We audited the Housing Authority of the City of Allentown'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. This is our second audit report issued on the Authority's program. The audit objective addressed in this report was to determine whether the Authority adequately administered its Section 8 housing quality standards inspection program to ensure that 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 57 housing units and found that 51 units did not meet HUD's housing quality standards. Moreover, 47 of the 51 units had exigent health and safety violations that the Authority's inspectors neglected to report during their last inspection. The Authority spent $80,316 in program and administrative funds for these 47 units. The Authority also did not properly abate rents when units failed its housing quality standards inspections. We reviewed 30 program units that did not pass the Authority's housing quality standards inspections and determined that the Authority should have abated housing assistance payments for 13 units. However, the Authority failed to abate the program rents or terminate the contracts for these units, resulting in improper payments of $8,504 in housing assistance. We estimated 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 $1.3 million in housing assistance and administrative fees on units that materially fail to meet HUD's housing quality standards and for units that should have had assistance payments abated.

We recommend that HUD require the Authority to ensure that housing units inspected during the audit are repaired to meet HUD's housing quality standards, reimburse its program for the improper use of $80,316 in program 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 $1.2 million from being spent annually on units that materially fail to meet HUD's housing quality standards. Further, we recommend that HUD require the Authority to reimburse its program $8,504 for the 13 units for which it did not abate assistance payments and develop and implement management controls to ensure that employees comply with HUD policies and procedures concerning abatements, thereby preventing an estimated $34,016 from being spent annually on units that should have had assistance payments abated.