Audit Survey of Municipality of Humacao Section 8 Housing Choice Voucher Program, Humacao, Puerto Rico

Published by the Department of Housing and Urban Development, Office of Inspector General on 2004-06-29.

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

                                                      U.S. Department of Housing and Urban Development
                                                      Office of the Inspector General for Audit, Region 4
                                                      Richard B. Russell Federal Building
                                                      75 Spring Street, SW, Room 330
                                                      Atlanta, GA 30303-3388
                                                      (404) 331-3369

June 29, 2004                                         Memorandum No:

MEMORANDUM FOR:               Olga Saez, Director, Public Housing Division, 4NPH

FROM:           James D. McKay
                Regional Inspector General for Audit, 4AGA

SUBJECT:        Audit Survey of Municipality of Humacao
                Section 8 Housing Choice Voucher Program
                Humacao, Puerto Rico


We completed a survey of the Municipality of Humacao Housing Authority’s (Authority)
Section 8 Housing Choice Voucher Program. The review was initiated in response to a request
from the Department of Housing and Urban Development’s (HUD) Caribbean Office of Public
Housing. The Caribbean Office advised that it was not satisfied with the Authority’s overall
performance administering its Section 8 Program, despite technical assistance provided. This
included HUD’s concern over the Authority’s payment standard being too low to attract owner
participation in the Section 8 Program. Our objective was to obtain information on the Authority
and assess whether the administration of the Section 8 Program was carried out in accordance
with HUD requirements, and determine if a full audit was warranted.

                               METHODOLOGY AND SCOPE

To accomplish our objective, we reviewed applicable HUD requirements and regulations, the
Consolidated Annual Contributions Contract, and other requirements. We reviewed the
Authority’s procedures pertaining to: a) housing eligibility and rent abatement, b) participant
selection and assistance determination, c) lease-up performance, d) rent reasonableness/payment
standard, and d) accounting of program expenditures. In addition, we obtained an understanding
of the Authority’s management controls as it related to our objective. We reviewed the
Authority’s files and records including financial statements, general ledgers, check vouchers, and
invoices. We examined the Authority’s Section 8 client files to verify accuracy and
completeness of the records. This included testing of the Authority’s assistance level
determinations for ten program participants. We also examined inspection records maintained
by the Authority on ten housing units currently participating in the Section 8 Program. We
interviewed responsible Authority and Caribbean Office Public Housing officials.
The review generally covered the period July 1, 2002, through September 30, 2003, and we
extended the period as necessary. We performed our fieldwork at the Authority’s Section 8
Program administrative offices. The review was performed during the period October 2003 to
April 2004. We performed our review in accordance with generally accepted government
auditing standards.


The Municipality of Humacao, Puerto Rico, was founded in 1793. It operates as a governmental
unit of the Commonwealth of Puerto Rico under the Law Number 81 of August 30, 1991. The
government system of the Municipality of Humacao is composed of the executive and legislative
bodies. The Mayor is the Chief Executive Officer and is elected every four years in the general
elections of the Commonwealth of Puerto Rico. The legislative body consists of 14 elected

During our review, the Mayor was The Honorable Marcelo Trujillo Panisse. The Authority’s
Housing Assistance Program Office has been assigned the responsibility of administering the
Section 8 Program under the direction of Gilberto Rivera, Coordinator. The Authority
administers 237 Section 8 vouchers with an annual budget allocation of $1.5 million for fiscal
year 2004. The Authority’s books and records for the Section 8 Program are maintained at
Miguel Casillas Street, Humacao, Puerto Rico.

                                   RESULTS OF SURVEY

Our tests identified some minor deficiencies as follow:

       Unit Inspections - The Authority executed lease contracts without ensuring that units
       met housing quality standards. Authority inspections of three housing units were
       classified as inconclusive, but the Authority failed to conduct follow-up inspections prior
       to the execution of contracts.

       Assistance Determination - We found one case in which the participant’s income was
       not properly determined resulting in an excessive assistance of $19 per month. (Contract
       effective date: December 2003 - June 2004).

       We also found five instances where the Authority approved contract rents that were
       above the amounts requested by owners. The Authority automatically gave owners the
       payment standard, which was higher. We recalculated the assistance using the amount
       originally requested by owners for all five cases. The recalculations resulted in two
       instances with possible excessive monthly assistance (Case A: $97, Case B: $19). For the
       other three cases, program participants possibly paid a higher share of the rent or were
       deprived from receiving utility allowances.

       Financial Reporting - The financial reports submitted by the Authority contained errors
       and were modified by HUD’s Section 8 Financial management Center. This included
       adjustments to correct the Section 8 reserve balances included in the statements.
       However, the Authority did not record the HUD adjustments in its books.

       Record Keeping of Client Files - The Authority did not document rent reasonableness
       determination in all ten cases examined. In addition, three case files did not contain copy
       of Social Security cards of family members to evidence verification procedures.

We also reviewed information in HUD’s Section 8 Management Assessment Program (SEMAP)
that HUD uses to evaluate the performance of housing authorities. The SEMAP is a gauging
tool designed to:

        Determine whether the program is assisting eligible families to afford decent, safe, and
        sanitary housing (including correct assistance determination);
        Gauge the performance in crucial areas and ascertain program integrity and
        Identify management capabilities/deficiencies and target assistance where needed; and
        Assess whether the housing authority affirmatively promotes fair housing.

In fiscal year 2001, HUD’s evaluation of the Authority’s performance resulted in an overall
SEMAP score of 32 percent. Therefore, the Authority was designated as a trouble performer.
The Authority’s SEMAP score improved over the two subsequent fiscal years. It obtained scores
of 68 percent in fiscal year 2002 and 74 percent in fiscal year 2003, resulting in an overall rating
of standard performer. HUD’s assessments of the Authority’s performance during the last two
fiscal years reflected improvements to various SEMAP indicators:

                                                                          Indicator Score
      SEMAP Indicators                                                 2001 2002 2003
      1. Selection From Waiting list                                     0       0      15
      2. Rent Reasonableness                                             0      20      20
      3. Determination of Adjusted Income                                0      15      20
      4. Utility Allowance                                               0       0       5
      5. Housing Quality Standards-Quality Control Inspections           0       5       5
      8. Fair Market Rent Limit and Payment Standards                    0       5       5
      15. Deconcentration Bonus                                          0       0       5

In addition, we also reviewed HUD’s risk assessment. HUD conducts periodic risk assessments
to identify those housing authorities that need increased monitoring or technical assistance to
prevent or resolve problems. A housing authority with a high-risk level will require closer
monitoring and more technical assistance, than one with a lower risk level. HUD’s risk
assessment for fiscal year 2003 resulted in a score of 44, with a low risk designation. During the
first quarter of fiscal year 2004, the risk level continued to be low, with a score of 41 points.

Furthermore, we also reviewed the Authority’s lease-up performance. The Authority showed
signs of improvement, increasing its utilization rate from 63 percent in July 2003 to 91 percent in
March 2004.


Based on the survey results, we determined that a detailed audit was not warranted. Therefore
we will not expand the survey into the audit phase. We discussed our survey results with HUD
and the Authority during our review, and both agreed to take corrective measures. The
Caribbean Office of Public Housing concurred that the Authority’s SEMAP scores and risk
assessments had improved, and agreed that a full audit of the Authority was no longer needed.

Should you or your staff have any questions, please contact me or Michael A. Rivera, Assistant
Regional Inspector General for Audit at (787) 766-5540 or e-mail mrivera@hudoig.gov.