Public Housing
New Assessment System Holds Potential for Evaluating Performance
Gao ID: GAO-02-282 March 15, 2002
The Department of Housing and Urban Development (HUD) spends $7 billion annually to provide decent, safe, and sanitary housing for low-income households in about 14,000 rental properties nationwide. Yet, many public housing properties have been unsafe and unsanitary for several decades. To identify and correct these problems, HUD began a Public Housing Assessment System (PHAS) to evaluate the performance of public housing authorities. Although HUD is still testing and revising PHAS, it has begun to designate certain housing authorities as troubled and to assign them to recovery centers, where they receive technical and other assistance. HUD also created the Public and Indian Housing Information Center (PIC) database to collect information on funding, compliance, and other problems that fall outside the scope of PHAS. PHAS includes four performance indicators: (1) the physical condition of the properties, (2) the financial condition of the housing authority, (3) the authority's management operations, and (4) residents' satisfaction with their living conditions. HUD develops a score for each indicator and, starting in this fiscal year, plans to use the scores for all four indicators to determine whether housing authorities are troubled. So far, HUD has used only the management operations score to designate housing authorities as troubled. The PIC risk assessment uses the total PHAS score and information about funding and compliance issues to classify troubled and nontroubled housing authorities as high, moderate, or low risk. According to HUD, the field offices focus their monitoring resources on the nontroubled high-risk authorities in an effort to correct their problems before the authorities are designated as troubled. GAO found inconsistencies between the PHAS and PIC assessment. The five public housing authorities GAO visited, which had not been designated as troubled under PHAS but had been classified as moderate to high risk under PIC, had various problems. However, even under the same authority, some developments were well or adequately maintained, while others had cosmetic, structural, or health and safety problems. HUD may provide technical assistance at a housing authority through either a field office team or a troubled agency recovery center. HUD may also impose sanctions on a housing authority or intervene in its operations to compel the authority to correct problems. For more serious, long-standing problems, HUD may put a housing authority into receivership. In some instances, HUD may enter into special agreements with housing authorities, giving them the flexibility to address unique problems. Although these options have the potential for solving problems at public housing authorities, it is still to early to evaluate their effectiveness. Moreover, in the past, the options have not always fully addressed the problems or the housing authorities have not sustained the improvements. Refer to the accompanying video, Public Housing Today (GAO-02-1040SP).
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GAO-02-282, Public Housing: New Assessment System Holds Potential for Evaluating Performance
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Report to the Ranking Minority Member, Subcommittee on Housing and
Transportation, Committee on Banking, Housing, and Urban Affairs, U.S.
Senate:
March 2002:
Public Housing:
New Assessment System Holds Potential for Evaluating Performance:
GAO-02-282:
Letter:
Results in Brief:
Background:
PHAS and PIC Establish Criteria for Identifying Performance Problems:
At Some Nontroubled Housing Authorities, Unsatisfactory Living
Conditions Stemmed from Management Deficiencies:
HUD Has Several Options for Addressing Housing Authorities‘ Problems:
Conclusions:
Recommendation for Executive Action:
Agency Comments:
Scope and Methodology:
Appendixes:
Appendix I: Extent to Which Problems Occur at All Public Housing
Authorities:
REAC‘s Data for the End of Fiscal Year 2000:
PIC Data for the End of Fiscal Year 2001:
Appendix II: Problems at Nontroubled High-Risk Public Housing
Authorities:
Appendix III: Camden Housing Authority
Historical Problems:
HUD‘s Role and Corrective Actions:
Current Status and Challenges:
Appendix IV: Puerto Rico Public Housing Administration:
Historical Problems:
HUD‘s Role and Corrective Actions:
Current Status and Challenges:
Appendix V: Housing Authority of New Orleans:
Historical Problems:
HUD‘s Role and Corrective Actions:
Current Status and Challenges:
Appendix VI: Chicago Housing Authority:
Historical Problems:
HUD‘s Role and Corrective Actions:
Current Status and Challenges:
Appendix VII: San Francisco Housing Authority:
Historical Problems:
HUD‘s Role and Corrective Actions:
Current Status and Challenges:
Appendix VIII: Contact and Staff Acknowledgments
GAO Contact:
Acknowledgments:
Tables:
Table 1: PHAS Designations for Fiscal Year 2001 under Partial and Full
Implementation:
Table 2: Quality Factors Associated with Nontroubled High-Risk and
Nontroubled Low-Risk Housing Authorities:
Figures:
Figure 1: Examples of Well-Maintained Public Housing Properties, San
Francisco Housing Authority and Camden Housing Authority:
Figure 2: Examples of Deteriorated Public Housing Properties, San
Francisco Housing Authority and Camden Housing Authority:
Figure 3: Potential Increase in Recovery Centers‘ Workload Following
Full Implementation of PHAS:
Figure 4: Risk Levels of Troubled and Nontroubled Housing Authorities,
Fiscal Year 2001:
Figure 5: Examples of Well-Maintained Public Housing, Puerto Rico
Public
Housing Administration:
Figure 6: Examples of Deteriorated Public Housing, Puerto Rico Public
Housing Administration:
Figure 7: Examples of Health Hazards in Public Housing, Puerto Rico
Public Housing Administration:
Figure 8: Examples of Safety Hazards, Puerto Rico Public Housing
Administration:
Figure 9: Examples of Public Housing Problems, Housing Authority of New
Orleans:
Figure 10: Examples of Public Housing Problems, Housing Authority of
New
Orleans:
Figure 11: Examples of Public Housing Problems, Housing Authority of
New
Orleans:
Figure 12: Examples of Public Housing Problems, Chicago Housing
Authority:
Figure 13: Examples of Public Housing Problems, Chicago Housing
Authority:
Figure 14: Completed Modernization Project at the Camden Housing
Authority:
Figure 15: Modernization Project in Process at the Camden Housing
Authority:
Figure 16: Percentages of Public Housing Authorities Receiving Scores
of
Less than 60 Percent for PHAS Subindicators:
Figure 17: Percentages of Public Housing Authorities Receiving Scores
of
Zero for PHAS Subindicators :
Figure 18: Presence of Factors Indicating Potential Problems with the
Quality of Housing Authorities‘ Management :
Figure 19: Example of a Deteriorated Public Housing Development at the
Camden Housing Authority:
Figure 20: Example of a Rehabilitated Public Housing Development at the
Camden Housing Authority:
Figure 21: Example of a Deteriorated Public Housing Development at the
Housing Authority of New Orleans:
Figure 22: Examples of a Deteriorated Public Housing Development at the
Chicago Housing Authority:
HANO: Housing Authority of New Orleans:
HUD: Department of Housing and Urban Development:
PHAS: Public Housing Assessment System:
PHMAP: Public Housing Management Assessment Program:
PIC: Public and Indian Housing Information Center:
PRPHA: Puerto Rico Public Housing Administration:
REAC: Real Estate Assessment Center:
SFHA: San Francisco Housing Authority:
Letter March 15, 2002:
The Honorable Wayne Allard
Ranking Minority Member, Subcommittee on Housing
and Transportation
Committee on Banking, Housing, and Urban Affairs
United States Senate:
Dear Senator Allard:
The Department of Housing and Urban Development (HUD) spends nearly $7
billion annually to provide decent, safe, and sanitary housing for low-
income households in about 14,000 rental properties administered by
over 3,000 public housing authorities nationwide. Yet despite
expenditures of this magnitude, many public housing properties have
been unsafe and unsanitary for several decades. To identify and correct
these and other problems at public housing properties, HUD has begun to
implement a new tool--the Public Housing Assessment System (PHAS)--for
evaluating public housing authorities‘ performance. Although HUD is
still testing and revising PHAS, it has begun to use the results of the
PHAS analysis to designate certain housing authorities as troubled and
to assign them to recovery centers, where they receive technical and
other assistance to correct their problems. In addition, HUD
established the Public and Indian Housing Information Center (PIC)
database to collect information about funding, compliance, and other
problems that fall outside the scope of PHAS. PIC generates a risk
assessment for HUD field offices to use in planning their monitoring
strategies and targeting their monitoring resources. Both PHAS and PIC
collect data for all public housing authorities, and these data are
used for different but complementary purposes.
Concerned about conditions at public housing authorities and how those
conditions are measured, you asked us to:
* identify HUD‘s criteria for designating housing authorities as
troubled under PHAS and for classifying them as high risk under PIC and
determine whether the results of the PHAS and PIC analyses are
consistent;
* describe the kinds of problems found at housing authorities that have
not been designated as troubled under PHAS but have been classified as
high risk under PIC; and:
* identify HUD‘s options for addressing problems at housing
authorities, regardless of whether they have been designated as
troubled, and examples of the options HUD has used at nontroubled
authorities that pose high risks.
In addition, as requested by your office, we determined the extent to
which problems occur at all public housing authorities. The results of
this analysis, which were based on PHAS and PIC data, are discussed in
appendix I.
To address these objectives, we analyzed PHAS and PIC data to identify
problems at troubled and nontroubled public housing authorities;
interviewed HUD headquarters and field staff; and reviewed public
housing laws, policies, and procedures. We visited four public housing
authorities that had not been designated as troubled but had been
classified as high risk at the time of our review--the Camden Housing
Authority, the Chicago Housing Authority, the Housing Authority of New
Orleans, and the San Francisco Housing Authority. In addition, because
of serious problems that have sparked intense congressional interest,
we visited the Puerto Rico Public Housing Administration. We provide
background information on these five housing authorities in appendixes
III through VII--that is, historical problems, HUD‘s role and
corrective actions, and current status and challenges. Our scope and
methodology are discussed in greater detail at the end of this letter.
This is one of several engagements we have planned to assess problems
in public housing and to evaluate the corrective actions that HUD and
public housing authorities have taken.
Results in Brief:
HUD uses PHAS and PIC to assess public housing authorities‘
performance. PHAS includes four performance indicators: (1) the
physical condition of the properties, (2) the financial condition of
the housing authority, (3) the authority‘s management operations, and
(4) residents‘ satisfaction with their living conditions. HUD develops
a score for each indicator and, starting in fiscal year 2002, plans to
use the scores for all four indicators to determine whether housing
authorities are troubled. To date, HUD has used only the management
operations score to designate housing authorities as troubled. While
the scores for the other indicators are based on independent analyses,
housing authorities self-certify the data that HUD uses to calculate
the management operations score. After designating a housing authority
as troubled, HUD generally refers the authority to a recovery center
for rehabilitation, although a HUD field office may sometimes continue
to monitor a troubled authority. As of December 3, 2001, 21 of 3,167
authorities were designated as troubled and 20 of the troubled
authorities were assigned to a recovery center. When HUD fully
implements PHAS and uses the scores for all four indicators, it should
designate many more authorities as troubled. However, it is too early
to tell how effective PHAS will be in identifying and providing for the
correction of long-standing problems at public housing authorities. The
PIC risk assessment uses the total PHAS score and information about
funding and compliance issues to classify troubled and nontroubled
housing authorities as high, moderate, or low risk. According to HUD,
the field offices focus their monitoring resources primarily on the
nontroubled high-risk authorities in an effort to correct their
problems before the authorities are designated as troubled. Our
analysis revealed that the results of the PHAS and PIC assessments were
inconsistent. Specifically, 12 of the troubled authorities were
classified as low risk. Although 11 of the troubled low-risk
authorities were assigned to recovery centers for rehabilitation, 1
remained under the field office‘s supervision and was scheduled to
receive routine monitoring--the lowest level of monitoring. Such
monitoring may not be sufficient to correct the problems of a troubled
housing authority. Accordingly, we are recommending that all troubled
housing authorities be classified as high risk to better ensure that
they receive sufficient monitoring. In commenting on a draft of this
report, HUD agreed with our recommendation and is planning to revise
its risk assessment to incorporate this change. HUD also provided
technical comments, which we incorporated in this report as
appropriate.
The five public housing authorities we visited, which had not been
designated as troubled under PHAS but had been classified as moderate
to high risk under PIC, had a wide variety of problems. However, even
under the same authority, some developments were well or adequately
maintained, while others exhibited cosmetic, structural, or health and
safety problems. For example, new HOPE VI developments at the San
Francisco Housing Authority and some older properties at the Camden
Housing Authority were very well maintained, while other developments
at these authorities had problems ranging from broken windows to
deteriorated structures (see figs. 1 and 2). Some problems, including
broken windows and damaged roofs at the Housing Authority of New
Orleans and open fuse boxes, open electric meters, leaky sewer pipes,
mold, and termites at the Puerto Rico Public Housing Administration,
created safety and health hazards for residents. These problems stemmed
from a variety of management deficiencies. For example, poor
procurement practices at the San Francisco Housing Authority, fraud and
abuse at the Puerto Rico Public Housing Administration, and a lack of
capacity to manage maintenance and modernization efforts at the Housing
Authority of New Orleans diverted funds from their intended uses and
delayed the completion of scheduled repairs and capital improvements.
These management deficiencies, in turn, resulted from problems such as
weak internal controls, high staff turnover, and insufficient training.
Data were not readily available to determine whether the physical and
management problems we observed at the housing authorities we visited
were representative of nontroubled high-risk housing authorities
nationwide. However, according to information reported to PIC,
nontroubled high-risk authorities are more likely than nontroubled low-
risk authorities to have factors indicative of problems in management,
such as staff that lack skills needed to carry out their functions,
significant and repeated delays in submitting required information,
complaints from tenants, disagreements between the housing authority‘s
board and management that impede operations, and major audit findings
relevant to the authority‘s operations (e.g., poor procurement
practices, fraud and abuse, and lack of capacity to manage
modernization projects).
Figure 1: Examples of Well-Maintained Public Housing Properties, San
Francisco Housing Authority and Camden Housing Authority:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
Figure 2: Examples of Deteriorated Public Housing Properties, San
Francisco Housing Authority and Camden Housing Authority:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
HUD has several options for improving the performance of problem
housing authorities, regardless of whether they have been designated as
troubled. HUD‘s choice of options varies with circumstances at the
authorities and the level of intervention needed. For example, HUD may
provide technical assistance at a housing authority through either a
field office team or a troubled agency recovery center. At the Puerto
Rico Public Housing Administration, headquarters and field office teams
are helping to resolve procurement weaknesses, and at the San Francisco
Housing Authority, recovery center staff are developing a plan to
address the authority‘s financial and procurement difficulties. HUD may
also impose sanctions on a housing authority or intervene in its
operations to compel the authority to correct problems. At the
financially troubled San Francisco Housing Authority, for example, HUD
reviews staff salaries and procurement contracts in excess of $50,000.
For more serious, long-standing problems, HUD may place a housing
authority into receivership. At the Camden Housing Authority, HUD
imposed an administrative receivership, taking over the authority‘s
decision-making authority and sending in a recovery team to revamp the
authority‘s operations. Finally, in some instances, HUD may enter into
special agreements with housing authorities, giving them the
flexibility to address unique problems. For example, HUD authorized the
Chicago Housing Authority to consolidate its funding sources in order
to demolish its old high-rise developments; relocate residents; and
build mixed-income, low-rise developments. While these options have the
potential for solving problems at public housing authorities, it is
still to early to evaluate their effectiveness. Moreover, in the past,
the options have not always fully addressed the problems or the housing
authorities have not sustained the improvements.
Background:
HUD is required by law[Footnote 1] to assess the performance of public
housing authorities so that the secretary of housing can evaluate the
authorities‘ performance in all major areas of management operations.
In response to this law, HUD introduced the Public Housing Management
Assessment Program (PHMAP) in 1992. Though designed to evaluate housing
authorities‘ performance, PHMAP was based on self-certification, and,
by 1998, about two-thirds of the authorities had certified themselves
as high performers. Furthermore, PHMAP did not provide for either an
independent physical inspection or input from the public housing
residents themselves. An authority could be classified as a standard or
a high performer even though its residents were living in conditions
that HUD considered unacceptable.[Footnote 2]
In 1997, as part of its 2020 Management Reform Plan, HUD instituted a
new approach for evaluating public housing authorities‘ overall
performance and for helping them improve their performance. The
approach includes the following components:
* PHAS is designed to obtain an independent evaluation of an
authority‘s overall operations, including the physical condition of its
housing, the soundness of its financial operations, the effectiveness
of its management operations, and the extent to which residents are
satisfied with their services and living conditions.
* The Real Estate Assessment Center (REAC) collects and analyzes PHAS
data and provides for independent physical inspections of HUD‘s 14,000
public housing properties as well as for analyses of their financial
condition and surveys of residents‘ satisfaction.[Footnote 3]
* Two Troubled Agency Recovery Centers assist those authorities that
fail the PHAS evaluation and are designated as troubled or substandard
as well as those that voluntarily seek technical support from the
centers.
* A statute[Footnote 4] requires that a housing authority be placed
into receivership if it is unable to turn around failing management and
escape troubled status within 2 years.[Footnote 5]
HUD began collecting data for all four PHAS indicators in 1998, and for
fiscal year 1999, it computed, for each housing authority, a score for
each indicator as well as a total PHAS score. HUD used these scores to
test the system but not to classify housing authorities‘ performance.
For public housing authorities whose fiscal years ended on or after
June 30, 2000, HUD planned to implement PHAS fully; however, the
Congress directed HUD to conduct further testing and to obtain an
independent evaluation of PHAS before using its scores as a basis for
taking adverse actions against public housing authorities.[Footnote 6]
Interpreting the term ’adverse action“ to mean the designation of a
housing authority as troubled on the basis of its total PHAS score, HUD
decided to use the score for the management operations indicator alone
to classify performance for fiscal year 2000. This decision, in effect,
perpetuated PHMAP, since the management operations indicator served as
the sole criterion for classifying performance under PHMAP.
HUD‘s Office of Public and Indian Housing, which administers the public
housing program, uses PIC, an Internet-based information system, to
generate a risk assessment for the nation‘s 14,000 public housing
properties. HUD‘s 43 field offices can then use the results of this
assessment to plan their annual monitoring strategies. The field
offices are also responsible for approving the housing authorities‘
annual plans and monitoring their compliance with their annual
contributions contracts[Footnote 7] as well as their progress in
responding to the HUD Inspector General‘s conclusions and
recommendations.
PHAS and PIC Establish Criteria for Identifying Performance Problems:
HUD uses PHAS and PIC to assess public housing authorities‘
performance. PHAS includes four performance indicators, which HUD
scores and plans to use for designating housing authorities as
troubled. In most cases, HUD then refers troubled authorities to a
recovery center for rehabilitation. To date, HUD has only partially
implemented PHAS, using the score for just one indicator to designate
authorities as troubled. Housing authorities self-certify the data for
this indicator, whereas the data for the other indicators are based on
independent assessments. As of December 3, 2001, 21 of 3,167
authorities were designated as troubled. Our analysis indicates that
when HUD fully implements PHAS, using the scores for all four
indicators as planned, it should designate many more authorities as
troubled. HUD is currently revising PHAS, attempting to make it more
responsive to the concerns of residents and the public housing
industry, before implementing it fully. In addition to PHAS, HUD uses
the PIC risk assessment to classify troubled and nontroubled housing
authorities as high, moderate, or low risk and to focus its monitoring
resources primarily on the nontroubled high-risk authorities to prevent
them from being designated as troubled. According to our analysis, 12
of the troubled authorities were classified as low risk, and 1 of these
authorities, which was not referred to a recovery center, was scheduled
to receive only limited monitoring from the supervising field office.
HUD agreed that all troubled authorities should be classified as high
risk to better ensure that they receive sufficient monitoring.
PHAS Uses Four Indicators:
Each year, HUD measures the essential housing operations of public
housing authorities through PHAS--a system intended to improve the
delivery of services in public housing and to enhance trust in the
public housing system among public housing authorities, public housing
residents, HUD, and the general public. PHAS scores determine (1) how
HUD designates a housing authority (troubled overall, troubled in one
area, standard performer, or high performer); (2) which HUD office will
be responsible for overseeing the housing authority; and (3) whether
the housing authority will be eligible for certain bonus funding. REAC
is responsible for assessing and scoring the performance of public
housing authorities.
The four PHAS indicators measure different aspects of a housing
authority‘s performance. Each indicator receives a score that is based
on specific types of data.
* The physical condition indicator is used to determine whether the
housing authority is providing decent, safe, and sanitary housing to
its residents. Its score is based on an independent physical inspection
of the authority‘s properties provided by REAC. The public housing
industry has expressed concerns about the reliability of these
inspections.
* The financial condition indicator measures whether the housing
authority has sufficient financial resources and is capable of
effectively managing those resources. Its score is based on audited and
unaudited financial data that the authority is required to submit to
HUD each year.
* The management operations indicator measures housing authorities‘
management performance. Its score, like PHMAP‘s, is based on self-
certified data submitted by the public housing authorities.[Footnote 8]
As we previously reported,[Footnote 9] HUD cannot ensure the
reliability of this indicator because it does not have a systematic way
to verify the authorities‘ self-certified data.
* The resident service and satisfaction indicator measures residents‘
satisfaction with their living conditions. Its score is based on data
obtained through a survey of the residents and an evaluation of the
extent to which the public housing authority manages the process in
accordance with a methodology prescribed by HUD.
Each of the four PHAS indicators is scored individually. Public housing
authorities can receive a maximum of 30 points each for the physical,
financial, and management indicators and a maximum of 10 points for the
resident service and satisfaction indicator, for a maximum total score
of 100 points. HUD‘s regulations classify housing authorities on the
basis of their scores as follows:
* Overall troubled: Less than 60 percent overall or less than 60
percent of the points available under more than one of the three major
(physical, financial and management) indicators.
* Troubled in one area: Less than 60 percent of the points available
under any one of the three major indicators:
* substandard physical,
* substandard financial, or:
* substandard management.
* Standard: At least 60 percent but less than 90 percent overall and at
least 60 percent of the points available under each of the three major
indicators.
* High: 90 percent or more overall and at least 60 percent of the
points available under each of the four indicators.
Full Implementation of PHAS Is Likely to Result in More Troubled
Designations:
For fiscal years 2000 and 2001, HUD used the scores for the management
operations indicator alone to designate housing authorities as
troubled. Thus, the authorities that were designated as troubled in
these years were, in fact, troubled in one area--management--rather
than overall. According to our analysis of the fiscal year 2001 scores
for the management indicator, 45 of 3,167 authorities were troubled.
Had HUD used the scores for all four indicators to designate
performance in fiscal year 2001, as it plans to do in fiscal year 2002,
our analysis indicates that it could have designated as many as 90
public housing authorities as troubled overall and 442 others as
troubled in one area. Table 1 presents the results of our analysis.
Table 1: PHAS Designations for Fiscal Year 2001 under Partial and Full
Implementation:
PHAS designation: Overall Troubled[A]; Number of authorities designated
under one indicator: 0; Number of authorities that could
be designated under four indicators: 90.
PHAS designation: Troubled in one area[A]; Number of authorities
designated under one indicator: 0; Number of authorities
that could be designated under four indicators: 442.
PHAS designation: * Substandard physical; Number of authorities
designated under one indicator: 0; Number of authorities
that could be designated under four indicators: 169.
PHAS designation: * Substandard financial; Number of authorities
designated under one indicator: 0; Number of authorities
that could be designated under four indicators: 249.
PHAS designation: * Substandard management[B]; Number of authorities
designated under one indicator: 45; Number of authorities that
could be designated under four indicators: 24.
PHAS designation: Standard performer; Number of authorities designated
under one indicator: 3,122; 0; Number of authorities that could
be designated under four indicators: 1,808.
PHAS designation: High performer[A]; Number of authorities designated
under one indicator: 0; Number of authorities that could
be designated under four indicators: 827.
PHAS designation: Total; Number of authorities designated under one
indicator: 3,167; Number of authorities that could be
designated under four indicators: 3,167.
[A] HUD designated no high performers for fiscal year 2001. The only
troubled performers were those that were troubled in the management
area.
[B] When performance is assessed using all four indicators, housing
authorities that are troubled in more than one area become overall
troubled. Some of the 45 housing authorities that were troubled in the
management area alone under one indicator moved into the overall
troubled category when their physical and financial condition were also
taken into account. As a result, only 24 housing authorities remained
troubled in the management area alone under all four indicators.
Source: GAO analysis of HUD fiscal year 2001 PHAS scores.
[End of table]
The number of housing authorities designated as troubled changes over
time as housing authorities take corrective action and resolve their
problems or demonstrate to HUD through an appeals process that the
troubled designation is inappropriate. Thus, although our analysis
identified 45 housing authorities with troubled management as of
September 30, 2001, this number declined as the authorities worked with
the recovery centers or field offices to correct their problems. As of
December 3, 2001, 21 authorities were designated as troubled under the
management indicator.
When HUD fully implements PHAS, the number of troubled designations is
likely to increase and the workload for the recovery centers therefore
could rise dramatically. According to HUD‘s regulations, housing
authorities that are designated as either troubled overall or troubled
in one area shall be referred to a recovery center. In practice, HUD
field offices sometimes continue to oversee troubled housing
authorities, but most of those with troubled management have been
referred to the recovery centers. For fiscal year 2001, for example, 20
of the 21 troubled authorities were assigned to the recovery centers.
Figure 3 shows how the recovery centers‘ workload could increase if all
of the authorities that would be designated under all four indicators
as troubled overall or troubled in one area in fiscal year 2001 were
referred to the centers.
Figure 3: Potential Increase in Recovery Centers‘ Workload Following
Full Implementation of PHAS:
[See PDF for image]
Source: GAO analysis of HUD data.
[End of figure]
HUD did not believe that such potentially large increases in workload
would be a problem for the recovery centers. According to HUD, each
center is staffed to monitor between 150 and 175 housing authorities,
and not all authorities would be referred to the centers at the same
time. In addition, HUD noted that the field offices can continue to
monitor some troubled housing authorities.
HUD Is Revising PHAS before Implementing It Fully:
Before implementing PHAS fully, HUD is obtaining input from
stakeholders and revising the system in an effort to make it more
responsive to the stakeholders‘ concerns. In 2001, HUD met with
representatives of housing authorities, residents, housing advocacy
groups, and other government agencies to make interim modifications to
PHAS. These stakeholders recommended a number of changes that they
believed would improve the system. For example, they recommended that
the physical inspection:
score, which was based on five components,[Footnote 10] be based on the
two components that have the greatest impact on residents‘ living
conditions--that is, building systems and dwelling units. The
stakeholders also recommended some changes for the management
operations indicator and suggested that the resident service and
satisfaction indicator continue to be worth 10 points and be counted in
the total scores and performance designations for public housing
authorities.
HUD plans to move forward with the modifications to PHAS, using the
stakeholders‘ recommendations as guidelines, and to complete the
modifications in time to use the scores for all four indicators to
evaluate public housing authorities‘ performance in fiscal year 2002.
HUD intends to continue the 100-point scoring system and to maintain
the overall troubled designation for any housing authority that scores
less than 60 points. In addition, according to HUD, public housing
authorities designated as high performers (those scoring 90 points or
more) will receive regulatory relief and bonus points for funding
competition. Finally, HUD plans further improvements to PHAS over the
long term that could lead to an assessment system that, according to
HUD officials, would differ dramatically from the current system.
PIC Does Not Classify All Troubled Housing Authorities as High Risk:
HUD field offices use the PIC risk assessment to identify housing
authorities under their jurisdiction that are having serious problems
and to devise monitoring strategies to address those problems before
the authorities are designated as troubled. The risk assessment takes
three factors into account and assigns different weights to each of
them. Specifically, the risk assessment considers:
* the total PHAS score, weighted at 50 percent;
* funding issues that lie outside the scope of PHAS, including funds
that are available but not obligated and the number and complexity of
active programs, weighted at 30 percent; and:
* compliance issues identified in audit reports, weighted at 20
percent.
In addition, PIC includes data on ’qualitative factors“ that HUD field
offices provide for housing authorities that they plan to visit. Such
factors include major audit findings, concerns raised by another group
or department about a housing authority, court actions or situations
that restrict a housing authority‘s management, significant and
repeated delays in submitting required information, and claims by
tenants that something was done improperly. These factors provide
additional context for the risk assessments.
The PIC risk assessment uses a 100-point scale to reflect the housing
authorities‘ PHAS scores, funding issues, and compliance issues as
weighted in the risk assessment:
* Low risk: 0 to 44 points:
* Moderate risk: 45 to 64 points:
* High risk: 65 to 100 points:
According to our analysis, the vast majority of housing authorities,
whether troubled or nontroubled, were classified as low risk or high
risk. Figure 4 shows the breakdown, by risk level, for the 45 housing
authorities that our analysis identified as troubled and for the 3,121
housing authorities that were nontroubled as of September 30, 2001.
Figure 4: Risk Levels of Troubled and Nontroubled Housing Authorities,
Fiscal Year 2001:
[See PDF for image]
Note: Percentages may not add to 100 percent due to rounding.
[End of figure]
Source: GAO analysis of HUD data.
The classification of any troubled housing authority as low risk is
inconsistent with the severity of the problems indicated by the
troubled designation. This inconsistency would probably not affect
troubled authorities assigned to recovery centers, since they would be
compelled to take corrective action, regardless of their risk level.
However, troubled authorities that are not assigned to recovery centers
but remain under field office supervision might not receive sufficient
monitoring attention if they were classified as low risk because the
field offices target their monitoring resources according to risk
level. The one troubled low-risk authority we identified that was not
assigned to a recovery center was scheduled to receive routine
monitoring--the lowest level of monitoring. This housing authority may
not receive the attention it needs from HUD to correct the problems
that led to its troubled designation. HUD officials could not explain
the apparent anomaly, but, according to one official, all troubled
housing authorities should be considered high risk. HUD plans to
address this flaw in the risk assessment.
At Some Nontroubled Housing Authorities, Unsatisfactory Living
Conditions Stemmed from Management Deficiencies:
The five public housing authorities we visited, which have not been
designated as troubled under PHAS but have been classified as moderate
to high risk under PIC,[Footnote 11] exhibited a wide range of
problems. However, many developments at these authorities were well or
adequately maintained. The problems at other developments varied in
their severity and, in the worst cases, created unsafe and unsanitary
living conditions for residents. These problems are, in large part, the
results of management deficiencies, including poor procurement
practices, fraud and abuse, and weak management of maintenance and
modernization programs. Such deficiencies--which can themselves be
traced to frequent management and staff turnover, insufficient
training, and weak internal controls--divert funds from their intended
uses and create repair and capital improvement backlogs. Comprehensive
data are not readily available to determine whether conditions at the
housing authorities we visited are representative of conditions at
nontroubled high-risk authorities nationwide. However, our analysis of
PIC data for fiscal year 2001 shows that factors indicative of
management problems--such as staff with insufficient skills,
disagreements between the housing board and management, and major audit
findings (including noncompliance with procurement requirements, fraud
and abuse, and ineffective management of modernization programs)--are
more likely to be found at nontroubled high-risk housing authorities
than at nontroubled low-risk housing authorities (see app. II).
Property and Living Conditions Vary, but Deterioration Creates Health
and Safety Hazards for Residents of Some Properties:
At the five public housing authorities we visited, property and living
conditions varied, often from one development to another within the
same authority. At the Puerto Rico Public Housing Administration, for
instance, some developments were well-maintained, as shown in figure 5,
while others had deteriorated to varying degrees, as shown in figure 6.
Figures 7 and 8 illustrate health (termites and mold and mildew) and
safety (exposed wiring and open electric meters) hazards. Figures 9
through 13 illustrate some of the problems we observed at the other
public housing authorities we visited.
Figure 5: Examples of Well-Maintained Public Housing, Puerto Rico
Public Housing Administration:
[See PDF for image]
[End of figure]
Source: GAO photographs taken during site visits to five housing
authorities.
Figure 6: Examples of Deteriorated Public Housing, Puerto Rico Public
Housing Administration:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
Figure 7: Examples of Health Hazards in Public Housing, Puerto Rico
Public Housing Administration:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
Figure 8: Examples of Safety Hazards, Puerto Rico Public Housing
Administration:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
Figure 9: Examples of Public Housing Problems, Housing Authority of New
Orleans:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
Figure 10: Examples of Public Housing Problems, Housing Authority of
New Orleans:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
Figure 11: Examples of Public Housing Problems, Housing Authority of
New Orleans:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
Figure 12: Examples of Public Housing Problems, Chicago Housing
Authority:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
Figure 13: Examples of Public Housing Problems, Chicago Housing
Authority:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
The physical problems we observed at the five housing authorities we
visited stemmed in large part from deficiencies in the quality of the
housing authorities‘ management. At the five authorities we visited,
problems such as poor procurement practices, fraud and abuse, and weak
administration of maintenance and modernization programs contributed to
the physical problems we observed at some developments.
Poor Procurement Practices Waste Funds and Delay Projects:
Poor procurement practices have been a problem at most of the housing
authorities we visited. Before being placed into receivership, for
example, the Camden Housing Authority failed to comply with its own
procurement policies and federal procurement regulations.[Footnote 12]
Noncompliance with federal procurement practices was also found at the
San Francisco Housing Authority,[Footnote 13] in March 2000 as well as
at the Puerto Rico Public Housing Administration, where the Inspector
General classified as ineligible about $21.8 million of $39 million in
procurements reviewed.[Footnote 14] In addition, the Inspector General
found that the Puerto Rico housing authority did not effectively
monitor the activities of its management agents or maintain adequate
property management and related procurement documents.
Sound procurement plans, policies, and procedures are crucial for
public housing authorities, particularly those that have largely
replaced their own staff with contractor staff. At the Chicago Housing
Authority, for example, the staff has declined from about 2,600 to 500
employees, and, in Puerto Rico, fewer than 100 of 4,500 housing
authority employees remain. These remaining staff are responsible for
hiring and overseeing the contractors. However, the authorities often
lack adequate procurement plans, policies, and procedures; continuity
in management and staffing; and managers and staff with the training
needed to oversee and implement procurements effectively.
At the Puerto Rico Public Housing Administration, a lack of adequate
procurement policies and procedures led to many of the housing
authority‘s procurement problems. For example, the authority‘s
procurement regulations, policies, and procedures did not comply with
federal requirements. As a result, the authority was not implementing
federal requirements for planning, soliciting, and awarding purchase
orders and contracts. As early as 1994, the Inspector General and HUD
program officials began recommending that the housing authority develop
and issue a procurement manual and improve its procurement records.
High turnover rates and other changes in roles and responsibilities
also contribute to procurement problems. At some of the housing
authorities we visited, frequent changes in managers and staff were
among the causes of uncertainty over who was in charge of awarding,
reviewing, and monitoring contracts. The Housing Authority of New
Orleans, for example, has had four different one-person housing boards
of directors since 1997 and three executive directors in the past 6
years. In part because of these many changes in leadership, it was not
clear who was finally responsible for approving contracts. Similarly,
at the San Francisco Housing Authority, there appeared to be confusion
and some tension over whether the board of commissioners, the recovery
center, the field office, or HUD headquarters had the final word in
approving and reviewing contracts. According to the current acting
executive director, the San Francisco Housing Authority has had 10
different executive directors in the past 10 years.
Insufficient training for managers and policymakers, as well as for
staff, is another cause of procurement problems. For example, the HUD
Inspector General found that the San Francisco Housing Authority‘s
management and board of commissioners did not follow federal
procurement policies and procedures and recommended that HUD sanction
the executive director and the board. Later, one of the HUD recovery
centers provided procurement training to the board and began reviewing
all contracts over $50,000. Similarly, the Inspector General found that
procurement problems in Puerto Rico existed because the housing
authority‘s management disregarded federal requirements and therefore
was incapable of administering the procurement program. In October
2000, HUD headquarters sent a team to Puerto Rico to oversee the
procurement process and provide technical assistance.
Fraud and Abuse Divert Funds from Their Intended Uses:
Fraud and abuse have contributed to deterioration at the Puerto Rico
Public Housing Administration, reducing the funds available for
maintenance and modernization. In November 2001, for example, the
Inspector General reported that criminal investigations of fraud and
abuse had resulted in 26 indictments and 24 guilty pleas. In 1 case, a
consultant at the housing authority, who reviewed payment vouchers and
approved payments to management agents, conspired with employees of a
management company to embezzle over $1 million. The Inspector General
attributed this and other problems with fraud and abuse at the housing
authority to poor internal controls, noting as early as March 2000 that
the authority did not have effective management control systems to
deter waste, fraud, and abuse. In June, the Inspector General pointed
out that the parties who embezzled $1 million were able to commit this
fraud because the housing authority did not have internal controls in
place to prevent the consultant from solely approving unauthorized
checks to the management company.
Weak Management of Maintenance and Modernization Programs Creates
Backlogs:
Weak management of maintenance and modernization programs was a problem
at several of the housing authorities we visited. For instance, the
Housing Authority of New Orleans failed to make effective use of the
funds it received for maintenance and modernization. For years, it made
no progress toward implementing plans to modernize its rapidly
deteriorating properties, and maintenance backlogs grew. The Puerto
Rico housing authority had difficulty monitoring contracts. As a
result, the physical condition of housing developments varied widely
from one contracted management agent to another. According to
residents, some management agents were adequately maintaining their
developments and responding to residents‘ concerns, while others were
allowing their developments to deteriorate. Even though the housing
authority had a contractor-monitoring unit, a HUD official told us that
the housing authority was not adequately monitoring its contractors.
The problems in managing maintenance and modernization programs, like
the poor procurement practices, often stemmed from high turnover rates
and insufficient training. For example, HUD attributed many of the
delays in carrying out repair and modernization efforts at the New
Orleans housing authority to a lack of continuity in the authority‘s
management. In addition, according to the current executive director,
interference from parties outside of the housing authority limited its
ability to follow through on many of its plans. Furthermore, in New
Orleans and in Puerto Rico many housing authority staff were let go,
and the in-house staff who remained to hire and supervise contractor
staff were not always trained in monitoring and oversight.
Factors Associated with Management Problems Are Found at Nontroubled
High-Risk Housing Authorities Nationwide:
HUD does not maintain data on the types of problems found at public
housing authorities according to their PHAS designation and PIC risk
classification. Therefore, we cannot determine whether the problems we
observed at the five nontroubled high-risk housing authorities we
visited are representative of problems at such housing authorities
nationwide. However, HUD field offices do report certain ’qualitative
factors“ that, in their view, may indicate problems with the quality of
a housing authority‘s management. They use these factors, which are
entered into PIC, to target housing authorities for on-site monitoring.
According to PIC, these factors were more frequently reported for
nontroubled high-risk housing authorities than for nontroubled low-risk
authorities. While the percentages of authorities where these factors
were reported were generally small for both groups (under 5 percent for
all but two factors), the percentages were consistently higher for the
high-risk group. The most frequently reported factors were insufficient
staff skills; significant and repeated delays in submitting required
information; reports of tenant complaints; the number, size, or
complexity of new programs; issues or disagreements between the board
and management; and major audit findings such as noncompliance with
federal procurement requirements, theft, fraud, and abuse. (App. II
lists all of the factors and the percentages of housing authorities
where the factors were reported.):
HUD Has Several Options for Addressing Housing Authorities‘ Problems:
HUD has several options for improving a housing authority‘s
performance, from providing technical assistance, to imposing
sanctions, to taking over the authority‘s operations. In some
instances, HUD may enter into special agreements with housing
authorities, giving them the flexibility to address unique problems.
Although implementing these options can bring about positive changes at
housing authorities, it may not completely or permanently solve long-
standing problems. For this review, we did not evaluate the
effectiveness of HUD‘s efforts to resolve management problems at public
housing authorities, but we are planning future reviews.
HUD May Provide Technical Assistance to Address Problems:
HUD may provide technical assistance to address chronic problems at
housing authorities even when the authorities have not been designated
as troubled under PHAS. The Quality Housing and Work Responsibility Act
of 1998 and regulations authorize HUD to provide technical assistance,
training, or both to authorities that are at risk of being designated
as troubled as well as to those that have not been so
designated.[Footnote 15] For those that have not been designated as
troubled, this assistance is contingent upon agreement or may even be
requested by the housing authority. Technical assistance may involve
developing policies for the housing authority, streamlining its
operations, designing or improving its organizational structure, or
training its staff. HUD may provide this assistance continuously, by
stationing a team at the housing authority, or periodically, by
visiting the authority from time to time. HUD may also hire a
contractor to provide the assistance or make funding available for the
authority to hire technical assistance contractors.
HUD tailors its assistance to the problems at a housing authority,
often attempting to improve the authority‘s ability to manage an aspect
of its operations or administer one of its programs. For example, HUD
put together a team led by its field office-based procurement
specialist to assist the Puerto Rico Public Housing Administration in
developing policies and procedures for its procurement office that will
allow it to comply with federal procurement regulations. Similarly, HUD
provided grant funding for the Chicago Housing Authority to contract
with a local university for assistance in streamlining its procurement
processes. At the financially troubled San Francisco Housing Authority,
staff from the Memphis recovery center are helping the authority find
ways to reduce expenses and balance its budget. Recovery center staff
are also helping the housing authority address findings from an audit
by HUD‘s Inspector General. At small housing authorities, HUD assists
in building overall management capacity, usually by sending a team to
completely revamp an authority‘s policies and procedures.
HUD May Apply Sanctions or Intervene in a Housing Authority‘s
Operations to Correct Problems:
When HUD is unable to address the problems at a housing authority
cooperatively, it has the authority to intervene or apply several
different sanctions at varying levels of severity as follows:
* HUD may review a housing authority‘s expenditures and place
restrictions and conditions on them. For example, at the financially
troubled San Francisco Housing Authority, HUD recovery center officials
review all staff salaries and procurement contracts in excess of
$50,000.
* HUD can remove housing authority officials through a suspension,
debarment, or limited denial of participation if the authority‘s poor
performance is directly related to the actions of these officials.
* A suspension disqualifies an individual from participation in HUD
programs for a time because of evidence of crime, fraud, or serious
improper conduct.
* A debarment excludes an individual from participation in HUD programs
for criminal offenses or other violations.
* A limited denial of participation prevents an individual from
participating in the HUD program under which the cause arose for up to
12 months. HUD can apply this sanction even if no criminal activity is
suspected if it determines that an individual‘s removal is in the best
interest of the government.
* HUD may impose an alternative management arrangement when it finds
ongoing management weaknesses in some or all of a housing authority‘s
operations. The alternative management can be provided by a private
management company, a resident management corporation, a management
team from another housing authority, or some other arrangement for
effecting change at the housing authority. For example, at the Housing
Authority of New Orleans, the secretary of HUD and the mayor of New
Orleans entered into a cooperative endeavor agreement. This agreement
established the role of an executive monitor, a HUD appointee and
representative who would oversee the operations of the housing
authority. The agreement also replaced the board of commissioners with
a contractor.
* HUD may declare a housing authority in substantial default or in
breach of its annual contributions contract with HUD. According to
HUD‘s guidance, this measure should be considered only when (1) the
housing authority‘s performance problems are severe, pervasive, and
systemic; (2) the authority consistently and vigorously resists
problem-solving efforts; and (3) other remedies have been exhausted or
are determined inappropriate because of the urgent need to take action.
Under these circumstances, HUD can arrange for an alternative form of
management, including the designation of a receiver, to remedy the
housing authority‘s problems.
HUD May Name a Receiver to Take Over a Housing Authority‘s Operations:
When problems are long-standing, severe, or both, HUD may seek a
receivership if a housing authority is in substantial default of its
contractual obligations to HUD. For a housing authority that has been
designated as troubled on the basis of its PHAS scores, HUD must seek
an administrative or a judicial receivership if the authority has not
substantially improved its performance within 2 years. Under an
administrative receivership, HUD appoints either a contractor or a HUD
employee to take over the housing authority‘s management. Under a
judicial receivership, a judge makes the appointment. According to HUD
officials, a receivership is a good option when a housing authority is
very poorly run and is under local political pressure that is impeding
HUD‘s efforts to bring about the authority‘s recovery.
The Camden Housing Authority had long-standing problems, an inability
to provide decent, safe, and sanitary housing; numerous instances of
noncompliance with federal regulations; poor internal controls; or
political influence, that were preventing improvements at the
authority. Consequently, HUD determined that the housing authority had
breached its annual contributions contract and acted to take over the
housing authority‘s operations. HUD and the mayor of Camden agreed in
August 1997 on an administrative receivership, under which HUD assumed
responsibility for the housing authority‘s management. HUD hired
consultants to administer the housing authority‘s financial management
and modernization programs, focused on improving properties‘
maintenance and reducing the vacancy rate, and established a security
partnership with local police and set up a housing authority security
force to reduce crime. Although the housing authority is still under
administrative receivership, HUD has reduced the consultants‘ role and
an administrator currently manages the authority.
Although there is no requirement for HUD and a housing authority to
focus corrective actions on raising the authority‘s PHAS scores, the
Camden Housing Authority‘s administrator has done so with positive
results, according to HUD officials. From fiscal years 1999 to 2000,
the management operations indicator rose from a troubled level of 16 to
a standard level of 23, and the financial operations indicator rose
from a failing score of 15 to a passing score of 19. In addition,
several modernization projects have been completed (see fig. 14) or are
under way (see fig. 15); crime rates have declined; and, according to
the residents, maintenance has vastly improved.
Figure 14: Completed Modernization Project at the Camden Housing
Authority:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
Figure 15: Modernization Project in Process at the Camden Housing
Authority:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
HUD May Enter into Special Agreements to Address Unique Problems at
Housing Authorities:
HUD has given some housing authorities the flexibility to address
unusual challenges. At the Chicago Housing Authority, for example, HUD
waived some of its regulations for 10 years and allowed the authority
to consolidate its capital and operating funding into a single block
grant. HUD approved these steps in February 2000 under the housing
authority‘s Plan for Transformation--a plan to completely revamp
Chicago public housing. The plan was designed to address the poor
physical condition of the housing stock; the poor design of the
developments, which encouraged crime; and the high concentration of
extremely poor families. The authority plans to solve these problems by
developing low-rise public housing structures in mixed-income
communities. In part, the plan responds to a mandate from HUD calling
for the housing authority to demolish distressed public housing units
and either provide the residents with tenant-based assistance or
relocate them to other pubic housing developments. The plan calls for
the demolition of 18,000 units and the redevelopment and rehabilitation
of 25,000 units. HUD approved the Chicago Housing Authority‘s plan
under its Moving to Work Program. The program was designed to give
housing authorities the flexibility to design and test cost-effective
approaches for providing housing assistance, to assist public housing
residents in obtaining employment and becoming self-sufficient, and to
increase housing choices for low-income families. The flexibility that
HUD has given this housing authority has allowed it to undertake a
large-scale redevelopment project. HUD has entered into similar
agreements at 22 other housing authorities and has entered into
negotiations with 5 other authorities.
Effectiveness and Sustainability of HUD‘s Interventions Are Uncertain:
Despite the variety of actions available to improve public housing
authorities‘ performance, these actions have not always fully resolved
problems or precluded their recurrence. For example, HUD sanctioned the
Puerto Rico Public Housing Administration in 1991, freezing its
unobligated funds, because of serious financial, administrative, and
project maintenance problems. A decade later, the HUD Inspector General
found similar problems at the housing authority, including a lack of
management controls, inadequate procurement and contract management
procedures, and an inability to administer the authority‘s HOPE VI
project. HUD‘s actions also have not resolved problems at the Housing
Authority of New Orleans. A designated HUD representative has been
monitoring the progress of the housing authority since 1996, yet many
of the authority‘s past problems persist, including the poor physical
condition of the housing stock and delays in the completion of
modernization work. The San Francisco Housing Authority is also
struggling with problems even after extensive HUD assistance. Despite
the work of a HUD recovery team between 1996 and 1997 and ongoing
monitoring by the recovery center, the housing authority still has
significant financial difficulties. Lastly, while HUD officials agree
that the Camden Housing Authority has improved significantly and has
addressed many of its past deficiencies by targeting corrective actions
to problems identified through PHAS, both HUD and the authority‘s
current administration are concerned about the ability of the housing
authority to sustain its current level of performance when it reverts
to local control. We are planning to review the nature and outcomes of
housing authorities‘ corrective actions.
Conclusions:
Because HUD has not yet fully implemented PHAS, it is too early to tell
how effective the new system will be in identifying and providing for
the correction of long-standing problems at public housing authorities.
But when HUD fully implements PHAS, it should have a broader and more
reliable basis for evaluating housing authorities‘ performance. As a
result, full implementation should increase the potential for PHAS to
identify the authorities‘ problems.
It would be consistent for public housing authorities that are
designated as troubled overall or troubled in one area to be classified
as high risk to ensure that they receive sufficient monitoring
attention from HUD. While most troubled housing authorities are
assigned to troubled agency recovery centers where they receive close
monitoring regardless of their risk classification, those troubled
authorities that remain under field office supervision and are
classified as low risk may not be scheduled for sufficient monitoring.
When HUD fully implements PHAS and designates many more authorities as
troubled, this problem could become more widespread.
Recommendation for Executive Action:
To help ensure that troubled public housing authorities receive
sufficient monitoring, we recommend that the secretary of housing and
urban development revise the PIC risk assessment to automatically
classify all troubled housing authorities as high risk so that they
receive the correct level of HUD monitoring.
Agency Comments:
We provided a draft of this report to HUD for its review and comment.
In e-mails dated January 31, February 1, and February 4, 2002,
incorporating comments from the deputy assistant secretary for the
Office of Troubled Agency Recovery, the deputy assistant secretary for
the Office of Administration and Budget, and the acting director of
field operations, Office of Public and Indian Housing, and a REAC
official, HUD provided background information on the PIC risk
assessment process and indicated that it planned to revise the PIC
rating scheme to ensure that all troubled public housing authorities
are designated as high risk. In addition, HUD provided technical
comments, which we incorporated in this report as appropriate.
Scope and Methodology:
To accomplish our objectives, we conducted case studies of five public
housing authorities: (1) the Camden Housing Authority, (2) the Chicago
Housing Authority, (3) the Housing Authority of New Orleans, (4) the
Puerto Rico Public Housing Administration, and (5) the San Francisco
Housing Authority. With the exception of the Puerto Rico Public Housing
Administration, we selected these housing authorities because they were
known to pose high risks but had not been designated as troubled at the
time of our review and they were geographically diverse. We selected
the Puerto Rico Public Housing Administration because its history of
significant problems had generated congressional interest although HUD
only considered it to be of moderate risk.
To identify HUD‘s criteria for designating housing authorities as
troubled under PHAS and for classifying them as high risk under PIC, we
reviewed HUD‘s guidance on public housing assessment criteria. This
included our review of PHAS and the status of its implementation. We
also received a briefing on PIC from HUD officials.
To identify the kinds of problems found at housing authorities that
have not been designated as troubled under PHAS but have been
classified as high risk under PIC, we interviewed HUD officials,
representatives of the public housing authorities, and tenant
representatives at our five case study authorities. In addition, we
visited public housing developments at these authorities and took
photographs to document the kinds of problems we observed. The
developments we visited were of different types, had different PHAS
scores, and varied in the severity of their problems.
To identify HUD‘s options for addressing problems at housing
authorities, regardless of whether they have been designated as
troubled, we examined the corrective actions taken at each of our case
study authorities. We discussed these options with HUD officials at
headquarters and at the hub offices near the five authorities. In
addition, we obtained HUD‘s guidelines for these options, relevant
correspondence between HUD and the housing authorities, and status
reports sent by the housing authorities to HUD.
We used PHAS data, obtained from REAC, and PHAS and PIC data, obtained
from HUD‘s Office of Public and Indian Housing, to examine the kinds of
problems found at nontroubled high-risk public housing authorities and
at public housing authorities in general. The data in both PHAS and PIC
are collected for each public housing authority once a year on a
rolling basis, by quarter. Thus, at any point in time, the data are the
most current that have been collected, but conditions may have changed
at some public housing authorities since the data were collected. We
assessed the reliability of HUD‘s REAC and PIC data by (1) reviewing
existing information about the REAC and PIC systems and data, (2)
interviewing agency officials knowledgeable about the data, and (3)
performing electronic testing of the data elements used in this report.
We determined that the data were reliable enough for the purposes of
this report.
The data we obtained from REAC were for the end of fiscal year 2000 and
contained the total PHAS scores and the scores for each of the four
PHAS indicators and their subindicators. The data we obtained from PIC
were for the end of fiscal year 2001. These data included both the PHAS
scores (the total scores and the scores for the four indicators) for
fiscal year 2001 that PIC received from REAC and the PIC risk
assessment scores. At the time that we received the PIC data, HUD was
updating its method of calculating risk; thus, the risk assessment
scores used in our analysis are derived according to the method HUD
told us it is most likely to use in calculating future scores.
Using the PHAS scores for fiscal year 2001 and HUD‘s scoring system, we
determined how many public housing authorities should be designated as
troubled under both HUD‘s current and planned approaches. Under the
current approach, we used the score for the management operations
indicator alone, as HUD has done to date, and classified housing
authorities as troubled if they scored less than 18 out of 30 possible
points (60 percent). Under the approach HUD plans to use in fiscal year
2002, we used the total PHAS score and the scores for all four
indicators, classifying housing authorities as troubled if they scored
less than 60 percent overall or less than 60 percent on more than one
of the major indicators (physical condition, financial condition, and
management operations). We based our calculations for both approaches
on rounded scores, following HUD‘s example. Our analysis did not
exclude scores of zero for any indicator, even though a zero may
indicate that a housing authority was late in submitting the applicable
data, never submitted the data, or in rare instances was not required
to submit the data. Additionally, PHAS scores may not always be updated
immediately in PIC.
We used the results of the PIC risk assessment and HUD‘s scoring system
to determine whether housing authorities posed low (0-44 points),
moderate (45-64 points), or high (65-100 points) risks. Then we grouped
the authorities according to their status (troubled or nontroubled) and
risk level (low, moderate, or high) and determined what quality factors
were present at authorities in each of the six resulting groups. To
identify the kinds of problems found at nontroubled high-risk
authorities, we paid particular attention to the quality factors
present at authorities in this group, comparing them with the quality
factors present at nontroubled low-risk authorities. See appendix II
for the results of our analyses.
We used REAC data for fiscal year 2000 and PIC data for fiscal year
2001 to identify the kinds of problems found at all public housing
authorities. See appendix I for the results of our analyses of PHAS
subindicators and PIC quality factors.
We conducted our work from January 2001 through January 2002 in
accordance with generally accepted government auditing standards.
As agreed with your office, we are sending copies of this report to the
chairman and ranking minority member, Senate Committee on Banking,
Housing, and Urban Affairs; the chairman, Subcommittee on Housing and
Transportation, Senate Committee on Banking, Housing, and Urban
Affairs; the chairman and ranking minority member, House Committee on
Financial Services; and the chairwoman and ranking minority member,
Subcommittee on Housing and Community Opportunity, House Committee on
Financial Services. We will also send copies to the secretary of
housing and urban development and the director of the Office of
Management and Budget. Please contact me at (202) 512-6520 if you have
any questions about this report. Key contacts and contributors to this
assignment are listed in appendix VIII.
Sincerely yours,
Stanley J. Czerwinski
Director, Physical Infrastructure Issues:
Signed by Stanley J. Czerwinski
[End of section]
Appendix I: Extent to Which Problems Occur at All Public Housing
Authorities:
To determine the extent to which problems occur at all public housing
authorities, we analyzed the most recent data available for these
authorities from the Department of Housing and Urban Development (HUD).
HUD maintains these data in two databases. The data from one database,
managed by HUD‘s Real Estate Assessment Center (REAC), were for the end
of fiscal year 2000. The data from the other database, HUD‘s Public and
Indian Housing Information Center (PIC), were for the end of fiscal
year 2001. For both of these databases, information is collected for
each public housing authority once a year on a rolling basis, by
quarter. Thus, at any point in time, the data are the most current that
have been collected, but conditions may have changed at some housing
authorities since the data were collected.
REAC‘s Data for the End of Fiscal Year 2000:
REAC maintains the data used to assess the performance of public
housing authorities under HUD‘s new assessment system, the Public
Housing Assessment System (PHAS). From these data, REAC generates a
total PHAS score for each housing authority. This total score is made
up of scores for four indicators of performance--physical condition,
financial condition, management operations, and resident service and
satisfaction. The score for the physical condition indicator reflects
the results of all physical inspections performed at the housing
authority. The score for each of the other three indicators is made up
of scores for several subindicators. For example, the score for the
resident service and satisfaction indicator is the sum of the scores
for subindicators that measure residents‘ satisfaction as gauged by
their responses to a survey, housing authorities‘ completion of a plan
for implementing the survey, and housing authorities‘ development of a
follow-up plan to address issues arising from the survey.
We examined the scores for each subindicator for 3,166 public housing
authorities to identify any widespread problems with their
performance.[Footnote 16] For several of the subindicators for which
data had been collected for the entire fiscal year,[Footnote 17] the
scores were low, indicating possible problems. However, we could not
determine from information in the database whether the low scores
indicated problems with the housing authorities‘ performance or
problems with their filing the required data with HUD.[Footnote 18]
Because PHAS considers a score of less than 60 percent as failing, we
examined the extent to which housing authorities received scores below
60 percent for each subindicator. Since the maximum scores for the
subindicators ranged from 2 to 9, the failing percentages varied from 0
to 56 percent. The scores were particularly low for the annual
inspections and work orders subindicators under the management
operations indicator. The results of our analysis are shown in figure
16.
Figure 16: Percentages of Public Housing Authorities Receiving Scores
of Less than 60 Percent for PHAS Subindicators:
[See PDF for image]
Note: The maximum possible score for these subindicators varies from 2
to 9; thus, the closest approximation of less than 60 percent is
different for each indicator. Subindicators with an approximate failing
percentage represented as 0 had maximum scores of only 2 or 3, and the
closest percentage less than 60 was 0.
Source: GAO analysis of HUD data.
[End of figure]
For several subindicators, particularly within the financial condition
and resident service and satisfaction indicators, a large percentage of
housing authorities received a score of zero. Again, the information in
the database did not allow us to determine whether this score indicated
a serious performance problem or a problem with filing the required
data. Figure 17 shows the percentages of housing authorities that
received scores of zero for the subindicators.
Figure 17: Percentages of Public Housing Authorities Receiving Scores
of Zero for PHAS Subindicators:
[See PDF for image]
Source: GAO analysis of HUD data.
[End of figure]
PIC Data for the End of Fiscal Year 2001:
HUD‘s Office of Public and Indian Housing, which administers the public
housing program, uses PIC, an Internet-based information system, to
generate risk assessments for the nation‘s public housing authorities.
These risk assessments use the total PHAS score and information about
funding and compliance issues to classify housing authorities as high,
moderate, or low risk. HUD‘s 43 field offices can then use the results
of these assessments to plan their annual monitoring strategies.
Besides generating risk assessment scores, PIC includes information on
the presence of certain factors associated with the quality of a
housing authority‘s operations. Figure 18 lists the factors--all of
which are indicative of potential problems--and the percentage of
housing authorities where, according to PIC, the factors were present.
As the figure indicates, the factors most frequently identified as
present (apart from ’other problems“) were insufficient staff skills,
delays in submitting required information, and reports from tenants of
something done improperly by the housing authority. The database does
not define what is in the ’other problems“ category.
Figure 18: Presence of Factors Indicating Potential Problems with the
Quality of Housing Authorities‘ Management:
[See PDF for image]
Source: GAO analysis of HUD data.
[End of figure]
[End of section]
Appendix II: Problems at Nontroubled High-Risk Public Housing
Authorities:
To identify the kinds of problems found at public housing authorities
that HUD has not designated as troubled but has classified as high
risk, we applied HUD‘s criteria for determining housing authorities‘
status (troubled or nontroubled) and risk level (high, moderate, or
low) to the nation‘s 3,166 public housing authorities.[Footnote 19]
First, as HUD has done to date, we considered the scores for the PHAS
management operations indicator alone and determined which housing
authorities met HUD‘s criteria for troubled (those that scored less
than 18 out of 30 possible points) and nontroubled (those that scored
18 or more points). We then considered the PIC risk assessment scores
and determined what risk levels would be assigned to the troubled and
nontroubled housing authorities under HUD‘s scoring system. Under PIC,
housing authorities are classified as low risk if they score between 0
and 44, moderate risk if they score between 45 and 64, and high risk if
they score between 65 and 100. All data were for the end of fiscal year
2001. Our analysis produced six groups of housing authorities, the
largest of which were the nontroubled high-risk (1,416) and the
nontroubled low-risk (1,615) groups.
After grouping the nation‘s housing authorities according to their
status and risk level, we attempted to identify the kinds of problems
found at nontroubled high-risk authorities by determining what quality
factors were associated with this group. For comparative purposes, we
also determined what quality factors were associated with the
nontroubled low-risk authorities.[Footnote 20] As discussed in appendix
I, the quality factors are indicative of potential problems. Table 2
identifies the percentage of housing authorities in each group where,
according to PIC, the factors were present. When we compared our
results for the two groups, we found that, in all but one
instance,[Footnote 21] the quality factors were more commonly present
for the nontroubled high-risk authorities than for the nontroubled low-
risk authorities. The largest differences between the two groups were
for other problems; reports where tenants claimed that the housing
authority did something improperly; and the number, size, or complexity
of new programs. The factors are ordered in the table according to
their frequency at nontroubled high-risk housing authorities.
Table 2: Quality Factors Associated with Nontroubled High-Risk and
Nontroubled Low-Risk Housing Authorities:
High Risk: (n=1416); Low Risk (n=1615):
Quality factor: Other problems; High risk: 16.4; Low risk: 6.7.
Quality factor: Staff skills insufficient to carry out housing
authority‘s functions; High risk: 6.9; Low risk: 5.2.
Quality factor: Significant and repeated delays in submitting required
information; High risk: 4.9; Low risk: 4.1.
Quality factor: Reports in which tenants claim that authority did
something improperly; High risk: 4.5; Low risk: 1.9.
Quality factor: Number, size, or complexity of new programs in last 12
months; High risk: 4.4; Low risk: 0.6.
Quality factor: Board or management issues or disagreements that
restrict authority‘s management; High risk: 3.2; Low risk: 1.9.
Quality factor: Theft, fraud, or other significant major audit
findings; High risk: 2.5; Low risk: 0.5.
Quality factor: News sources indicating significant and credible
problems; High risk: 2.3; Low risk: 0.3.
Quality factor: Serious or violent crime rate significantly above the
norm; High risk: 2.1; Low risk: 1.2.
Quality factor: Court actions or situations that restrict authority‘s
management; High risk: 2.0; Low risk: 0.1.
Quality factor: Concerns about authority raised by another group or
department; High risk: 1.7; Low risk: 1.2.
Quality factor: Unemployment, influx of people, and community
antagonism; High risk: 1.2; Low risk: 0.4.
Quality factor: Actions by political entity that restrict authority‘s
management; High risk: 0.8; Low risk: 0.3.
Quality factor: PHAS score is on appeal; High risk: 0.4; Low risk: 0.
Quality factor: Fire, flood, tornado, explosion, disease, or any act of
God; High risk: 0.1; Low risk: 0.
Quality factor: Section 8 Management Assessment Program score is on
appeal; High risk: 0; Low risk: 0.
Source: GAO analysis of HUD data.
[End of table]
[End of section]
Appendix III: Camden Housing Authority:
The Camden Housing Authority was established on April 20, 1938. It
consists of nine developments with 1,540 units. In addition, it
administers 804 Section 8 units and 93 Homeownership Project units,
which are available for purchase by residents. For fiscal year 2001,
the authority received an operating subsidy of $8.1 million and capital
funding of $4.8 million. Over the years, it has also received about $80
million for two ongoing HOPE VI projects--$42.1 million in fiscal year
1993, $3.1 million in fiscal year 1998, and $35 million in fiscal year
2000. The authority is currently under administrative receivership
because it breached its annual contributions contract. The director of
the New York Office of Public Housing is the HUD secretary‘s designee
and functions in lieu of the Camden Housing Board of Commissioners,
with the responsibilities and authority that would normally be assigned
to the board.
Historical Problems:
Management turnover has long been a problem at the Camden Housing
Authority. Since 1992, the authority has had nine executive directors
and many changes in the membership and leadership of its board of
commissioners, including five different chairpersons. Past
administrators attempted to respond to a broad range of issues and
constituencies--including local, state, and federal officials;
community leaders; residents; special interest groups; and the press--
instead of setting the foundations for substantive change. This
reactive management style left the residents confused and disheartened,
the staff demoralized, and the public housing authority open to
continuous criticism. In almost every key functional area, the
authority‘s systems were weak, nonexistent, or poorly administered. In
addition, the authority lacked clear goals, a strategic plan, and
strong leadership; most management decisions were subject to political
pressure; and the authority‘s workforce lacked the technical
competencies needed to operate a large property management
organization.
In addition, in July 1996 the HUD Inspector General reported that the
Camden Housing Authority was not complying with many of the public
housing program‘s requirements and regulations. Specifically, the
report indicated that the housing authority was, among other things,
* generally not providing decent, safe, and sanitary housing to
tenants;
* not complying with its procurement policies or with federal
procurement regulations;
* improperly hiring staff and providing salary increases;
* improperly paying for vacations and overtime;
* incurring unnecessary costs;
* inadequately controlling the disbursement of funds; and:
* inadequately controlling its equipment inventory.
On August 4, 1997, HUD found that the Camden Housing Authority had
substantially breached its annual contributions contract, seized the
authority‘s assets, appointed a transitional administrator, and
appointed a secretary‘s designee to assume the role and
responsibilities of the board of commissioners until the authority
could be returned to a fully functioning board.
Figure 19: Example of a Deteriorated Public Housing Development at the
Camden Housing Authority:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
HUD‘s Role and Corrective Actions:
After taking over the Camden Housing Authority, HUD installed a
consultant to act as a transitional executive director and start the
recovery process. This individual assessed conditions at the public
housing authority, finding many of the problems previously identified
by the Inspector General, and formulated a recovery plan. The initial
approach was to gain the confidence of residents through meetings with
them and to ensure that staff were properly trained and placed in
positions for which they were qualified. Several short-term initiatives
were instituted to clean and repair the housing projects, improve
management‘s relationship with residents, and improve the authority‘s
organizational structure. In addition, the authority developed a long-
term improvement strategy that focused on modernization efforts,
property management and maintenance, financial management,
administration, security, resident initiatives, and strategic
planning.
HUD awarded two technical assistance grants that totaled $1.1 million
for consulting services to manage the authority‘s day-to-day operations
as well as to provide technical assistance to the transitional
administrator and staff. In November 1997, HUD decided to downsize the
consultant team and hire permanent management staff in order to build
permanent capacity and stabilize the recovery effort for the long term.
On June 3, 1998, the transitional administrator resigned and a
permanent executive director took control of the public housing
authority. Since that time, there have been three executive directors.
Throughout the recovery process, HUD‘s New Jersey State Office has
provided intensive oversight and technical assistance to the public
housing authority to ensure an efficient and effective recovery
process.
Current Status and Challenges:
Under the current executive director, the public housing authority has
achieved many goals and successes in several operational areas. For
example, the public housing authority has:
* privatized its financial management and modernization functions until
internal capacity could be built;
* hired consultants to conduct an extensive training program and
reassigned its strongest employees to prominent positions;
* rehabilitated 148 units authoritywide;
* submitted an annual plan for the first time;
* initiated several capital improvement projects;
* reduced crime by improving security in its developments; and:
* instituted a skills training program for residents, many of whom have
subsequently been hired by the housing authority or the rehabilitation
and modernization contractors.
Figure 20: Example of a Rehabilitated Public Housing Development at the
Camden Housing Authority:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
In addition, the executive director established a PHAS coordinator who
made a concerted effort to raise the authority‘s PHAS scores. The
results have been positive. For example, the management operations
indicator rose from a troubled level of 16 in fiscal year 1999 to a
standard level of 23 in fiscal year 2000, and the financial operations
indicator rose from a failing score of 15 in fiscal year 1999 to a
passing score of 19 in 2000.
Despite these improvements, the public housing authority has not yet
fully recovered. Furthermore, there is a real concern within the
authority‘s current administration regarding whether the existing
reforms can be sustained and the authority can continue to move forward
after the Camden housing board resumes control.
[End of section]
Appendix IV: Puerto Rico Public Housing Administration:
Public housing programs started in Puerto Rico in 1938. In an effort to
reorganize its public housing, in 1957, the Puerto Rico government
created the Urban Renewal and Housing Corporation--the current housing
authority‘s predecessor. Then, in 1989, the government created the
Puerto Rico Public Housing Administration (PRPHA) within the Puerto
Rico Department of Housing. For a brief period, the government operated
both housing authorities before dissolving the Puerto Rico Urban
Renewal and Housing Corporation in 1991 and transferring its public
housing program to PRPHA. An administrator who is appointed by the
Puerto Rico secretary of housing directs PRPHA.
PRPHA is the second largest public housing authority in the
nation,[Footnote 22] with 338 developments and 56,834 units. Fifteen
private management companies and eight resident management corporations
manage the developments. In fiscal year 2001, it received about $270
million from the federal government, including $175.2 million for its
Capital Fund Program, $80.8 million for its operations, and $14 million
for its Drug Elimination Program. In addition, PRPHA continued to
obligate funds from a $50 million HOPE VI grant that it received in
fiscal year 1994.
Historical Problems:
Over the years, PRPHA has experienced many management problems,
although it is not currently considered troubled under PHAS. In 1981,
HUD designated the authority‘s predecessor as ’financially troubled.“
Later, in 1985, because of serious financial, administrative, and
project maintenance problems, HUD designated the agency as
’operationally troubled.“ In 1991, HUD severely sanctioned the agency
by freezing about $308 million of unobligated funds, and in 1992, the
governor of Puerto Rico transferred the housing authority‘s
modernization and development programs to the Puerto Rico Building
Authority, directing it to act as an agent for the housing authority.
In addition, private management companies were hired to manage the
housing developments, and the housing authority‘s staff was reduced
from over 4,500 employees to fewer than 100. The housing authority‘s
role was limited to accounting for and reporting on the use of federal
funds and ensuring that the management agents were fulfilling their
contractual responsibilities. HUD continued to view the housing
authority as troubled until December 1996, when it lifted the troubled
rating and restored control of the modernization program to the
authority. However, a year later, HUD designated the modernization
program as troubled because of financial management problems and the
need for corrective actions.
Single audits[Footnote 23] and HUD Inspector General reports have
disclosed other serious problems at PRPHA, including noncompliance with
procurement standards and associated management control weaknesses.
From fiscal years 1992 to 1997, single audit reports repeatedly cited
the housing authority for not following federal procurement
requirements. The reports also disclosed numerous instances of poor
management controls over disbursements and recommended that millions of
dollars in ineligible costs be recovered. Financial statement audits
for fiscal years 1993 through 1996 resulted in a disclaimer of opinion
because of the poor condition of the authority‘s accounting system and
internal control weaknesses. Furthermore, these audits were all done in
1998--the authority had not contracted for a single audit since 1991.
In 1997, the authority received a clean opinion,[Footnote 24] even
though the auditors found its internal controls to be inadequate, and,
in 1998 and 1999, it again received clean opinions despite
misappropriations of funds during those 2 years. For example, an
Inspector General‘s audit of the authority‘s fiscal year 1999
procurement activities disclosed that the authority had improperly
withdrawn and used about $17 million in public housing operating funds
for ineligible disaster relief expenses. Additionally, according to the
audit, the authority had improperly withdrawn and transferred $1
million in Comprehensive Grant Program funds to the Puerto Rico
Economic Development Bank for loans to public housing residents.
In March 2000, the Inspector General issued an audit report on the
housing authority‘s procurement management. The audit‘s objectives had
been to determine whether the authority (1) had procurement policies
and procedures that complied with HUD‘s requirements, (2) followed the
policies and procedures, (3) adequately determined the need for goods
and services, and (4) had adequate management controls to ensure the
receipt of quality goods and services and preclude duplicate payments.
According to the report, the authority‘s procurement practices and
controls fell short, as follows:
* PRPHA did not comply with federal and agency procurement requirements
and did not maintain control over its central office procurement
activities. For example, it bought 12,000 electric stoves at a cost of
$2,604,000 without going through the proper bidding process, 21,425 hot
water heaters at a cost of $2,365,437 even though the heaters could not
be installed in many of the projects because the units had only one
water line, and a desktop computer at the excessive price of $8,200.
* The housing authority also paid about $4.9 million more than
necessary for two professional services contracts valued at almost $14
million, because it issued the contracts without competition and a
comprehensive cost and price analysis.
* The authority did not have effective management controls to deter
waste, abuse, and fraud.
* The authority did not maintain adequate property management and
related procurement documents.
The Inspector General recommended, among other things, that HUD
consider declaring the authority in substantial default and placing it
on a reimbursement basis for funding. The authority ’vehemently“
disagreed with many aspects of the report, including many factual
findings and recommendations, and claimed, among other things, that the
report failed to recognize efforts already in place to improve
operations.
In addition, since 1998, a number of former public housing authority
and HUD employees and contractors have been under investigation for
embezzling federal housing funds, conspiracy, bribery, and money
laundering. These investigations have resulted in 26 indictments and 24
guilty pleas.
Finally, on March 30, 2001, the Inspector General reported a total
breakdown of the housing authority‘s administration of its HOPE VI
revitalization project. The report indicated that the authority lacked
effective management and accounting controls over its federal funds and
did not effectively monitor the activities of its project manager.
Furthermore, the Inspector General identified $5.4 million of
ineligible expenditures and $10.5 million of unsupported costs.
HUD‘s Role and Corrective Actions:
Since many of PRPHA‘s problems were in the procurement area, HUD sent a
procurement team to Puerto Rico in October 2000 to oversee the
procurement process and provide technical assistance. Specifically, the
team assessed how well the housing authority was addressing the
Inspector General‘s findings and recommendations, evaluated the
procurement practices, provided staff training, and reviewed documents
and manuals. The team spent 2 weeks a month on-site. In addition, HUD
sent a 10-member management team to Puerto Rico to provide technical
assistance in a variety of areas. The team expects the housing
authority to make tangible improvements over a specified time frame.
HUD will continue to evaluate the authority‘s progress and determine
whether more drastic intervention, such as placing the authority into
receivership, is warranted. Lastly, HUD planned to add seven staff to
its Puerto Rico field office to enhance its capacity to monitor the
authority and provide technical assistance.
To resolve problems with PRPHA‘s HOPE VI program, the governor of
Puerto Rico agreed on July 6, 2001, to transfer the program to HUD,
including all assets and functions necessary to complete and lease all
of the developments in the program. As a result, HUD now has:
* the ability to direct and hire the staff--including housing authority
staff--needed to complete the HOPE VI program,
* the right to propose resolutions of claims against the housing
authority arising under the program, and:
* the ability to direct and administer contracts that pertain to the
program.
Current Status and Challenges:
PRPHA‘s new administration has many initiatives under way to improve
operations and internal controls and to resolve many of the issues
identified by the HUD Inspector General. For example, the
administration centralized procurement functions in one office and
developed a procurement plan and manual, centralized all modernization
functions that were formerly decentralized, and created a new central
auditing office to review the authority‘s operations and coordinate
corrective actions with the Inspector General.
While these steps appear to be positive, there continues to be high
turnover in the housing authority‘s management--a source of past
problems and a potential limit on the authority‘s ability to sustain
recent improvements. The authority has had several administrators over
the past few years as well as a constantly changing stream of senior
administrative staff. With every change in administration, new staff
have been trained, and new processes and guidelines have been
established. This constant change has resulted in a lack of
accountability for past problems and confusion among those responsible
for implementing the new processes and procedures. Already, the new
administration, which was installed in January 2001, has hired a second
administrator.
[End of section]
Appendix V: Housing Authority of New Orleans:
The Housing Authority of New Orleans (HANO) was organized in 1937 to
assist and provide housing to low-income residents of New Orleans. HANO
operates approximately 9,600 public housing units in the city of New
Orleans. As of December 14, 2001, the housing authority had
approximately 6,600 occupied units and 3,000 vacant units. HANO was
designated as troubled in 1979 and remained as such until 1998, after
it scored well enough under HUD‘s former evaluation system to be
removed from the troubled list. The most recent and available
assessment of the housing authority‘s performance is for fiscal year
2000. Under this assessment, the authority received an overall advisory
PHAS score of 61 out of 100 possible points, including 26 out of 30
points for its management operations. For fiscal year 2001, the housing
authority received over $66 million, including an operating subsidy of
$34 million, $29.8 million through the Capital Fund Program, and $2.8
million through the Drug Elimination Program.
HANO‘s current executive director assumed responsibility in September
2000. At that time, the accounting and management firm of Mitchell and
Titus, LLP, won a federal contract to assume the role of the board of
commissioners at HANO. In January 2001, the firm appointed a
subcontractor who acts as a one-person board for HANO.
Historical Problems:
HANO has experienced significant management problems, particularly a
lack of continuity in its top management. Since 1997, HANO has had four
different one-person boards. In addition, it has had three executive
directors in the past 6 years. This lack of continuity has contributed
to the housing authority‘s inability to make any significant progress
in maintaining and improving its housing stock. During some periods,
routine maintenance was not conducted on many of its properties, and it
is only now, under its most recent executive director, that it has
begun major rehabilitation work to modernize many of its units. Because
of these management problems, HANO has received poor physical condition
scores for the last several years. The current executive director has
also had to make changes within the Section 8 staff. The executive
director conveyed that an in-depth investigation of the program
revealed improprieties among some of the staff, and several individuals
were fired, placed on administrative leave, or relocated.
Figure 21: Example of a Deteriorated Public Housing Development at the
Housing Authority of New Orleans:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
According to HANO officials, outside interference has made it extremely
difficult to determine who is actually in charge at HANO. The chair of
HANO‘s board of directors explained that he has periodically seen
outsiders step in and either influence or reverse decisions taken by
the housing authority. The chair explained that the ambiguity
surrounding who is in charge at HANO has contributed to further delays
in the housing authority‘s plans to maintain its housing assets.
Specifically, he said that contracts and proposals have at times been
delayed by outside interference.
HANO also has had a history of procurement problems. According to the
local HUD Inspector General‘s office, HUD headquarters has denied
procurements in some cases because of improprieties in the housing
authority‘s scoring of bids for projects. Concerns have also arisen
about procurement violations under a recovery plan that the authority
embarked upon in 1996.
Finally, HANO has accumulated insurance and other claims that have
amounted to about $22 million in liabilities. Judgments against the
housing authority have continued to accrue interest. While the claims
have left the housing authority financially strapped, HUD‘s current
executive monitor and HANO‘s executive director are making this issue a
priority, allocating approximately $5 million annually for payments of
claims.
HUD‘s Role and Corrective Actions:
In 1996, HUD entered into a partnership with the city of New Orleans
through a cooperative endeavor agreement designed to bring about the
agency‘s recovery. HANO officials view this agreement as a form of
administrative receivership. Under the agreement, HANO‘s seven-member
board of commissioners was dissolved and the acting assistant secretary
for public and Indian housing was given the authority to fulfill the
duties of the board. An executive monitor position was created to
oversee, coordinate, and monitor HANO‘s compliance with the agreement.
Specifically, the executive monitor oversees work on modernization,
revitalization, capital funding, and development. HUD retained its
right to appoint a receiver and created a specific action plan for the
authority‘s improvement. Under the agreement, HUD headquarters, and not
the local HUD field office, makes most of the decisions affecting the
oversight and monitoring of the housing authority. The cooperative
endeavor agreement is effective through December 31, 2003.
Current Status and Challenges:
HANO is currently focusing on its modernization and revitalization
projects. The authority is taking steps to correct the problems caused
by deferring maintenance in the past. Progress has been slower than
expected, particularly on the HOPE VI sites where, according to the
local HUD field office, tenants‘ concerns about relocation have caused
delays. The housing authority is also investigating the insurance
claims against it and attempting to settle those that pose the greatest
financial risks.
HUD and HANO have discussed the possibility of a judicial receivership
as the next step in bringing about the authority‘s recovery. However,
they have not yet reached a final decision.
[End of section]
Appendix VI: Chicago Housing Authority:
The Chicago Housing Authority--the nation‘s third largest, with 38,000
units--has long had a history of problems. HUD designated the authority
as ’troubled“ as far back as 1979, when the Department first began to
focus on poorly performing housing authorities. In 1995, HUD took
control of the authority‘s operations. It reorganized the authority‘s
management, privatized some functions, developed plans to improve
maintenance and security, and began to rebuild and rehabilitate the
housing stock. After completing these actions, HUD returned the
authority to local control in 1999. For fiscal year 1999, the Chicago
Housing Authority received an overall advisory PHAS score of 65.
Historical Problems:
Management problems and distressed housing conditions have plagued the
Chicago Housing Authority for years. It has had material weaknesses in
its internal control system, fiscal problems, and frequent turnover of
top management. In 1989, we reported that the authority had operated
for years without reasonable assurance that federal funds were
adequately safeguarded against waste, loss, or misuse.[Footnote 25] In
addition, the authority‘s housing is among the worst in the nation--
old, deteriorated, and poorly designed for the climate. According to a
Chicago Housing Authority official, the cost of repairing these poorly
designed projects is excessive. For example, after the boilers at the
authority‘s Robert Taylor Homes development broke down in the middle of
winter, causing flooding and freezing, the repairs cost $150,000 per
affected unit, according to a housing authority official. Further
complicating the authority‘s problems are large concentrations of high-
rise family projects. For example, the Robert Taylor Homes and Stateway
Gardens public housing complexes form one continuous development with
approximately 6,000 units. The design of these developments and their
concentration of residents have exacerbated crime and social problems
in Chicago‘s public housing.
Figure 22: Examples of a Deteriorated Public Housing Development at the
Chicago Housing Authority:
[See PDF for image]
Source: GAO photographs taken during site visits to five housing
authorities.
[End of figure]
HUD‘s Role and Corrective Actions:
After returning the Chicago Housing Authority to local control, HUD
agreed with its management and Mayor Daley to grant the authority
budget and management flexibility, allowing it to completely revamp
public housing in Chicago under its Plan for Transformation. HUD agreed
to provide $1.5 billion over 10 years so that the housing authority
could carry out this plan, which includes the demolition of 18,000
units and the redevelopment or rehabilitation of 25,000 units. The new
units are to be located in mixed-income communities. HUD used its
Moving to Work Program to allow the Chicago Housing Authority to
undertake a redevelopment plan of this size, even though the authority
does not have the history of high performance that other authorities in
the program have had. The Moving to Work Program was designed to reward
housing authorities that had demonstrated above-average performance by
giving them the flexibility to combine their funding streams into a
single block grant. The purpose of the program was to test innovative
methods of providing housing and delivering services to low-income
families in a cost-effective manner. According to Chicago Housing
Authority and HUD officials, even though the housing authority was not
a high-performing agency, the Moving to Work Program was the only means
by which it could carry out its Plan for Transformation. According to
housing authority officials, they needed to combine their funding
sources to leverage their assets and attract private funding.
Under this special agreement, HUD is monitoring the housing authority
through a headquarters-based liaison, using monitoring goals that the
authority agreed to under the Plan for Transformation. While still
subject to evaluation under PHAS, the authority will not be penalized
until March 2003 if its developments fail their physical inspections,
if the authority is making reasonable progress under its plan. HUD
considers the Plan for Transformation sufficient to meet its
requirement for a recovery plan.
Current Status and Challenges:
The Chicago Housing Authority has instituted several changes in its
operations in accordance with its goals under the Plan for
Transformation and has begun redevelopment activities. It has
transferred all of its property management functions to professional
property management companies or resident management corporations,
reduced overhead expenses, and eliminated its police force to achieve
further cost savings. According to the representatives of resident
groups we spoke with, maintenance at the developments has improved
since the transfer of property management responsibilities to private
companies. The representatives also commented that under the Plan for
Transformation, the housing authority officials are more responsive to
the residents‘ concerns and have a better rapport with the residents.
Housing authority officials are also seeking input from residents on
the design of the new public housing developments and the amenities
they should provide. According to the Chicago Housing Authority,
redevelopment has begun at six of its major developments. Since 1995,
the authority has spent approximately $50 million on redevelopment
activities, including the demolition of 1,190 units, rehabilitation of
2,178 units, and construction of 455 new units.
The Chicago Housing Authority has many challenges to face in completing
its massive transformation. The plan will take several years to
complete, repairs of existing units will cost over $3 billion, and
approximately 6,000 households will require relocation. Some of the
residents are opposed to relocating because they are fearful that they
will not be able to return to public housing. As a result, residents
have taken legal action to prevent the demolition of their housing
projects. Another challenge for the residents who need to relocate is
the tightness of the rental housing market in Chicago. Some residents
have complained that they have not been able to use their Section 8
vouchers to find apartments. According to the Metropolitan Planning
Council, as of 1999, Chicago‘s rental market has a vacancy rate of 4.2
percent, well below the 6-percent figure that HUD uses to define a
tight market.[Footnote 26] The Chicago Housing Authority also faces
constraints on where it may build new public housing developments. As a
result of a 1969 court order, known as the Gautreaux[Footnote 27]
judgment order, the building of new public housing units is restricted
in neighborhoods where more than 30 percent of the population is
African American.
[End of section]
Appendix VII: San Francisco Housing Authority:
The San Francisco Housing Authority (SFHA) was established in 1938 and
currently operates approximately 6,100 public housing units in the city
of San Francisco. As of July 31, 2001, approximately 98 percent of
these units were occupied. The current executive director assumed his
position in March 2001. For fiscal year 2001, SFHA received over $43
million, including a $24.6 million operating subsidy, $17.6 million
through the Capital Fund Program, and $1.4 million through the Drug
Elimination Program. To date, the authority has also received $115
million in HOPE VI grants.
The most recent and available assessment of SFHA‘s performance is for
fiscal year 2000. The authority received an overall advisory PHAS score
of 63 but was awarded only 9 of 30 possible points for the financial
condition indicator. The authority was taken over by a HUD recovery
team from 1996 to 1997 and was then assigned to a recovery center in
1997. The housing authority could have been removed from the center in
1999 after being designated as a standard performer under PHMAP, but
the authority decided to stay in the center so that it could continue
to receive assistance. SFHA is currently assigned to the Memphis
Troubled Agency Recovery Center.
Historical Problems:
SFHA‘s most pressing problem--and the primary reason for its low
financial condition score under PHAS--is an operating reserve
shortfall. The authority has been unable to balance its budget and for
fiscal year 2001 had an operating deficit of $6.2 million. In general,
the authority has very high expenses because, according to HUD
officials, its employees are paid at union rates, reflecting the
strength of unions in the city. In addition, the housing authority
spent almost $5 million during fiscal year 2001 for security provided
by the San Francisco Police Department and by private security hired by
the authority.
Other reasons for SFHA‘s operating reserve shortfall include debt
incurred in recent years and past improper procurements. The authority
is paying back approximately $22 million in emergency funds that the
previous executive director borrowed from HUD for repairs to roofs and
broken concrete, among other problems. In addition, more money was
spent on some contracts than was necessary because the authority was
not following procurement policies correctly and contracts were being
handled improperly.
According to SFHA officials, the housing authority has also had
problems with high turnover and staffing. Specifically, the authority
has had 10 executive directors in the past 10 years. In addition, past
hiring practices led to overstaffing, and some of the personnel who
were hired did not have the necessary qualifications, according to HUD
and SFHA officials. Furthermore, an SFHA official explained that some
of the housing authority‘s current employees are still loyal to the
previous executive director, and that this situation has caused
divisions within the housing authority.
HUD‘s Role and Corrective Actions:
The Memphis recovery center is currently servicing SFHA. A team from
the center provides technical assistance deemed necessary for the
authority‘s recovery and works closely with the authority‘s public
housing programs. It also monitors the authority and works with it to
close out the HUD Inspector General‘s audit findings.
The recovery center works with the housing authority on many fronts.
Together, they have developed a plan to balance the budget, and the
center has submitted a plan to the authority‘s executive director for
improving the authority‘s operations. HUD expects that some of the
plan‘s recommendations will be reflected in the authority‘s budget. The
recovery center has also worked with the authority on procurement
procedures by training staff on contracting regulations and practices.
The recovery center also reviews all procurement actions in excess of
$50,000. Finally, the recovery center is assessing the staffing
situation at SFHA. According to the recovery center‘s team leader for
SFHA, since the center began servicing the authority, 50 to 70
positions have been terminated in an effort to cut costs and alleviate
the overstaffing. As part of this effort, the center is responsible for
reviewing the hiring of individuals whose salary exceed $50,000.
Current Status and Challenges:
SFHA has made some progress toward financial accountability under the
recovery center‘s supervision. More attention is now being given to how
the housing authority allocates its budget. In addition, procurement
policies and procedures are being improved. The housing authority has
reduced its staff and, with assistance from the recovery center, is
working on a plan to improve its operations. The center‘s goal for
completing the authority‘s recovery is September 30, 2002.
[End of section]
Appendix VIII: Contact and Staff Acknowledgments:
GAO Contact:
Paul Schmidt, (312) 220-7681:
Acknowledgments:
In addition to those named above, Avani Divgi, Mark Egger, Elizabeth
Eisenstadt, Michele Fejfar, Jacqueline Garza, Kirk Kiester, Tarek
Mahmassani, John McGrail, Frank J. Minore, Theresa Perkins, and Roberto
Piņero made key contributions to this report.
FOOTNOTES
[1] 42 U.S.C. 1437d(j), Cranston-Gonzalez National Affordable Housing
Act of 1990, as amended.
[2] U.S. General Accounting Office, Public Housing: HUD Should Improve
the Usefulness and Accuracy of Its Management Assessment Program, GAO/
RCED-97-27 (Washington, D.C.: Jan. 29, 1997).
[3] U.S. General Accounting Office, HUD Housing Portfolios: HUD Has
Strengthened Physical Inspections but Needs to Resolve Concerns About
Their Reliability, GAO/RCED-00-168 (Washington, D.C.: July 25, 2000)
and HUD Inspections: Steps Needed to Address Uncertainty in Inspection
Scores, GAO-01-109 (Washington, D.C.: Nov. 8, 2000).
[4] 42 U.S.C. 1437d(j).
[5] The Quality Housing and Work Responsibility Act of 1998, enacted
shortly after HUD first issued regulations implementing PHAS, requires
housing authorities to be placed into receivership if they cannot
emerge from troubled status within 2 years.
[6] See the Conference Report (106-988) for HUD‘s fiscal year 2001
appropriations act (P.L. 106-377, approved Oct. 27, 2000).
[7] This annual contract between HUD and a housing authority specifies
what the authority must do to receive funding from HUD during the
contract year.
[8] The management operations indicator has six subindicators--vacancy
rate and unit turnaround, capital fund, rents uncollected, work orders,
annual inspection of dwelling units and systems, and security and self-
sufficiency.
[9] U.S. General Accounting Office, Public Housing: HUD Needs Better
Information on Housing Agencies‘ Management Performance, GAO-01-94
(Washington, D.C.: Nov. 9, 2000).
[10] The five components of the physical inspection score are the site,
building exteriors, building systems, common areas, and dwelling units.
[11] The Camden Housing Authority would have been designated as
troubled under PHAS but was not because it was in administrative
receivership; however, according to HUD, the authority was briefly
designated as troubled while it was in receivership. The four other
nontroubled authorities we visited were the Chicago Housing Authority,
the Housing Authority of New Orleans, the Puerto Rico Public Housing
Administration, and the San Francisco Housing Authority.
[12] HUD‘s Inspector General Audit Report (96-NY-204-1004, July
24,1996).
[13] San Francisco Housing Authority Low-Income and Section 8 Housing
Programs, San Francisco, California (00-SF-201-1001, Mar. 31, 2000).
[14] Puerto Rico Public Housing Administration Procurement Management,
San Juan, Puerto Rico (00-AT-201-1003, Mar. 6, 2000).
[15] Before the introduction of PHMAP, HUD field offices evaluated the
performance of public housing authorities and determined whether they
were troubled according to criteria in HUD‘s monitoring handbook.
However, this determination was not systematic and was not necessarily
done each year. Not until PHMAP took effect in fiscal year 1992 was the
troubled designation based on a systematic yearly assessment of housing
authorities‘ operations.
[16] The data we received from REAC did not include the PHAS scores for
1 of the 3,167 housing authorities.
[17] Although we received some data for management operations
subindicators measuring vacant units, unit turnaround, rent
uncollected, security, and economic self-sufficiency, we did not
include these measures in our analysis because they were not used
consistently for the entire fiscal year.
[18] Not filing the required data is in itself a management problem.
[19] Because the data we received from PIC did not include the risk
assessment scores for 1 of the 3,167 housing authorities, we eliminated
this authority from our analysis.
[20] Because fewer than 5 percent of the nontroubled housing
authorities were classified as moderate risk, it was inappropriate to
compare the results for them with the results for the other nontroubled
categories.
[21] No housing authorities in either the nontroubled high-risk or the
nontroubled low-risk group had a Section 8 Management Assessment
Program score on appeal reported.
[22] The New York City Housing Authority is the nation‘s largest public
housing authority.
[23] ’Single audits“ are annual financial audits conducted by
independent public accounting firms.
[24] Receipt of a ’clean opinion,“ according to the auditors, indicates
that the authority‘s financial statements fairly present the financial
position of the organization and the results of its operations and its
cash flows for the year, in conformity with generally accepted
accounting principles.
[25] U.S. General Accounting Office, Public Housing: Chicago Housing
Authority Taking Steps to Address Long-Standing Problems, GAO/RCED-89-
100 (Washington, D.C.: June 8, 1995).
[26] Public Housing in the Public Interest: Chicago Housing Authority
Transformation Plan Update, October 2000, Metropolitan Planning Council
(Chicago: Oct. 2000).
[27] Gautreaux v. CHA, 304 F. Supp. 736 (N.D. Ill. 1969)
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