We audited the Delaware County Housing Authority's (Authority) administration of its housing quality standards inspection program for its Section 8 Housing Choice Voucher program as part of our fiscal year 2008 audit plan. Our audit objective was to determine whether the Authority ensured its program units met housing quality standards in accordance with U.S. Department of Housing and Urban Development (HUD) requirements.

The Authority did not adequately administer its inspection program to ensure that its program units met housing quality standards as required. We inspected 61 housing units and found that 60 units did not meet HUD's housing quality standards. Moreover, 32 of the 60 units had health and safety violations that the Authority's inspectors did not observe or report during their last inspection. The Authority spent $43,324 in program and administrative funds for these 32 units.

The Authority also did not properly abate rents when units failed its housing quality standards inspections. We reviewed 25 program units that did not pass the Authority's housing quality standards inspections and determined that the Authority failed to abate payments for 21 of the units and inappropriately abated payments for four units. The 21 units remained in a failing status for as long as 65 days. However, the Authority failed to abate the program rents or terminate the contracts for these units, resulting in improper payments of $6,522. In four cases, the Authority did not resume the housing assistance payments once the units became compliant with housing quality standards, resulting in $1,520 in underpayments to landlords.

We estimate that over the next year if the Authority does not implement adequate procedures and controls to ensure that its program units meet housing quality standards and that abatement requirements are enforced, HUD will pay more than $1.9 million in housing assistance on units with material housing quality standards violations and for units that should have had assistance payments abated.

We recommend that the Director of HUD's Pennsylvania State Office of Public Housing require the Authority to ensure that housing units inspected during the audit are repaired to meet HUD's housing quality standards, reimburse its program from nonfederal funds for the improper use of $43,324 in program and administrative funds for units that materially failed to meet HUD's housing quality standards, and implement adequate procedures and controls to ensure that in the future, program units meet housing quality standards to prevent an estimated $1.9 million from being spent annually on units that materially fail to meet HUD's housing quality standards. We also recommend that HUD require the Authority to reimburse its program $6,522 for the 21 units for which it did not abate assistance payments, pay landlords $1,520 for payments that were not abated correctly, and enforce its established policies and procedures to ensure that its abatements comply with HUD requirements, thereby preventing an estimated $26,000 from being spent annually on units that should have had assistance payments abated.