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We audited the Memphis, TN, Housing Authority’s Housing Choice Voucher program as part of the activities in our fiscal year 2014 audit plan.  We selected the Authority because it had a large program, receiving about $40 million in yearly funding, and was part of the OIG’s annual audit plan.  Our objective was to determine whether the Authority’s inspection process adequately ensured that its units were in material compliance with housing quality standards.

The Authority’s inspections were not adequate for enforcing HUD’s housing quality standards.  Of 90 program units statistically selected for inspection, 77 failed to comply with HUD’s minimum housing quality standards, and 58 were in material noncompliance with the standards.  For the 58 units in material noncompliance, the Authority’s inspectors failed to observe or report 443 violations that existed when they conducted their last inspections.  The excessive violations occurred because the Authority’s quality control inspection program did not effectively detect that its inspectors lacked sufficient knowledge of HUD’s housing quality standards and missed opportunities to improve inspector performance.  As a result, some tenants lived in inadequately maintained units, and the Authority disbursed $61,949 in housing assistance payments and received $6,209 in administrative fees for the 58 units in material noncompliance with the standards.  Unless the Authority improves its inspection program and ensures that all of its units materially meet minimum housing quality standards, we estimate that over the next year, HUD will pay about $34 million in housing assistance for units in material noncompliance with the standards.

We recommend that HUD require the Authority to (1) reimburse its program $68,158 ($61,949 for housing assistance payments and $6,209 for administrative fees) from non-Federal funds for the 58 units that materially failed to meet HUD’s housing quality standards and (2) improve its quality control inspection program to help ensure that program units meet housing quality standards.  These measures will better ensure that $34 million in program funds will be expended for units that are decent, safe, and sanitary.