HUD Housing Portfolios:

HUD Has Strengthened Physical Inspections but Needs to Resolve Concerns About Their Reliability

RCED-00-168: Published: Jul 25, 2000. Publicly Released: Aug 24, 2000.

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Pursuant to a congressional request, GAO reviewed the Real Estate Assessment Center's (REAC) new physical inspection system for the Department of Housing and Urban Development's (HUD) public and multifamily housing properties, focusing on whether: (1) REAC's inspection system represents an improvement over HUD's prior inspection systems; and (2) REAC's inspections are reliable.

GAO noted that: (1) under the new physical inspection system, as in the past, the primary basis for HUD's physical inspection standards is the statutory requirement for decent, safe, and sanitary housing; (2) HUD's new standards require that both multifamily and public housing be decent, safe, sanitary, and in good repair; (3) while the new standards do not differ substantially from the previous ones, HUD substantially revised the procedures used to administer the standards; (4) HUD believes that the new system produces more objective assessments than those performed under previous systems; (5) these assessments provide a basis for targeting resources to the properties that need the most attention; (6) according to REAC's data, about 87 percent of the multifamily properties and 80 percent of the public housing properties reviewed as of April 2000 received scores of at least 60, which HUD considers satisfactory; (7) however, when REAC quality assurance staff performed on-site follow-up reviews to assess the adequacy of completed inspections, they often found that the inspections were not carried out consistently with REAC's requirements; (8) the quality assurance reviewers determined during follow-up reviews performed in 1999 and the early part of 2000 that about 35 percent of the inspections did not meet REAC's standards; (9) however, because these reviews were not performed on a random basis and the effects of the identified problems on the inspection scores cannot be readily determined, it is unclear to what extent the problems with the inspections affected the overall inspection results; (10) although REAC deserves credit for establishing quality assurance procedures, GAO found gaps and weaknesses in some of these procedures that substantially limited their effectiveness; (11) representatives of public housing authorities and multifamily housing industry groups that GAO interviewed also had concerns about the reliability of REAC's inspections; (12) they were concerned that the scores may not necessarily reflect the actual condition of some properties, noting that, in some instances, there were substantial differences in the inspection scores received by properties that had undergone more than one inspection; (13) they were also concerned that HUD may lack the resources needed to ensure the efficient operation of its appeals procedures; and (14) while some housing industry groups suggested alternatives to the current physical inspection system, none of the groups GAO contacted had conducted analyses to compare the cost and accuracy of these alternatives and HUD's current system.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: HUD has taken actions in response to GAO's recommendations that have improved REAC's quality assurance plan. For example, REAC has revised the plan so that it contains additional information on how the results of its quality assurance reviews will be used to evaluate the accuracy of inspections, assess inspector performance, and evaluate the REAC physical inspection protocol. The plan also more clearly describes how REAC will review contractor quality assurance activities so that it can take them into account when planning its own reviews. REAC's Inspector Tracking System also now documents problems that REAC identifies with inspector performance as part of its quality assurance activities and the corrective actions taken. This addresses our concerns regarding REAC documentation of actions taken when poorly performing inspectors are identified during collaborative and follow-up reviews.

    Recommendation: The Secretary of Housing and Urban Development should direct the Director, REAC, to revise REAC's April 2000 quality assurance plan as necessary to ensure that the quality assurance activities it contains will provide REAC with the information it needs to evaluate four key areas: (1) inspection contractors' compliance with provisions in their contracts and quality control programs; (2) inspectors' performance in applying REAC's inspection protocol; (3) the accuracy of the inspections and resulting scores; and (4) the performance of the physical inspection program as indicated by the precision and replicability of the inspection protocol. The revisions should include adding information to the plan that describes: (1) how the information obtained through various quality assurance procedures will be used to assess REAC's performance in meeting each of the plan's objectives; (2) how REAC's quality assurance activities relate to activities performed by the inspection contractors as part of their quality control programs; and (3) what records REAC should maintain to document its actions when poorly performing inspectors are identified during collaborative and follow-up reviews. In addition, REAC should reevaluate whether the plan contains appropriate criteria for quality assurance personnel to use in assessing each of the activities covered by the plan.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: REAC plans to conduct formal semi-annual reviews of its quality assurance program. The first of these reviews covered the period July 1, 2000, through December 31, 2000. In an effort to synchronize the review periods with REAC's fiscal year, future reviews will cover the period from October 1 to March 30 and April 1 to September 30. Reports on the reviews are to be completed within 60 days of the end of the reporting period.

    Recommendation: To provide Congress with timely information on REAC's progress in addressing concerns about the reliability of physical inspections, HUD should periodically issue reports describing the quality assurance activities that it has performed and the results of these activities.

    Agency Affected: Department of Housing and Urban Development


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