oversight

Multi-Family Housing Tenant Eligibility

Published by the Department of Agriculture, Office of Inspector General on 2020-02-12.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

     United States Department of Agriculture




Multi-Family Housing Tenant Eligibility




Audit Report 04601-0003-31
February 2020                                  OFFICE OF INSPECTOR GENERAL
Multi-Family Housing Tenant Eligibility


Audit Report 04601-0003-31
OIG evaluated RHS’ controls over tenant eligibility to occupy multi-family rental
housing in rural areas.



OBJECTIVE                           WHAT OIG FOUND
Our objective was to evaluate       From fiscal years (FY) 2016 to 2018, the Rural Housing
RHS’ controls over the tenant       Service (RHS) provided more than $2.9 billion in rental
certification and recertification   assistance payments on behalf of low-income tenants
process, including income
                                    residing in approximately 14,000 Multi-Family Housing
verification.
                                    (MFH) apartment complexes. In order to ensure the
                                    eligibility of tenants residing in these apartments,
                                    property management must verify and document tenant
REVIEWED                            eligibility in the tenant’s file.

We reviewed FY 2016 to 2018         Our review found that 11 of 100 selected MFH
MFH tenant records. We              tenant certification files from the selected States
selected a statistical sample of    contained either inadequate documentation, errors
100 tenants from the 14 States      in calculations, or both. This occurred because MFH
with highest rental assistance      property management did not always ensure all required
dollars for file reviews. We also
                                    documents were retained and all calculations were
evaluated supervisory review
records and analyzed MFH data.      correct. As a result, we could not confirm the eligibility
                                    of two tenants and, based on our statistical sample,
                                    estimated that approximately 74,652 tenants received a
                                    total of approximately $26.9 million in inaccurate rental
RECOMMENDS                          assistance. We also found that RHS did not complete
                                    triennial supervisory reviews timely for 1,503 out of
RHS should improve its training     14,388 properties—38 properties went 10 years without
for documentation requirements      review—due to issues with the reports State offices were
and best practices for document     using to track the reviews. Finally, we found that out of
transfers during management
                                    624,424 total MFH tenants, records for 5,585 tenants had
company changes. It also
                                    data quality issues related to identifying information for
needs to improve supervisory
review tracking and ensure          the heads of household. Erroneous data can impair the
past due reviews are completed.     agency’s efforts to verify tenant eligibility and implement
Additionally, the agency            recently authorized wage matching capabilities.
needs to better ensure tenant
identification information is       RHS concurred with our recommendations and
accurate. Finally, RHS needs to     we accepted management decision on all 10
recover unauthorized assistance     recommendations.
and address other errors we
identified.
                           United States Department of Agriculture
                                  Office of Inspector General
                                   Washington, D.C. 20250



DATE:          February 7, 2020

AUDIT
NUMBER:        04601-0003-31

TO:            Bruce W. Lammers
               Administrator
               Rural Housing Service

ATTN:          Gary Bojes
               Chief Risk Officer
               Office of the Chief Risk Officer

FROM:          Gil H. Harden
               Assistant Inspector General for Audit

SUBJECT:       Multi-Family Housing Tenant Eligibility


This report presents the results of the subject review. Your written response to the official draft
is included in its entirety at the end of the report. We have incorporated excerpts from your
response, and the Office of Inspector General’s (OIG) position, into the relevant sections of the
report. Based on your written response, we are accepting management decision for all 10 audit
recommendations in the report, and no further response to this office is necessary. Please follow
your internal agency procedures in forwarding final action correspondence to the Office of the
Chief Financial Officer (OCFO).

In accordance with Departmental Regulation 1720-1, final action needs to be taken within 1 year
of each management decision to prevent being listed in the Department’s annual Agency
Financial Report. For agencies other than the Office of the Chief Financial Officer (OCFO),
please follow your internal agency procedures in forwarding final action correspondence to
OCFO.

We appreciate the courtesies and cooperation extended to us by members of your staff during our
audit fieldwork and subsequent discussions. This report contains publicly available information
and will be posted in its entirety to our website (http://www.usda.gov/oig) in the near future.
Table of Contents
Background and Objectives ................................................................................... 1
Section 1: RHS Controls Over MFH Tenant Eligibility .................................... 4
Finding 1: RHS Needs to Improve Controls Over its Certification and
Recertification Process ........................................................................................... 4
         Recommendation 1 ........................................................................................6
         Recommendation 2 ........................................................................................7
         Recommendation 3 ........................................................................................7
Finding 2: RHS Needs to Improve Controls Over Triennial Supervisory
Reviews ..................................................................................................................... 9
         Recommendation 4 ......................................................................................10
         Recommendation 5 ......................................................................................10
Finding 3: RHS Needs to Improve the Quality of Data in MFIS .................... 12
         Recommendation 6 ......................................................................................14
         Recommendation 7 ......................................................................................15
         Recommendation 8 ......................................................................................15
         Recommendation 9 ......................................................................................16
         Recommendation 10 ....................................................................................16
Scope and Methodology ........................................................................................ 17
Abbreviations ........................................................................................................ 19
Exhibit A: Summary of Monetary Results ........................................................ 20
Exhibit B: Sampled Property Locations by State ............................................. 21
Exhibit C: Sampling Methodology for Rural Housing Service Multi-Family
Housing Eligibility Audit ...................................................................................... 22
Agency’s Response ................................................................................................ 25
Background and Objectives 
Background
The Department of Agriculture’s (USDA) Rural Housing Service (RHS) is responsible for
administering Multi-Family Housing (MFH) Programs. MFH properties provide affordable
rental housing in rural areas geared for low-income, elderly, and disabled individuals and
families.1 To occupy a unit in an MFH apartment complex, applicants must meet agency-defined
income limits as well as the program’s definition of an eligible household, which may be made
up of a variety of one or more people residing in the apartment.2

RHS provides rental assistance payments on behalf of low-income tenants who are unable to pay
their full rent.3 From fiscal years (FY) 2016 to 2018, RHS provided more than $2.9 billion in
subsidies through the MFH rental assistance program, which includes about 14,000 MFH
apartment complexes in 50 States, Puerto Rico, the Virgin Islands, and Guam. Each property
includes multiple apartment units, which vary from one bedroom to five bedrooms. Figure 1
shows a recently vacated two-bedroom MFH apartment.

                          Figure 1: A recently vacated MFH apartment before the next
                          tenant moved in. Photo by Office of Inspector General (OIG).




MFH property management is responsible for complying with all applicable laws and
regulations, including requirements to verify tenant eligibility.4 With RHS guidance, MFH
property management develops verification and documentation procedures for the properties


1
  MFH programs were authorized by Title V of the Housing Act of 1949 and are governed by 7 C.F.R. § 3560,
which was last updated in 2005.
2
  A household consists of the tenant or co-tenant and the persons or dependents living with a tenant or co-tenant, but
not including a resident assistant.
3
  For those tenants receiving benefits, MFH rental assistance subsidizes the difference between 30 percent of a
tenant’s income and the monthly rental rate.
4
  The owners of MFH apartment complexes may manage the complexes themselves or hire management agents to
operate their properties.

                                                                          AUDIT REPORT 04601-0003-31                1
they manage. During the application process, property management certifies that prospective
tenants are eligible.

To complete a tenant certification, property management must verify and document the
following in the tenant’s file: all income, assets, expenses, deductions, family characteristics,
and any other factors that affect family eligibility or level of assistance. To ensure a tenant
remains eligible to reside in MFH housing, property management must complete a
recertification, at least annually, or whenever a tenant reports a $100 minimum change in
monthly household income. Property management must recertify tenants for monthly household
income changes at or above $50, if the tenant requests that such a certification be made. The
certification is valid for 1 year unless the tenant’s income changes in such a way that a new
certification would be required.

If permitted by State law, RHS State offices verify tenant income by conducting State-level wage
and benefit matches on at least 10 percent of all initial and subsequent tenant certifications each
year. The recent Agriculture Improvement Act of 2018 granted USDA additional authorities to
verify the income of tenants in rural housing programs similar to another Federal Department.5
RHS is currently working on an inter-Departmental agreement that will provide property
management personnel with additional resources to determine tenant eligibility, such as access to
a national wage matching system.

RHS monitors the program through State and local office reviews. Routine monitoring includes
regular checks of property management submissions and periodic onsite visits. The agency also
performs triennial supervisory visits at MFH properties. These visits consist of a full physical
inspection, an onsite review, a compliance review, and a tenant file review. The physical
inspection includes an inspection of the project’s grounds, exterior, common areas, and a sample
of dwelling units. The onsite review includes examining the property’s occupancy procedures,
rent charge calculations, financial system and controls, and maintenance programs. The
compliance review focuses on the property’s marketing procedures, rental policies, waitlist,
project and unit accessibility, eviction policy, and other operating policies. The tenant file
review includes determining whether the asset and income documentation in the tenant file
matches the information in the data system.

Property management submits tenant certifications to the agency through the Management
Interactive Network Connection, which is a secure system for inputting information. It includes
data validation checks and system messages that will alert the property management to potential
data errors. Information flows through the Management Interactive Network Connection into the
Multi-Family Information System (MFIS), which is the online intranet application used to input,
query and report on MFH project and tenant-related information.




5
  The Agriculture Improvement Act of 2018 granted USDA the same access to information, subject to the same
requirements, applicable to the U.S. Department of Housing and Urban Development to verify income for
participants in certain rural housing programs. Agriculture Improvement Act of 2018, Pub. L. No. 115-334,
132 Stat. 4763.

2     AUDIT REPORT 04601-0003-31
Objective
The objective of this audit was to evaluate RHS controls over the tenant certification and
recertification process, including income verification.




                                                              AUDIT REPORT 04601-0003-31     3
Section 1:  RHS Controls Over MFH Tenant Eligibility 
Finding 1: RHS Needs to Improve Controls Over its Certification and
Recertification Process
During our review of 100 selected MFH tenant certification files,6 we found that 11 of the files
contained inadequate documentation, errors in calculations, or both. This occurred because
MFH property management did not ensure that tenant files contained all required documents,
were transferred when properties changed management companies, or correctly calculated tenant
income or adjusted income. As a result, RHS could not confirm whether two tenants living in
MFH properties were eligible to participate in the program, and five other tenants potentially
received inaccurate rental assistance benefits.7 Based on our sample, we estimated that
approximately 74,652 tenants in our 14 sampled States received a total of approximately
$26.9 million in inaccurate rental assistance.8

Federal regulations require property management to retain executed tenant certification forms
and any supporting documentation in the tenant file for at least 3 years or until the next triennial
supervisory visit, whichever is longer.9 According to the MFH Asset Management Handbook
(MFH Handbook), MFH property management must verify and document all income, assets,
expenses, deductions, family characteristics, and any other factors that affect family eligibility or
level of assistance in the tenant file.10 Also, according to the MFH Handbook, “tenant file
records are critical pieces of source documentation, perhaps the critical source documentation,
used as evidence to support determinations and conclusions in all areas of occupancy
monitoring.”11 The tenant file records must be complete and contain all information and forms
relevant to occupancy at the project.12

In our review of 100 statistically-selected tenant files, we identified errors that generally fell into
two categories: (1) inadequate documentation, or (2) miscalculated income or adjusted income.
Based on our statistical sample, we projected that approximately 11 percent of MFH tenant files
in the 14 sampled States were affected by one or both of these errors.

Specifically, we found that four tenant files contained inadequate documentation. In two of these
instances, properties stated they no longer had the required tenant files. Without the required
documentation, we were unable to verify the tenants’ eligibility to occupy a unit at these

6
  We statistically selected a sample of 100 certification and recertification files from the top 14 States with the
highest MFH rental assistance dollars received. These 14 States accounted for approximately 50 percent of the
MFH rental assistance between FYs 2016–2018.
7
  The identified errors for the remaining four tenants would have resulted in erroneous benefits, had they been
receiving assistance.
8
  We are 95 percent confident this applies to between 38,145 and 127,791 (5.62 and 18.83 percent, respectively)
tenant certifications and MFH paid between $3,433,928 and $113,269,598 (0.23 and 7.55 percent, respectively) in
unsupported or improperly computed rental assistance for the 14 selected States.
9
  7 C.F.R. § 3560.152(e)(2).
10
   USDA, MFH Asset Management Handbook, HB-2-3560, Chapter 6, “Project Occupancy” (Feb. 2005).
11
   USDA, MFH Asset Management Handbook, HB-2-3560, Chapter 6, “Project Occupancy” (Feb. 2005).
12
   USDA, MFH Asset Management Handbook, HB-2-3560, Attachment 6-J, “Required Tenant File Documentation”
(Feb. 2005).

4     AUDIT REPORT 04601-0003-31
properties. Additionally, we could not verify either of these tenants’ eligibility to receive rental
assistance, even though, for example, one of these tenants was receiving $271 per month in
rental assistance. In two other instances, we identified incomplete files that did not contain
supporting documents for all or part of tenants’ incomes at the time of the certifications. Federal
regulations require MFH property management to verify household income and other
information necessary to establish tenant eligibility prior to annual or other recertifications.
Further, MFH property management agree to accept financial responsibility when unauthorized
assistance results from errors made by property management during certification.

When asked about the two instances of missing tenant files, current property managers stated
that the files were not provided when the property owners changed management companies. We
determined that the property owners did not ensure that all tenant files were transferred and
properly retained. When we spoke with officials from the relevant States about the missing
tenant files, the officials said they had never had a situation like this happen before these
instances. State and national program officials agreed that the properties should have had the
required documentation and acknowledged that Federal regulations require property owners to
keep that documentation for at least 3 years. Furthermore, national program officials said that
transferring MFH files can be a challenge, and increased guidance on file transfers would help
prevent the loss of other files during management company changes. RHS officials also agreed
that the identified property management companies with missing tenant files would need to
attempt to obtain documentation to support the tenants’ eligibility and any rental assistance
received. Further, they agreed that the agency should seek recovery of any unauthorized rental
assistance payments.

We also followed up with the two other properties to determine why they did not obtain income
documentation at the time of certification. In one instance, the tenant was to provide a document
but did not, and the property did not follow up until after we requested the tenant file. In the
other instance, the property management personnel did not know why the supporting
documentation was not obtained at the time of certification, when a similar document was
obtained for the recertification the following year. When we discussed the tenant files’
inadequate documentation with State officials, the officials told us they consider the lack of
documentation an issue. They confirmed that the properties should obtain documentation prior
to submitting a tenant certification, and that any unauthorized rental assistance should be repaid.

Finally, we determined that 8 out of the 100 tenant files at 8 different properties contained errors
in the calculations of income or adjusted income.13 Specifically, four tenant files had an error in
calculated income, three had errors in calculated adjusted income, and one had both. The
miscalculations were a result of various errors made by the property management personnel at
the time of certification. For example, one file included an erroneously calculated medical
expense deduction, while another file mistakenly included the same child support income twice.

When we discussed the erroneous calculations with current property management personnel,
they generally agreed the errors had been made and said the management company or person that
completed the certification in question no longer worked at the property. When we discussed the


13
     One of these files also did not contain adequate documentation.

                                                                       AUDIT REPORT 04601-0003-31   5
erroneous calculations with State officials, they said they would have someone do a review of the
tenant files to determine if unauthorized assistance was indeed received. When we discussed the
erroneous calculations with national program officials, they said that income and adjustment
calculations can get complicated; however, it is a property management responsibility to ensure
calculations are accurate. RHS officials said many of these issues could be identified during a
supervisory review and that additional training on these topics for property management
personnel would help minimize the incidence of such errors, as well.

Our review of the 100 tenant files identified $3,973 in erroneously calculated rental assistance.
Based on these results and the statistical sample drawn from 14 States, we projected that between
38,145 and 127,791 of tenant files in these States are similarly affected, with the total inaccurate
rental assistance ranging between about $3.4 million and $113.3 million.

RHS has begun to review the tenant files for which we have identified the $3,973 in errors and,
at the conclusion of its reviews, RHS will need to resolve the identified errors. In order for RHS
to better ensure that all MFH tenants are eligible and receive the correct amount of rental
assistance, RHS needs to ensure the property management personnel are knowledgeable of
program rules and requirements regarding document retention and tenant income and adjusted
income calculations. RHS should provide additional training or guidance to property
management personnel on documentation requirements for tenant files, including document
retention policies. RHS should also develop and provide training or guidance to MFP property
owners on best practices for document transfers in the event of management company changes.
Finally, RHS should provide additional training or guidance to property management personnel
on income calculations, including any adjustments to income.


Recommendation 1
Develop and provide training or guidance to property management personnel on documentation
requirements for tenant files, including document retention policies, income calculations, and
any adjustments to income.

Agency Response
We concur with the Office of Inspector General’s (OIG) recommendation to provide further
training to property management personnel on tenant file documentation, which is the guidance
on document retention that is already issued to Section 515 borrowers. The following action will
address this recommendation: As part of an Agency realignment, MFH is planning to implement
a program-wide, online training delivery system which will train internal and external
stakeholders on a variety of topics related to MFH compliance. As part of this curriculum, MFH
will carry out training for borrowers and management companies on the completion and
retention of all tenant income documents, as well as tenant file maintenance. This information is
available in MFH Handbook 2, Chapter 6, but providing it in an online training format will make
the information more accessible to property management personnel.

The estimated completion date is December 31, 2020.


6    AUDIT REPORT 04601-0003-31
OIG Position
We accept management decision for this recommendation.

Recommendation 2
Develop and provide MFH property owners training or guidance on best practices for document
transfers during management company changes.

Agency Response
The Agency agrees that document transfers between management companies can result in
misplaced documents. However, any training given must appropriately reflect the Agency’s role
with regard to the contract between the borrower and management agent(s). It is the Agency’s
opinion that new guidance is not necessary, as it remains the borrower’s responsibility to always
secure tenant certification documents, even if the management agent changes. It is preferred that
a borrower replace a management company that is not performing up to compliance standards,
including deficiencies in record retention. Providing additional guidance on tracking missing
records may challenge the Agency’s emphasis on the overall performance and well-being of the
property. The following action will address this recommendation: The Agency proposes to
provide training to both borrowers and management companies, which will include suggested
best practices for document transfers during management company changes while appropriately
defining the Agency’s role and expectations.

The estimated completion date is December 31, 2020.

OIG Position
We accept management decision for this recommendation.

Recommendation 3
Pursue recovery or take other actions as appropriate for the $3,973 in unauthorized assistance
and other errors we identified.

Agency Response
The Agency concurs with OIG’s recommendation to pursue recovery of any verified
unauthorized assistance. OIG provided the list of cases where they discovered problems in
income calculation. The majority of the unauthorized assistance was on one case in which the
file could not be found (representing $3,252 out of the total $3,973 listed). When a tenant
certification file is not found, the MFH field staff will work with the borrower to locate the most
recent and appropriate documentation and concentrate on the actual amount that can be verified.
While each case is unique, the eventual amount due is typically not the entire amount paid to the
borrower on behalf of the tenant. The following action will address this recommendation: The


                                                               AUDIT REPORT 04601-0003-31         7
MFH staff in area offices will work with the management of the properties listed in order to
verify and produce the corresponding unauthorized assistance repayment agreements.

The estimated completion date is December 31, 2020.

OIG Position
We accept management decision for this recommendation.




8    AUDIT REPORT 04601-0003-31
Finding 2: RHS Needs to Improve Controls Over Triennial Supervisory
Reviews
We found that RHS had not always completed its triennial supervisory reviews of MFH
properties, as required. Specifically, we found that 1,503 out of 14,388 properties were past due
for a triennial review, including 38 properties that went 10 years without the review. This
occurred because properties that missed a review did not appear on State office tracking reports
showing supervisory reviews coming due the following year. As a result, RHS cannot ensure
that tenants receive the correct amount of rental assistance and property managers properly
maintain the MFH apartment complexes.

Federal regulations require RHS to perform monitoring activities in order to assess borrower and
tenant compliance with requirements and ensure MFH housing projects are managed in
accordance with program goals and objectives.14 The MFH Handbook requires that a
supervisory visit be completed at least once every 3 years.15 The supervisory review consists of
three parts: a physical inspection, an onsite review, and a compliance review. The onsite review
includes a review of tenant files, which should include income verifications, documentation to
support eligibility, and the tenant’s lease.

During our review of sampled tenant files, we identified that 4 out of 96 properties had not
received a triennial supervisory review since at least 2015.16,17 One sampled property had not
received a supervisory review since 2010. Therefore, we obtained a report showing the date of
the most recent supervisory review for all MFH properties. Using this combined information, we
identified at least 1,503 properties were past due for a triennial review, including 38 that had not
received a supervisory review since at least 2009.

We spoke with RHS state officials, who informed us that they were, at times, unable to complete
supervisory review visits timely due to staffing shortages and budget constraints. However, they
agreed that properties that have gone longest without a review should be prioritized on the
review schedule. After we made our audit request for the most recent supervisory review, the
officials began scheduling the reviews and, in some instances, have already completed them.
National program officials said that missed supervisory reviews may not show up on tracking
reports if the reports are set to show only the current year.18 They said they could use the data
system to identify this problem and send alerts on whether a property has “fallen off” the reports.

To better ensure routine supervisory reviews of MFH properties, RHS needs to ensure that all
past due supervisory reviews appear on State office tracking reports. RHS should establish

14
   7 C.F.R. § 3560.
15
   USDA, MFH Asset Management Handbook, HB-2-3560, Chapter 9, “Agency Monitoring,” 9.10(C) (Feb. 2005).
16
   Of the 100 tenants in our sample, 4 tenants lived at properties where another tenant was also statistically selected
for our sample. Because of this overlap, the 100 tenants in our sample were associated with 96 total MFH
properties.
17
   Of the 4 sampled properties with missed reviews, 1 was subsequently included on the report showing
1,500 properties past due for a triennial review as of July 24, 2019. After we made our audit request for the most
recent supervisory review, State officials had completed the reviews for the remaining three sampled properties.
18
   RHS runs reports from MFIS that show the status of triennial supervisory reviews that are scheduled to be
completed in the current year.

                                                                           AUDIT REPORT 04601-0003-31                 9
additional controls, such as data system reviews or alerts, to ensure the proper tracking and
prioritization of past due supervisory reviews. RHS should also schedule and complete
supervisory reviews on MFH properties that had not received a supervisory review within the
past 3 years. These additional controls should help verify property management personnel
follow program guidelines and help ensure that tenants receive the correct amount of rental
assistance.


Recommendation 4
Establish additional controls, such as data system reviews or alerts, to ensure the proper tracking
and prioritization of past due triennial supervisory reviews.

Agency Response
We concur with OIG’s recommendation to implement better tracking of overdue supervisory
visits. Agency staff across the country continue to make the health and safety of MFH tenants
their top priority. Prompt supervisory reviews are important, but there are circumstances under
which it is appropriate to postpone such reviews, such as if the property has been severely
damaged, is temporarily vacant, or under foreclosure. As MFH reviewed a list of active Section
515 properties in the portfolio, we found that 4.4 percent of properties are considered “overdue,”
and 2.9 percent of properties were greater than one year overdue. MFH found only three
properties that are still listed as active in the portfolio that were at least nine years overdue for a
supervisory visit. Of these, one property has only Department of Housing and Urban
Development (HUD) Section 8 subsidy (no Rental Assistance) and another property is currently
in foreclosure proceedings (also with no Rental Assistance). Including these properties, only
twenty-four properties are 7 years or more overdue (10 years since the last supervisory visit),
which is approximately 0.18 percent of the entire portfolio. As with the foreclosure that was
listed, it is possible that some necessary conditions were not included in the original data that
MFH IT sent to OIG for review. The following action will address this recommendation: MFH
will review the data provided to field offices in order to accurately account for the timeliness of
any applicable supervisory reviews. We are also conducting an overall review and realignment
of reporting and procedures throughout MFH, which will enable greater consistency in timely
completion and documentation of supervisory visits across the country.

The estimated completion date is December 31, 2020.

OIG Position
We accept management decision for this recommendation.

Recommendation 5
Schedule and complete triennial supervisory reviews of the MFH properties that have not
received a supervisory review within the past 3 years.


10     AUDIT REPORT 04601-0003-31
Agency Response
We concur with OIG’s recommendation. As a new realignment of MFH staffing is to be
implemented, the existing staff and resources available will improve coordination to complete all
overdue supervisory site visits, or better document why such visits are not feasible (i.e. natural
disaster.) In addition, MFH will research and report on efficient and sustainable options for
future supervisory visits. The following action will address this recommendation: All applicable
overdue supervisory visits will be prioritized for completion in fiscal year 2020.

The estimated completion date is December 31, 2020.

OIG Position
We accept management decision for this recommendation.




                                                            AUDIT REPORT 04601-0003-31        11
Finding 3: RHS Needs to Improve the Quality of Data in MFIS
Of the total 624,424 MFH tenants from FYs 2016 to 2018, we found data quality issues with the
identifying information for 5,585 tenants. Data quality issues included Social Security numbers
(SSN) for heads of household that were either invalid or matched the identifying information of
deceased people, or listing the head of household as less than 18 years of age. This occurred
because property management personnel did not always correctly enter codes or other data in
MFIS, and current data checks either did not identify instances of mistyped tenant data or were
not effective. Erroneous data in MFIS can impair the agency’s efforts to verify tenant eligibility
and implement its recently authorized wage matching capabilities.

Managers directing or controlling resources within USDA are responsible to establish, maintain,
and improve controls for their assigned areas.19 State offices must utilize wage matching of
tenants if permitted by State law;20 additionally, the agency recently received statutory authority
to verify income for MFH participants.21 Specifically, the agency was granted access to verify
participant information derived from nationwide computer matching programs for all program
participants with valid personal identifying information (name, date of birth, and SSN).

We evaluated tenant certification data obtained from MFIS and used data analytics software to
perform verifications of SSNs and dates of birth, matching records from MFIS with the Social
Security Administration’s Death Master File (DMF).22 In our analysis, we identified
5,585 tenants with one or more of the following:

     ·   SSN that included letters or number combinations that were not valid, according to SSN
         formatting rules;
     ·   SSN that matched the SSN of an individual reported as deceased in the DMF; or
     ·   date of birth indicating the tenant was under 18 years old or older than the oldest known
         living person.

To better understand these observations, the team then non-statistically selected a sample of the
tenant files described above for spot checks.23 The spot checks confirmed that tenant data in
MFIS included non-SSNs used in lieu of an SSN, a head of household under 18 years old, and
various data entry errors.




19
   USDA Departmental Regulation 1110-002, Management’s Responsibility for Internal Control (June 17, 2013).
20
   USDA, MFH Asset Management Handbook, HB-2-3560, Chapter 6, 6.11 “Verification Procedures,” and
Chapter 9, “Wage and Benefit Matching,” 9.14 (Feb. 2005).
21
   Agriculture Improvement Act of 2018, Pub. L. No. 115-334, 132 Stat. 4763.
22
   The DMF contains over 83 million records of deaths that have been reported to the Social Security
Administration.
23
   We selected a sample of 74 tenant files based on date of birth analysis, social security validation, and data
matched between the DMF and RHS data. This sample is non-statistical and results could not be projected.

12       AUDIT REPORT 04601-0003-31
Specifically, we identified the following concerns:

     ·   At least 2,509 SSNs in MFIS did not follow the rules for valid SSNs. For example, our
         analysis identified instances where an SSN did not contain nine numeric digits or had
         invalid repeating digits. Through our spot checks, we confirmed that MFIS included data
         from tenant files that used a Tax Identification Number or a number issued by a country
         other than the United States, instead of an SSN. We noted that additional SSNs in MFIS
         may also be invalid, depending on whether they were issued before or after 2011.24
     ·   At least 2,855 SSNs in MFIS matched SSNs of deceased people recorded in the DMF.
         Each of our spot checks for this issue disclosed data entry errors between the tenant files
         and MFIS.
     ·   220 tenants listed as heads of household were under the age of 18 on the certification’s
         effective date in MFIS.25 The ages ranged from negative 2,930 years old to between
         17 and 18 years old. In our spot checks, we identified a tenant file stating the tenant was
         17 years old at the time of certification and did not identify additional documents
         supporting that the tenant could properly enter into a rental contract.26
     ·   Tenants with other questionable dates of birth, such as 6 tenants over the age of 116,
         including individuals over 140 years old.
     ·   5 tenants had more than one of the above concerns.

When we discussed our SSN data observations with RHS, national program officials explained
that they did not establish certain SSN controls because, due to the indefinite delay of a
regulatory requirement, they do not have the authority to require tenants to provide a SSN.27
Also, while the agency checks MFH property management personnel against the DMF, agency
officials stated they have not successfully developed checks for individual MFH tenants against
the DMF.

Despite these explanations, the Federal regulations also require MFH applications to collect
SSNs,28 and the program handbook says tenant files should include verification and certification
of SSNs, if available.29 Further, MFIS requires information to be entered in the SSN data field in
order to complete a certification. We determined that program officials permitted property
management personnel to use various forms of tenant identification support, while MFIS did not
differentiate between various forms of identification that property management personnel entered
into the data system. This practice also did not prevent data entry errors.

24
   The Social Security Administration changed its numbering system in 2011, affecting the number combinations
that may be valid if issued before or after the change. We identified 6,038 SSNs that failed tests of either a pre-2011
or post-2011 rule, but could not confirm when these 6,038 SSNs were issued. Thus, we could not determine
whether the pre-2011 or post-2011 rules were applicable.
25
   The effective date is the first day of the month of an initial or updated tenant certification.
26
   To be considered an eligible tenant, students must be of legal age in accordance with the applicable State law or
otherwise legally able to enter into a binding contract. USDA, MFH Asset Management Handbook, HB-2-3560,
Chapter 6, “Determining an Eligible Household,” 6.5 (Feb. 2005).
27
   7 C.F.R. § 3560.152 states that at 70 FR 8503, Feb. 22, 2005, regulatory implementation of the words “Be a
United States citizen or qualified alien” was delayed indefinitely.
28
   7 C.F.R. § 3560.154.
29
   MFH Asset Management Handbook, HB-2-3560, Chapter 6, “Required Tenant File Documentation,”
Attachment 6-J (Feb. 2005).

                                                                         AUDIT REPORT 04601-0003-31                13
National program officials explained that there is a system code to enter into MFIS for tenants
who did not provide an SSN.30 However, we observed that properties did not use this system
code consistently. Our spot checks disclosed that a property manager entered non-SSNs into
MFIS rather than the system code for tenants without SSNs. State officials told us that they were
unfamiliar with how to indicate when tenants do not have an SSN. Additionally, national
officials stated that the system may include data errors that predate the data check.

When we discussed our concerns regarding tenants’ dates of birth with RHS officials, the
officials stated that the data system could be set to call extra attention to heads of household with
dates of birth that indicate they are under the age of 18. They mentioned age of consent while
discussing tenants under age 18. They also stated that MFIS is designed to identify tenants listed
as over 150 years old and that the setting can be set to a lower number.

We determined that mistakes in the entry of SSNs into MFIS negatively affected tenant data.
We also determined that the erroneous SSNs impaired efforts to verify tenant income through
wage matches, as we were unable to receive State wage match results for all spot-checked
tenants. Based on discussions with RHS officials, we determined that wage matches are not
useful if they do not receive results or the results are for the wrong person. Also, the agency is
pursuing the authority to require tenants to have identification, such as SSNs.31 The agency also
recently received additional national wage matching authority32 and is currently working to
implement inter-Departmental wage matching. In order to better achieve the benefits of the
additional wage matching, RHS needs to ensure information in MFIS is accurate.

In order to improve the effectiveness of RHS’ controls over income certifications and subsidy
payment accuracy, RHS should determine the need for additional data input controls or guidance
for program managers. Also, RHS should ensure that MFIS’ current data check settings operate
as intended, and review legacy MFIS data prior to the implementation of the data checks.
Further, RHS should develop a method to identify and correct instances where property
management personnel erroneously input data, such as reporting a tenant’s age as a negative
number. Finally, the agency should review the tenant files we identified as having data errors
through our spot checks.


Recommendation 6
Develop and provide additional guidance for State officials and property management personnel
as necessary to ensure the accuracy of tenants’ SSNs in MFIS.




30
   The system code is a unique identification number that the system generates.
31
   The agency published Implementation of the Multi-Family Housing U.S. Citizenship Requirements Regulation
Identifier Number 0575-AC86 (Nov. 2018).
32
   Agriculture Improvement Act of 2018, Pub. L. No. 115-334, 132 Stat. 4763.

14      AUDIT REPORT 04601-0003-31
Agency Response
The Agency concurs with OIG’s recommendation. For tenants that do not provide an SSN,
MFH will provide guidance on a placeholder number that will not disrupt the data quality check.
This will help identify errors in SSN versus records where no SSN has been provided. Current
Agency regulations do not enforce the requirement of SSNs for MFH tenant eligibility. The
following action will address this recommendation: MFH will provide guidance on SSN entry
for management companies.

The estimated completion date is December 31, 2020.

OIG Position
We accept management decision for this recommendation.

Recommendation 7
Review the data system checks of SSNs and make changes as needed.

Agency Response
The Agency obtained authorization to access Social Security Administration (SSA) data through
the 2018 Farm Bill and is in the process of setting up a data sharing agreement. The following
action will address this recommendation: The Agency will work with SSA to obtain SSN data
for verification of current tenant SSNs. MFH will add a system check for impossible data in the
SSN field in MFIS. An alert will be added to alert the management company to possible SSN
errors.

The estimated completion date is December 31, 2020.

OIG Position
We accept management decision for this recommendation.

Recommendation 8
Review MFIS data, including legacy data from time periods prior to implementation of the data
checks, to ensure compliance with current data rules.

Agency Response
The Agency agrees that the data checks should also cover the legacy data. The following action
will address this recommendation: MFH will complete a full review and analysis of legacy data,
and will correct data, as needed

The estimated completion date is December 31, 2020.

                                                          AUDIT REPORT 04601-0003-31        15
OIG Position
We accept management decision for this recommendation.

Recommendation 9
Review system controls related to tenants’ date of birth to ensure controls identify tenants that
are improbably young or old.

Agency Response
The Agency agrees with this recommendation. The controls for date of birth data were put in
place in May 2019, as a result of discussions with OIG during this audit. The following action
will address this recommendation: MFH will run testing to ensure that the controls recently put
into place are an effective remedy.

The estimated completion date is March 31, 2020.

OIG Position
We accept management decision for this recommendation.

Recommendation 10
Review the data and files we identified as having data errors and take appropriate corrective
actions.

Agency Response
The Agency agrees with this recommendation. The following action will address this
recommendation: MFH will review the listed data and make corrections, as applicable.

The estimated completion date is December 31, 2020.

OIG Position
We accept management decision for this recommendation.




16     AUDIT REPORT 04601-0003-31
Scope and Methodology 
Our audit evaluated RHS’ controls over the MFH program tenant certification and recertification
process, including income verification, for FYs 2016 to 2018. We commenced fieldwork in
October 2018 at RHS Headquarters in Washington, D.C., and completed it in July 2019. Our
audit covered MFH properties in 15 States, 7 of which we visited in person. See Exhibit B for a
listing of locations.

The agency’s MFIS included over 1.4 million certification records from FYs 2016 to 2018.
These records include original certification records and recertification records, as tenants may
certify or recertify multiple times. Based on this universe of certifications, RHS provided a total
of approximately $2.9 billion in rental assistance to MFH tenants. In order to evaluate the tenant
certification and recertification process, we identified 14 States that received the highest amounts
of rental assistance. These 14 States provided a total of approximately $1.5 billion to tenants,
which represented approximately 50 percent of program funding during that time period. We
selected a statistical sample of 100 tenant files from the 14 States. The audit team obtained
35 tenant files in person and mailed a request for a copy of the files from the property for
65 tenant files.33 We also conducted initial visits to the RHS State office and MFH properties in
Missouri to gain an understanding of the certification process.

In order to evaluate RHS’ compliance with its monitoring activities, we obtained the most recent
triennial supervisory review for each of the sampled properties. We also obtained the date of the
most recent triennial supervisory review for all MFH properties. For sampled properties that had
not received a supervisory review in the previous 3 years, we followed up with the respective
State offices to determine why.

We analyzed MFH data obtained from MFIS using commercially-available software and
compared records against those in the DMF as of February 2019.34 In order to assess our data
review results, we also selected a non-statistical sample of tenant files from 14 properties in
Missouri and 3 properties in Virginia to conduct spot checks. We selected the sample of
74 tenant files from these properties based on data characteristics, software validation test
results, and DMF matches, as well as on geographical proximity, with an emphasis on files at
properties with multiple potential concerns.

To obtain evidence about the controls over tenant certifications and recertifications included in
the information systems, we performed audit procedures to determine if data were accurate and
complete. We also obtained read-only access to the information system and reviewed the system
user manual to test various controls. In addition, we discussed identified issues with RHS
officials. As previously stated in our report, our evaluation of the accuracy of the tenant data in
MFIS found that it contained inaccurate or illogical data. However, we did not perform general
and application controls testing of RHS’ data systems, as our objective related to tenant
eligibility, and tenant eligibility is supported by management company tenant files. Therefore,

33
   We obtained the 100 tenant files from a total of 96 unique properties in our statistical sample. There were
instances where two tenant files were randomly selected from the same property in the following States: California,
Georgia, North Carolina, and Texas. We physically obtained tenant files from 33 unique properties and received, by
mail, tenant files from 63 unique properties.
34
   The DMF contains identities for approximately 83 million deceased individuals.

                                                                      AUDIT REPORT 04601-0003-31               17
while we recommend enhanced data controls, we make no overall representation regarding the
adequacy of any agency computer systems.

We relied on the work of specialists from OIG’s Office of Data Sciences to develop the sampling
methodology, select a statistical sample of MFH tenant certifications and recertifications, and
project results based on the findings from the statistical sample. We also relied on their work to
perform verifications of SSNs and dates of birth, and to match records from MFIS with the
DMF. We obtained documentation to ensure these specialists were qualified professionally,
competent in the work we relied upon, and met independence standards.

To accomplish our objectives, we also:
   · reviewed laws, regulations, agency instructions, and any other documentation, including
       prior OIG and Government Accountability Office reports applicable to the scope of our
       audit;
   · reviewed statistically selected tenant files using a proforma that was developed to
       consistently document reviews;
   · requested and obtained State wage matches, if available;
   · interviewed RHS national and State officials, as well as MFH property managers,
       regarding their responsibilities and administration of MFH with respect to tenant
       eligibility;
   · interviewed property management personnel regarding tenant file review observations;
       and
   · interviewed RHS national and State officials regarding the issues we found during our
       audit to obtain their position and response.

We conducted this performance audit in accordance with Generally Accepted Government
Auditing Standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objective. We believe that the evidence obtained provides a reasonable basis
for our findings and conclusions based on our audit objective.




18     AUDIT REPORT 04601-0003-31
Abbreviations 
C.F.R. .........................Code of Federal Regulations
DMF ...........................Death Master File
FY ..............................fiscal year
MFH ...........................Multi-Family Housing
MFH Handbook .........MFH Asset Management Handbook
MFIS ..........................Multi-Family Information System
RHS ............................Rural Housing Service
SSN ............................Social Security Number
OIG ............................Office of Inspector General
USDA.........................Department of Agriculture




                                                                 AUDIT REPORT 04601-0003-31   19
Exhibit A:  Summary of Monetary Results 
Finding     Recommendation        Description         Amount            Category
                                Inaccurate Rental
                                Assistance Paid to                 Questioned Costs, No
     1              1                                $26,962,764
                               Property Owners on                       Recovery
                                Behalf of Tenants
                                Inaccurate Rental
                                                                    Questioned Costs,
                                Assistance Paid to
     1              3                                  $3,973          Recovery
                               Property Owners on
                                                                     Recommended
                                Behalf of Tenants
               Total Monetary Results                $26,966,737




20       AUDIT REPORT 04601-0003-31
Exhibit B:  Sampled Property Locations by State 
                                             Number of            Number of            Number of           Number of
                          Number of          Properties           Properties             Non-              Properties
                          Statistical        Visited for         that Mailed           Statistical         Visited for
         State
                           Sample            Statistical         Tenant File          Sample Files            Non-
                            Files           Sample Files        for Statistical                            Statistical
                                                                   Sample                                 Sample Files
        Alabama                 7                   4                  3                     0                  0
       California              10                   6                  3                     0                  0
        Florida                 2                   0                  2                     0                  0
        Georgia                 9                   0                  8                     0                  0
       Louisiana                4                   0                  4                     0                  0
         Maine                  3                   0                  3                     0                  0
       Michigan                 5                   0                  5                     0                  0
       Mississippi              7                   0                  7                     0                  0
       Missouri35               0                   0                  0                    58                 14
     North Carolina            13                  11                  1                     0                  0
      Pennsylvania              6                   0                  6                     0                  0
     South Carolina             8                   6                  2                     0                  0
       Tennessee               10                   6                  4                     0                  0
         Texas                 11                   0                 10                     0                  0
        Virginia                5                   0                  5                    16                  3
        TOTAL                 100                  33                6336                   74                 17




35
   Our statistical sample review focused on the 14 States with the most estimated total rental assistance. To gain an
understanding of MFH, we additionally reviewed Missouri, which we selected due to its proximity to our office
located in Kansas City, Missouri.
36
   We physically obtained tenant files from 33 unique properties and received, by mail, tenant files from 63 unique
properties. Thus, we obtained tenant files from a total of 96 unique properties in our statistical sample. There were
instances where two tenant files were randomly selected from the same property in the following States: California,
Georgia, North Carolina, and Texas.

                                                                        AUDIT REPORT 04601-0003-31               21
Exhibit C:  Sampling Methodology for Rural Housing Service 
Multi­Family Housing Eligibility Audit 
Objective

This statistical sample was designed to support OIG Audit 04601-0003-31. The objective of this
audit was to evaluate RHS controls over the tenant certification and recertification processes,
including income verification.

To help achieve this objective, we developed a representative random statistical sample of
certifications for review.

Audit Universe

The audit team non-statistically selected the 14 States with the most estimated total rental
assistance for review. To assure the ability to audit all selected certifications, OIG eliminated all
that were in projects that were closed. This resulted in a universe comprised of 678,650 “fund
code 84” certifications at open projects in the 14 States with the largest estimated total rental
assistance for the 3 years ending September 30, 2018, totaling $1,500,022,332.

Sample Design37

We considered various sample designs and ultimately chose to audit 100 tenant certifications,
randomly selected without replacement from those in the audit universe.38

The sample size was determined based on the following factors:

·    audit universe: 678,650 tenant certifications (from 14 States);
·    confidence level: we are reporting two-tailed, 95 percent confidence intervals;
·    precision: we wanted to report confidence intervals no wider than 20 percent (i.e., average
     precision of 10 percent, and ±10 percent if symmetrical around the point estimate) and
     consistent with sequential (or stop-or-go) sampling per paragraph 3.64 and Appendix B of
     American Institute of Certified Public Accountants’ Audit Guide Audit Sampling
     (May 1, 2017); and
·    expected exception rate: we did not have reliable historical information to help estimate this
     rate, so an exception rate of 50 percent was used since this rate provides the most
     conservative sample size.



37
   This statistical design is provided as evidence of the statistical sample and projections. It is simply an explanation
of statistics involved with the audit work and results. This is not a reflection of the monetary results of this audit
report. See Exhibit A and the related findings for the actual monetary results.
38
   We used commercially available software to select this simple random sample “on record” with sample
parameters “random” and the software’s default algorithm (with a random seed of 407716) and with the software
reporting the selection order.

22       AUDIT REPORT 04601-0003-31
Results

The results in the table below are projected to the audit universe of 678,650 certifications. Due
to the relatively large population, small sample, and low exception rate (11 percent), the
confidence interval limits for the number of certifications inadequately documented or with
miscalculations in the universe are based on the binomial distribution. The binomial
approximation is acceptable in this case, due to the large size of the population and the small
sampling fraction (i.e., 100 out of 678,650 tenant certifications). The limits for the universe of
unsupported or inaccurate rental assistance dollars are based on empirical likelihood.39

Statistical Estimates

 100 certifications selected from a universe of 678,650 with $1,500,022,332 estimated rental assistance
       Description,                                         In the audit universe:
   number, percent,          Actual                       95% confidence limits          Average
      and dollars of        found in      Estimate        Lower           Upper         precision
       exceptions            sample                          A              B           (B−A)÷2
      Certifications
      inadequately
                               11          74,652         38,145         127,791
  documented or with
     miscalculations
                                            11%           5.62%          18.83%           6.60%
     Unsupported or
    inaccurate rental        $3,973     $26,962,764     $3,433,928 $113,269,598
        assistance
                                           1.80%          0.23%           7.55%           3.66%


The next section further explains the projections above.




39
   For the dollar-related projection, we used an empirical likelihood method consistent with that described by Alan
H. Kvanli and Robert Schauer in Endnote 15 of “Is Your Agency Too Conservative? Deriving More Reliable
Confidence Intervals,” Journal of Government Financial Management, Vol. 54, Summer 2005, pages 30–37. In
addition, we incorporated the following adjustments, which in combination caused the limits on dollar amounts to be
slightly more conservative (i.e., widened the confidence interval).
     ·   The 3.841459 (chi-square value) was replaced with 4.79036857 (F-value with 1 and 99 degrees of
         freedom).
     ·   Bartlett correction for kurtosis (k) and skewness (s): 1/(1 – a/n), with a = (k + 3)/2 – s2/3 and n = 100.
     ·   Finite population correction factor: (1 – 100/678,650).
         In combination, these adjustments result in calculations consistent with those by Kvanli and Schauer (2005,
         endnote 15) except that each value of 3.841459 is replaced with: [4.79036857 × 1/(1 – a/100) × (1 –
         100/678,650)].

                                                                       AUDIT REPORT 04601-0003-31               23
Interpreting the results

Based on our sample, we estimate the following:

We estimated 74,652 (11 percent) of the certifications in the audit universe had inadequate
documentation or miscalculated income or adjusted income, with a corresponding absolute value
of $26,962,764 (1.80 percent) paid for unsupported or improperly computed rental assistance.
We are 95 percent confident this applies to between 38,145 and 127,791 (5.62 and 18.83 percent,
respectively) of the tenant certifications and RHS paid between $3,433,928 and $113,269,598
(0.23 and 7.55 percent, respectively) in unsupported or improperly computed rental assistance.




24     AUDIT REPORT 04601-0003-31
Agency’s Response 




                AGENCY’S
         RESPONSE TO AUDIT REPORT




                        AUDIT REPORT 04601-0003-31   25
Rural Development           January 22, 2020
Bruce W. Lammers
Administrator
                            TO:             Gil Harden
                                            Assistant Inspector General for Audit
Rural Housing Service                       Office of the Inspector General
1400 Independence Ave, SW
Room 5014-S
Washington, D.C. 20250
                            THROUGH:         Gary Bojes
                                             Acting Chief Risk Officer
Telephone: (202) 692-0268                    Office of the Chief Risk Officer

                            FROM:           Bruce W. Lammers /s/ Bruce W. Lammers
                                            Administrator
                                            Rural Housing Service

                            SUBJECT:        Office of Inspector General Audit Number 04601-003-31, Multi-
                                            Family Housing Tenant Eligibility – Official Draft Response

                            Recommendation 1

                            Develop and provide training or guidance to property management personnel on
                            documentation requirements for tenant files, including document retention policies,
                            income calculations, and any adjustments to income.

                            Agency Response:

                            We concur with the Office of Inspector General’s (OIG) recommendation to provide
                            further training to property management personnel on tenant file documentation,
                            which is the guidance on document retention that is already issued to Section 515
                            borrowers.

                            The following action will address this recommendation:

                            As part of an Agency realignment, MFH is planning to implement a program-wide,
                            online training delivery system which will train internal and external stakeholders on
                            a variety of topics related to MFH compliance. As part of this curriculum, MFH will
                            carry out training for borrowers and management companies on the completion and
                            retention of all tenant income documents, as well as tenant file maintenance. This
                            information is available in MFH Handbook 2, Chapter 6, but providing it in an
                            online training format will make the information more accessible to property
                            management personnel.

                            Estimated Completion Date: December 31, 2020




                                           USDA is an equal opportunity lender, provider, and employer.
Page 2


Recommendation 2

Develop and provide MFH property owners training or guidance on best practices for document
transfers during management company changes.

Agency Response:

The Agency agrees that document transfers between management companies can result in
misplaced documents. However, any training given must appropriately reflect the Agency’s role
with regard to the contract between the borrower and management agent(s). It is the Agency’s
opinion that new guidance is not necessary, as it remains the borrower’s responsibility to always
secure tenant certification documents, even if the management agent changes. It is preferred that a
borrower replace a management company that is not performing up to compliance standards,
including deficiencies in record retention. Providing additional guidance on tracking missing
records may challenge the Agency’s emphasis on the overall performance and well-being of the
property.

The following action will address this recommendation:

The Agency proposes to provide training to both borrowers and management companies, which
will include suggested best practices for document transfers during management company changes
while appropriately defining the Agency’s role and expectations.

Estimated Completion Date: December 31, 2020

Recommendation 3

Pursue recovery or take other actions as appropriate for the $3,973 in unauthorized assistance and
other errors we identified.

Agency Response:

The Agency concurs with OIG’s recommendation to pursue recovery of any verified unauthorized
assistance. OIG provided the list of cases where they discovered problems in income calculation.
The majority of the unauthorized assistance was on one case in which the file could not be found
(representing $3,252 out of the total $3,973 listed).* When a tenant certification file is not found,
the MFH field staff will work with the borrower to locate the most recent and appropriate
documentation and concentrate on the actual amount that can be verified. While each case is
unique, the eventual amount due is typically not the entire amount paid to the borrower on behalf
of the tenant.

The following action will address this recommendation:

The MFH staff in area offices will work with the management of the properties listed in order to
verify and produce the corresponding unauthorized assistance repayment agreements.

*See Management Response regarding Exhibit A

Estimated Completion Date: December 31, 2020
Page 3


Recommendation 4

Establish additional controls, such as data system reviews or alerts, to ensure the proper tracking
and prioritization of past due triennial supervisory reviews.

Agency Response:

We concur with OIG’s recommendation to implement better tracking of overdue supervisory
visits. Agency staff across the country continue to make the health and safety of MFH tenants
their top priority. Prompt supervisory reviews are important, but there are circumstances under
which it is appropriate to postpone such reviews, such as if the property has been severely
damaged, is temporarily vacant, or under foreclosure.

As MFH reviewed a list of active Section 515 properties in the portfolio, we found that 4.4 percent
of properties are considered “overdue,” and 2.9 percent of properties were greater than one year
overdue. MFH found only three properties that are still listed as active in the portfolio that were at
least nine years overdue for a supervisory visit. Of these, one property has only Department of
Housing and Urban Development (HUD) Section 8 subsidy (no Rental Assistance) and another
property is currently in foreclosure proceedings (also with no Rental Assistance). Including these
properties, only twenty-four properties are 7 years or more overdue (10 years since the last
supervisory visit), which is approximately 0.18 percent of the entire portfolio. As with the
foreclosure that was listed, it is possible that some necessary conditions were not included in the
original data that MFH IT sent to OIG for review.

The following action will address this recommendation:

MFH will review the data provided to field offices in order to accurately account for the timeliness
of any applicable supervisory reviews. We are also conducting an overall review and realignment
of reporting and procedures throughout MFH, which will enable greater consistency in timely
completion and documentation of supervisory visits across the country.

Estimated Completion Date: December 31, 2020

Recommendation 5

Schedule and complete triennial supervisory reviews of the MFH properties that have not received
a supervisory review within the past 3 years.

Agency Response:

We concur with OIG’s recommendation. As a new realignment of MFH staffing is to be
implemented, the existing staff and resources available will improve coordination to complete all
overdue supervisory site visits, or better document why such visits are not feasible (i.e. natural
disaster.) In addition, MFH will research and report on efficient and sustainable options for future
supervisory visits.
Page 4


The following action will address this recommendation:

All applicable overdue supervisory visits will be prioritized for completion in fiscal year 2020.

Estimated Completion Date: December 31, 2020

Recommendation 6

Develop and provide additional guidance for State officials and property management personnel as
necessary to ensure the accuracy of tenants’ SSNs in MFIS.

Agency Response:

The Agency concurs with OIG’s recommendation. For tenants that do not provide an SSN, MFH
will provide guidance on a placeholder number that will not disrupt the data quality check. This
will help identify errors in SSN versus records where no SSN has been provided. Current Agency
regulations do not enforce the requirement of SSNs for MFH tenant eligibility.

The following action will address this recommendation:

MFH will provide guidance on SSN entry for management companies.

Estimated Completion Date: December 31, 2020

Recommendation 7

Review the data system checks of SSNs and make changes as needed.

Agency Response:

The Agency obtained authorization to access Social Security Administration (SSA) data through
the 2018 Farm Bill and is in the process of setting up a data sharing agreement.

The following action will address this recommendation:

The Agency will work with SSA to obtain SSN data for verification of current tenant SSNs. MFH
will add a system check for impossible data in the SSN field in MFIS. An alert will be added to
alert the management company to possible SSN errors.

Estimated Completion Date: December 31, 2020

Recommendation 8

Review MFIS data, including legacy data from time periods prior to implementation of the data
checks, to ensure compliance with current data rules.
Page 5


Agency Response:

The Agency agrees that the data checks should also cover the legacy data.

The following action will address this recommendation:

MFH will complete a full review and analysis of legacy data, and will correct data, as needed

Estimated Completion Date: December 31, 2020

Recommendation 9

Review system controls related to tenants’ date of birth to ensure controls identify tenants that are
improbably young or old.

Agency Response:

The Agency agrees with this recommendation. The controls for date of birth data were put in
place in May 2019, as a result of discussions with OIG during this audit.

The following action will address this recommendation:

MFH will run testing to ensure that the controls recently put into place are an effective remedy.

Estimated Completion Date: March 31, 2020

Recommendation 10

Review the data and files we identified as having data errors and take appropriate corrective
actions.

Agency Response:

The Agency agrees with this recommendation.

The following action will address this recommendation:

MFH will review the listed data and make corrections, as applicable.

Estimated Completion Date: December 31, 2020
Page 6


* Management Response regarding Exhibit A

Finding 1 - Recommendation 1
Potential Inaccurate errors in sample of tenant income calculations of $3,973

The OIG projection does not adequately describe the context of the findings. In the OIG sample of
100 tenant certifications, the Agency made ten processing errors resulting in estimated
overpayment of improper payments of $721. In addition, one out of the 100 files was missing
entirely. OIG included the total amount for the year of rental assistance associated with that file
($3,252) in the total calculation of errors. The OIG projection is misleading and not accurate.
While the missing file could have had improper calculations for assistance, the exact amount, if at
all, has not yet been determined and drastically skews the projected amount of income calculation
errors. The Agency action associated with Recommendation 3 will determine if any improper
payments would be associated with the missing file.
Learn more about USDA OIG
Visit our website: www.usda.gov/oig
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Report Suspected Wrongdoing in USDA Programs

OIG Hotline: www.usda.gov/oig/hotline.htm

Local / Washington, D.C. (202) 690-1622
Outside D.C. (800) 424-9121
TTY (Call Collect) (202) 690-1202

Bribery / Assault
(202) 720-7257 (24 hours)




In accordance with Federal civil rights law and U.S. Department of Agriculture             Relay Service at (800) 877-8339. Additionally, program information may be made
(USDA) civil rights regulations and policies, USDA, its Agencies, offices,                 available in languages other than English.
employees, and institutions participating in or administering USDA programs
are prohibited from discriminating based on race, color, national origin, religion,        To file a program discrimination complaint, complete the USDA Program
sex, gender identity (including gender expression), sexual orientation, disability,        Discrimination Complaint Form, AD-3027, found online at How to File a Program
age, marital status, family/parental status, income derived from a public                  Discrimination Complaint and at any USDA office or write a letter addressed to
assistance program, political beliefs, or reprisal or retaliation for prior civil rights   USDA and provide in the letter all of the information requested in the form. To
activity, in any program or activity conducted or funded by USDA (not all bases            request a copy of the complaint form, call (866) 632-9992. Submit your completed
apply to all programs). Remedies and complaint filing deadlines vary by                    form or letter to USDA by: (1) mail: U.S. Department of Agriculture, Office of the
program or incident.                                                                       Assistant Secretary for Civil Rights, 1400 Independence Avenue, SW, Washington,
                                                                                           D.C. 20250-9410; (2) fax: (202) 690-7442; or (3) email: program.intake@usda.gov.
Persons with disabilities who require alternative means of communication for
program information (e.g., braille, large print, audiotape, American Sign                  USDA is an equal opportunity provider, employer, and lender.
Language, etc.) should contact the responsible Agency or USDA’s TARGET
Center at (202) 720-2600 (voice and TTY) or contact USDA through the Federal               All photographs on the front and back covers are from USDA’s Flickr site and are in
                                                                                           the public domain. They do not depict any particular audit or investigation.