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Key program results Questioned costs Funds put to better use

Audit 42 audits* $21.4 million $12.7 million Our Page 27 • Section 8 Housing Choice Voucher program focus _{Page 29 • Public Housing Capital Fund programs}

Page 30 • Public housing program activities

* The total public and Indian housing audits, questioned costs, and funds put to better use amounts include any American Recovery and Reinvestment Act of 2009 (29 audits) and disaster recovery (1 audit) type audits conducted in the public and Indian housing area. The writeups for these audits are shown separately in chapters 5 and 6 of this semiannual report.

Chart 2.1: Percentage of OIG public and Indian housing audit reports

during this reporting period

Region 1 - 12% Region 2 - 9% Region 3 - 12% Region 4 - 2% Region 5 - 17% Region 6 - 10% Regions 7/8/10 - 12% Region 9 - 14% Region 11 - 12%

Chapter 2 - Public and Indian Housing Programs 26

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During this reporting period, OIG reviewed HUD’s controls over the Section 8 Housing Voucher program, the Public Housing Capital Fund (Capital Fund) program and public housing activities.

Section 8 Housing Choice Voucher Program

Audits of the Section 8 Housing Choice Voucher program continued to be a priority during this semiannual reporting period. PHAs were selected for audit based on risk analysis and/or hotline complaints. While OIG’s objectives varied by auditee, the majority of reviews were to determine whether the units met housing quality standards, the PHA managed the program according to HUD requirements, and the eligibility of the tenants was correctly determined. The following section illustrates the audits conducted in the Section 8 Housing Choice Voucher program area.

HUD OIG audited the Section 8 Housing Choice Voucher program of the Cuyahoga Metropolitan Housing Authority in Cleveland, OH, and found that the Authority failed to operate HUD programs according to HUD’s and its own requirements. Its program administration regarding housing unit conditions was inadequate. Of the 82 program units inspected, 76 did not meet minimum housing quality standards, and 50 had material violations that existed before the Authority’s previous inspections.

The Authority did not always comply with HUD’s requirements, its action plan, and its program procedures in administering its Family Self-Sufficiency program. It failed to maintain required documentation for 64 of its 71 program participants with an escrow balance and all 22 of its graduates with escrow disbursements. In addition, it failed to maintain accurate escrow balances for 69 participants with escrow balances or issue accurate escrow disbursements to all of its graduates.

The Authority did perform timely housing quality standards unit inspections. OIG reviewed 58,805 inspections for 14,344 tenants and determined that the Authority’s timeliness of inspections was sufficient. OIG recommended that HUD require the Authority to (1) reimburse its program from non-Federal funds for the improper use of more than $100,000 in program funds, (2) provide documentation or reimburse its program nearly $550,000 from non-Federal funds for the unsupported housing assistance payments, and (3) implement adequate procedures and controls to address the findings cited to prevent nearly $9.6 million in program funds from being spent on excessive housing assistance payments over the next year. (Audit Report: 2011-CH-1011)

HUD OIG audited the Housing Choice Voucher program and Federal public housing programs at the Weymouth, MA, Housing Authority and found that the Authority (1) approved rents without adequately performing rent reasonableness determinations, (2) did not adequately perform and monitor the Housing Choice Voucher program’s housing quality standards process, (3) did not have an adequate cost allocation plan, (4) did not adequately perform procurements in compliance with HUD regulations and its own procurement policy, and (5) did not have a policy to ensure that Housing Choice Voucher program receipts were used only for the program. In addition, the Authority submitted its 2010 Section 8 Management Assessment Program in late February 2011 and self-certified to items that it did not perform.

OIG recommended that HUD require the Authority to (1) provide supporting documentation to show that the rents were reasonable for units for which the Authority paid more than $1.7 million in housing assistance in 2009 and more than $2 million in 2010 or repay from non-Federal funds any unsupported costs to its housing assistance payment reserve account; (2) repay from non-Federal funds the Housing Choice

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Voucher program housing assistance payment costs of nearly $12,000 that should have been abated for units that were materially noncompliant with housing quality standards; (3) reimburse the Federal public housing and Housing Choice Voucher programs more than $159,000 from non-Federal sources and any additional amounts determined to be improperly allocated based on an equitable cost allocation plan and supporting documentation; (4) support the use of nearly $70,000 paid for services that were not properly procured by soliciting price or rate quotations from three sources to procure a fee accountant, Housing Choice Voucher program inspector, attorney, and independent public accountant or reimburse the Federal programs for any unreasonable amounts paid; and (5) develop and implement a plan to ensure that the Authority records and reconciles interprogram fund transactions monthly to correct any imbalances. (Audit Report: 2011-BO-1009)

HUD OIG audited the Housing Authority of the City of Camden, NJ’s administration of its housing quality standards inspection program for its Section 8 Housing Choice Voucher program and found that the Authority did not ensure that its program units met housing quality standards. Of 17 units inspected, 16 did not meet HUD’s housing quality standards, 10 of which were in material noncompliance with HUD’s standards. The Authority spent nearly $30,000 in program and administrative funds for these 10 units. In addition, it did not properly identify life-threatening violations, conduct timely reinspections or maintain documentation to show that owners made repairs within specified time limits, and abate assistance payments to owners for units that did not meet housing quality standards.

OIG recommended that HUD require the Authority to (1) ensure that housing units inspected during the audit are repaired to meet HUD’s housing quality standards; (2) reimburse its program from non-Federal funds for the improper use of program and administrative funds for units that materially failed to meet HUD’s standards; and (3) develop and implement adequate controls to ensure that program units meet housing quality standards, inspectors are periodically provided training, quality control inspections are thorough, and the results are used to improve the program. OIG also recommended that HUD require the Authority to revise and update its administrative plan to ensure that violations are properly categorized and repairs are completed within the prescribed time limits and that it abates housing assistance payments in accordance with HUD requirements. (Audit Report: 2011-PH-1013)

HUD OIG audited the Housing Choice Voucher program at the Fall River Housing Authority in Fall River, MA, and found that the Authority generally administered its program efficiently and effectively and in compliance with its annual contributions contract and HUD regulations. However, it did not always perform its housing quality standards inspections in a timely manner, adequately monitor the results of its contract inspectors, and properly abate rents if necessary. Thirty-eight housing quality standards inspections were late and clearly outside the timeframes required by HUD under the Authority’s third-party inspection contract. As a result, the Authority did not (1) earn a portion of the more than $7,000 in paid administrative fees, (2) always comply with HUD procurement regulations and its own procurement policy, and (3) ensure that travel incurred for Federal programs was in accordance with HUD regulations.

OIG recommended that HUD require the Authority to (1) repay a portion of the unearned administrative fees paid by HUD and document the results of the remaining 17 housing quality standards inspections to determine whether rents needed to be abated; (2) update delegation and procurement policy to include duties assigned and delegated, maintain a program contract register, develop procedures to ensure that a cost benefit analysis is conducted and documented, and document the method for conducting technical evaluations of bid responses and proposals; and (3) revise its travel policy and obtain approval of the policy from the Authority’s board of commissioners. (Audit Report: 2011-BO-1011)

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