The keyed bedroom locks could impede access to alternate exits in
    the event of an emergency because the tenant would be trapped in a locked
    bedroom.

   Number of egress concerns: The Authority stated that we cited individual
    rooms for not having two clear means of egress when the housing quality
    standards requirements and its local standards discuss only the building or
    unit needing to have an alternate means of egress, not each room. The
    Authority noted that while it is aware that the Uniform Physical Condition


                               46
                   Standard required two clear accessible means of egress, the housing
                   quality standards regulations did not require this for every room and the
                   guidebook stated only that it is a good practice to assess potential
                   hazards. However, Chapter 10 of HUD Guidebook 7420.10G stated that
                   emergency exits from buildings may consist of fire stairs, a second door,
                   fire ladders, or windows, and the emergency exit must not be blocked.
                   Further, NJAC 5:28-1.9 required that rooms used for sleeping purposes to
                   have a safe and unobstructed means of egress leading to an outside area
                   accessible to a street.

                  Window egress concerns (see exhibits 10 and 11): The Authority stated
                   that while sleeping rooms are required to have windows, only windows
                   designed to be opened must be in proper working order. Further, it noted
                   that we cited windows in two units that were partially obstructed by small
                   items that could be easily moved. However, according to Section 10.3 of
                   HUD Guidebook 7420.10G, emergency exits must not be blocked. A
                   dresser and a reclining chair are not light pieces of furniture that can be
                   easily moved in the event of a fire.

                  Security door egress concerns (see exhibit 12): The Authority stated that
                   while the door for unit 22 was locked at the time of the inspection, there
                   was another door on the same level of the unit and a stairway that led
                   directly to the front door of the unit on the upper level, which meant there
                   were still two available means of egress from the building, if not the
                   room. However, the tenant may not be able to escape in the event of a fire
                   if the back door was locked and the other door became blocked. Further,
                   Section 10.3 of HUD Guidebook 7420.10G required emergency exits to
                   not be blocked.

                  Sink deficiencies (see exhibits 13 through 16): The Authority noted that
                   we failed four units for problems with sink parts when HUD’s 52580-A
                   form says that minor defects such as slow drains, marked surfaces, and
                   damaged cabinets should be passed with a comment. However, Section
                   10.3 of HUD Guidebook 7420.10G required food preparation areas to
                   have a kitchen sink in proper operating condition and that sanitary
                   facilities should not have broken fixtures and clogged drains. These
                   deficiencies could create an unsanitary conditions for the tenants and
                   develop into health and safety issues.

Comment 3   The Authority stated that we assumed deficiencies found during our inspection
            predated its inspections without any factual evidence or support. The Authority
            noted that in most cases, the reason given for our determination that a deficiency
            was a pre-existing conditions was an “appraiser’s opinion” designation, and that
            the only other reason given was a “tenant statement” designation. As an example,
            the Authority asserted that no appraiser could determine whether an outlet plate


                                             47
            was cracked two months ago or six months ago by looking at it. Further, the
            Authority stated that it is highly unlikely that a tenant would recall the exact date
            a deficiency developed and that tenant statements are not a reasonable basis for
            assessment. The Authority included examples related to exhibits 17 through 22,
            and also provided examples related to five inspection photos included in our
            finding.

            To determine whether the Authority ensured that units complied with housing
            quality standards requirements, we reviewed 29 units that were statistically
            selected. In conjunction with our inspections, we took photographs of violations,
            interviewed tenants, and reviewed the Authority’s latest inspection reports to help
            us determine whether a housing quality standards violation existed before the last
            passed inspection conducted by the Authority and its contractor or whether it was
            identified on the last passed inspection and not corrected. We believe that we
            took a conservative approach to determine the facts and circumstances
            surrounding violations to conclude whether they existed before the last passed
            inspection conducted by the Authority. Some violations were easily determined
            to have existed at the time of the Authority’s inspection. In the event that we
            could not reasonably make a determination of when a violation occurred, we did
            not categorize it as pre-existing. Further, we maintain that all program units are
            required to meet housing quality standards performance requirements throughout
            the assistance tenancy and all of the violations identified during our inspections
            need to be corrected.

Comment 4   The Authority stated that some of the exigent health and safety deficiencies we
            reported were not on its administrative plan’s list of life-threatening conditions,
            including blocked means of egress. The Authority noted that the regulation,
            guidance, and handbook do not specifically state which deficiencies should be
            considered exigent health and safety violations but rather allowed housing
            authorities to define them in their administrative plans so that such standards
            reflect local conditions. The Authority provided an example of a window guard
            issue that it considered a deficiency, but not a life-threatening condition, and two
            examples of windows that we classified as blocked. Last, the Authority provided
            a table classifying 60 deficiencies we listed as life-threatening and noting how
            many of the 60 it did not consider a valid exigent health and safety deficiency.

            We disagree with the Authority’s assertion that we incorrectly reported exigent
            health and safety deficiencies. While we cited units that failed to comply with the
            Authority’s requirements, we were not limited to the list violations outlined in the
            Authority’s administrative plan. Regulations at 24 CFR 982.401(1) required the
            site and neighborhood to be free from dangers to the health, safety and general
            welfare of the occupants, including items such as: adverse environmental
            conditions that are either natural or manmade such as dangerous walks or steps;
            poor drainage; sewer hazards; excessive accumulation of trash; and fire hazards.
            During our inspections, we used professional judgment and experience in



                                               48
            reporting health and safety violations. As part of the normal audit resolution
            process, the Authority will need to improve controls over its inspection program
            to ensure compliance with HUD guidelines. This could include reviewing its
            current administrative plan and making adjustments if necessary based on the
            results of this report and of its own inspections.

Comment 5   The Authority contended that we improperly concluded that its inspectors did not
            apply their training to thoroughly inspect units, and maintained that its inspectors
            are trained and certified on HUD’s housing quality standards and visual lead
            assessments, and described the weekly and monthly training and quizzes
            administered. Further, the Authority stated that housing quality standards are
            subjective in many areas and noted that well-informed HQS inspectors can often
            reasonably disagree on violations observed during inspections. We agree that
            housing quality standards are subjective in nature. However, housing quality
            standards do set an expectation that inspections are thoroughly executed and
            completed, and we found that the inspectors did not thoroughly inspect the units.
            For example, in some cases, the inspectors failed to identify issues that were
            preexisting such as open sewer lines and dangerous electrical wiring. In other
            cases, the inspectors had identified the deficiencies, but had marked them as being
            corrected, when our inspections showed that the issues still existed.

Comment 6   The Authority noted that we overstated the abatement amount. Specifically, it
            stated that our calculations were based on abatements starting after the failed
            reinspection instead of on the first of the month following the failed reinspection.
            Based on the Authority’s comments and additional information provided in its
            comments, we removed three of the seven units cited in our finding. Further, we
            ensured that the abatement amount cited for the remaining four units started on
            the first of the month following the failed reinspection.

Comment 7   The Authority disagreed with the deficiencies cited for six of the seven units
            discussed in our draft report. It stated that in all six cases, the disagreement
            related to whether the violations should have been classified as needing to be
            fixed within 24 hours or needing to be fixed within 30 days. The bullets below
            summarize the Authority’s concerns and our response.

               Smoke detector violations (units 2, 14, and 16): For three of the four units
                cited for smoke detector violations, the Authority contended that it properly
                cited the violations as regular 30-day deficiencies. The Authority stated that
                when there is another working smoke detector in the unit, it considered smoke
                detector violations to be a regular non-emergency deficiency and noted that its
                procedures require only one working smoke detector on each floor level of the
                assisted unit. The Authority claimed that in each of the three cases, there was
                a working smoke detector nearby in the unit. However, the inspection reports
                did not document this and the Authority’s written policies and procedures did
                not discuss how it would handle this situation. Further, we believe the smoke



                                              49
                detector violations should have been classified as 24-hour violations and that
                abatements should have been calculated accordingly.

               Trip hazard violation (unit 7): The Authority stated that this item was cited as
                a regular fail item instead of a 24-hour violation because the portion of the
                stairs that was a tripping hazard was on the outside of the rail and did not
                block access to the unit. Upon review of the information provided, we agree
                with the Authority’s classification of the violation. As a result, we removed
                the unit from our finding.

               Bathroom exhaust violation (unit 13): The Authority stated that this item was
                cited as a regular fail item, noted that the issue identified during the first
                inspection was corrected before the second inspection. Therefore, while the
                reinspection had identified a new issue, the owner was given a new 30-day
                cycle to cure the new item. Upon review of the information provided, we
                agree with the Authority’s classification of the violation. As a result, we
                removed the unit from our finding.

               Water shut off due to maintenance (unit 18): The Authority stated that based
                on discussions with the tenant, it determined that the issue cited was not a 24-
                hour violation. Further, it noted that the issue was corrected within the same
                month it was cited. Upon review of the information provided, we determined
                that regardless of whether the deficiency was a 24-hour violation, it was
                corrected within the month it was cited and the unit was not subject to
                abatement. As a result, we removed the unit from our finding.

Comment 8   The Authority stated that it plans to amend its administrative plan to strengthen
            housing quality standards and abatement protocols for items considered life
            threatening emergencies and non-life threating emergencies. It stated that in cases
            where bedrooms do not have a smoke detector within 15 feet of the door, it
            planned to cite the issue as a regular fail. Further, it stated that in cases where
            there is not a working carbon monoxide detector in the kitchen and in the
            basement when required, it planned to cite the issue as a regular fail. The
            Authority’s planned actions are related to recommendations 1C and 1E. We agree
            with the Authority’s plan to amend its administrative plan to strengthen
            procedures to clarify what it considers to be a life threatening emergencies and to
            clarify its housing quality standards and abatement protocols. We encourage the
            Authority to consider the safety of its tenants and the protocol currently being
            piloted as discussed on page 20 of its response. As part of the normal audit
            resolution process, the Authority will need to provide documentation showing that
            it strengthened controls over its inspection program and the calculation of
            abatements.

Comment 9   The Authority stated that HUD’s program guidebook establishes the minimum
            criteria necessary for the health and safety of program participants in order to


                                              50
              keep assisted units attainable to program participants. Further, it expressed
              concerns related to inspecting units to a higher standard to due to issues in the
              local housing market. We agree that the HUD guidance establishes the minimum
              criteria necessary. However, we disagree with the Authority’s implementation of
              the criteria and how it classifies some deficiencies. We discuss this further in
              comment 2.

Comment 10 The Authority stated that our audit findings are not consistent with audit
           standards. We disagree. As stated in the Scope and Methodology section of the
           report, our audit was conducted in accordance with generally accepted
           government auditing standards. Those standards require that we plan and perform
           the audit to obtain sufficient, appropriate evidence to provide a reasonable basis
           for our findings and conclusions based on our audit objective(s). We believe that
           the evidence obtained provides a reasonable basis for our findings and
           conclusions based on our audit objective.

Comment 11 The Authority stated that it had notified the landlords and tenants for the 25 units
           cited for violations and performed follow-up inspections on all 25 units to ensure
           all deficiencies were corrected. The Authority’s actions are responsive to
           recommendation 1A. As part of the normal audit resolution process, it will need
           to provide certifications to show that the applicable violations have been
           corrected.

Comment 12 The Authority stated that we did not provide any detail behind the calculation of
           the reimbursement amount nor the reasoning of this reimbursement such as
           starting points of the amount cited per unit. Further, the Authority stated that
           because it is disputing the validity of the report, it requests that we not assess any
           reimbursement. After the exit conference, we provided the Authority with
           information related to the calculation in recommendation 1B. We calculated the
           reimbursement amount for each of the 23 units cited by totaling the housing
           assistance payments made by the Authority between when we believe it
           improperly passed the unit on an inspection and when our inspection was
           performed. We then added in the amount the Authority paid for the inspections in
           question. While we acknowledge its concerns with the report, we recommend
           that HUD require the Authority to reimburse its program from non-Federal funds
           for the 23 units that materially failed to meet HUD’s housing quality standards.

Comment 13 The Authority disagreed with recommendation 1C based on the reasons detailed
           on pages 1 through 20 of its response. However, while the Authority disagreed
           with the inspection process used during this audit, it is important to have strong
           controls over its inspection program to ensure compliance with HUD
           requirements and to ensure that the results of inspections are used to enhance the
           effectiveness of housing quality inspections. On page 24 of its comments, the
           Authority stated that it plans to make updates to its administrative plan to
           strengthen HQS protocols. We encourage the Authority to review its protocols to



                                                51
              ensure that the issues identified in this report are addressed in its plan. As part of
              the normal audit resolution process, the Authority will need to show that it has
              reviewed its controls and made improvements where necessary.

Comment 14 The Authority disagreed with recommendation 1D based on the reasons detailed
           on pages 20 through 24 of its response. As discussed in comments 6 and 7, we
           revised this section of the finding and now cite only four units as having
           abatement issues. The updated amount cited in recommendation 1D is $4,459.

Comment 15 The Authority referred to its detailed response on pages 20 through 24 in response
           to recommendation 1E. On page 24 of its comments, the Authority stated that it
           plans to make updates to its administrative plan to strengthen abatement
           protocols. We encourage the Authority to review its protocols to ensure that the
           issues identified in this report are addressed in its plan and that staff accurately
           calculate abatements. As part of the normal audit resolution process, the
           Authority will need to show that it has reviewed its controls and made
           improvements where necessary.




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