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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 

Piñero 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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