Issue Date September 30, 2004 Audit Case Number 2004-KC-1006 TO: Andrew L. Boeddeker, Director, Office of Public Housing, Kansas City HUB, 7APH /signed/ FROM: Ronald J. Hosking, Regional Inspector General for Audit, 7AGA SUBJECT: The Housing Authority of Kansas City, Missouri Did Not Consistently Follow HUD Rules Over its Housing Choice Voucher Program HIGHLIGHTS What We Audited and Why We selected the Housing Authority of Kansas City, Missouri based on information from the Kansas City Office of Public Housing regarding recent reviews of the Housing Authority’s Housing Choice Voucher Program. The results of these reviews, performed in 2002 and 2003, indicated that the Housing Authority was not consistently following HUD rules in administering its Housing Choice Voucher Program. The reviews identified problems regarding quality control, verification of tenant information, and a lack of proper documentation. Because of the volume of vouchers administered by the Housing Authority, it poses a significant risk to the voucher program in the Kansas City area. Our objective was to determine if the Housing Authority was following HUD rules and regulations in establishing tenant eligibility and calculating tenant income and rent, and was performing Housing Quality Standards inspections in a timely manner. Table of Contents What We Found Housing Authority of Kansas City, Missouri, personnel did not consistently follow HUD rules and regulations in calculating tenant income and rent or verifying tenant information. These results confirmed problems identified in previous reviews. Further, the Housing Authority did not follow an established quality control plan to ensure that errors would be captured and immediately corrected. As a result, the Housing Authority could not ensure that it would identify and correct errors in rents and subsidies. We also determined that the Housing Authority performed Housing Quality Standards inspections within the timeframes established by HUD and properly documented the completed inspections. What We Recommend We recommend that the Kansas City Office of Public Housing ensure that the Housing Authority has implemented an adequate quality control plan and made all appropriate corrections to the tenant files, rents, and subsidies. For each recommendation without a management decision, please respond and provide status reports in accordance with HUD Handbook 2000.06 REV-3. Please furnish us copies of any correspondence or directives issued because of the audit. Auditee’s Response The Housing Authority of Kansas City, Missouri, generally agreed with our conclusions and recommendations. The Housing Authority also responded that it has implemented a corrective action plan that addresses our quality control concerns, and made corrections to a majority of the tenant files questioned in this report. We provided a draft report to the Housing Authority and requested a response by September 24, 2004. The Housing Authority provided its written comments on September 24, 2004. The complete text of the Housing Authority’s response, along with our evaluation of that response, can be found in appendix B of this report. 2 Table of Contents TABLE OF CONTENTS Background and Objectives 4 Results of Audit Finding 1: Housing Authority Did Not Consistently Follow HUD Rules in 5 Calculating Tenant Income and Rent Scope and Methodology 8 Internal Controls 9 Appendixes A. Tenant File Exceptions 10 B. Auditee Comments and OIG’s Evaluation 13 3 BACKGROUND AND OBJECTIVES The Housing Authority of Kansas City, Missouri was established by city ordinance on July 14, 1941. In 1977, the Housing Authority entered into its first Annual Contributions Contract with HUD for the Section 8 Housing Assistance Payments (HAP) Program. The Housing Choice Voucher Program is the federal government’s major program for assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market. Participants in the program are able to select any housing that meets the requirements of the program. The Housing Authority determines a payment standard that is the amount generally needed to rent a moderately-priced dwelling unit in the local housing market and this amount is used to calculate the housing assistance a family will receive. A family that receives a housing voucher can select a unit with a rent that is above or below the payment; however, the family must pay 30 percent of its monthly adjusted gross income for rent and utilities; and if the unit rent is greater than the payment standard, the family is required to pay the additional amount. By law, the family may not pay more than 40 percent of its adjusted monthly income for rent. Our objective was to determine if the Housing Authority was following HUD rules and regulations in establishing tenant eligibility and calculating tenant income and rent, and was performing Housing Quality Standards inspections in a timely manner. 4 Table of Contents RESULTS OF AUDIT Finding 1: The Housing Authority Did Not Consistently Follow HUD Rules in Calculating Tenant Income and Rent The Housing Authority of Kansas City did not correctly calculate tenant rents and subsidy payments, or verify tenant information. This occurred because the Authority did not consistently follow an established quality control process, which resulted in many minor errors in tenant rent and HUD subsidy amounts. Authority Did Not Consistently Follow HUD Rules Housing Authority of Kansas City, Missouri personnel did not consistently follow HUD rules and regulations in calculating housing assistance payments, tenant payments, or utility allowances. The Housing Authority was also not consistent in following HUD rules and regulations for appropriately verifying required tenant information or adequately documenting the verification process. During our review of 50 tenant files, we found 31 exceptions related to tenant payments, utility allowances, and housing assistance payments, and 27 exceptions related to verification of tenant information and minor tenant eligibility issues (see appendix A). For example, during our review of tenant files, we found six tenant files in which the family’s adjusted gross income was miscalculated by using the wrong hourly wage, the wrong child support amount, etc. This caused incorrect rent calculations for these tenants, leading to minor under or overpayments of housing assistance. We also found 11 exceptions relating to utility allowances. These were minor problems relating to the use of the wrong utility allowance table, such as using the figure for gas instead of electric utilities. Authority Did Not Follow a Quality Control Process These problems occurred because the Housing Authority did not consistently follow an established quality control plan to ensure that the tenant eligibility and verification process, and the process of calculating tenant rents and subsidies, would capture errors so that the errors could be immediately corrected. In addition, the Housing Authority did not consistently provide adequate employee 5 Table of Contents training or perform quality control reviews to ensure that the tenant files were accurate. Incorrect Rents and Subsidies At the time of our review, the Housing Authority lacked an established quality control plan to ensure that errors leading to possible underpayment and/or overpayment of rent by residents, housing assistance payments to owners, or utility reimbursements to tenants would be identified and corrected. For example, in one case, the Housing Authority misread the tenant’s income as $388 per month. The actual income was $323 per month. This miscalculation caused an overpayment of rent by the tenant, and an underpayment of subsidy by HUD of $19 per month. In another case, the Housing Authority used the wrong utility allowance while calculating the housing subsidy payment, causing an incorrect payment. The Housing Authority used the utility allowance for a four-bedroom apartment when the rented unit was actually a four-bedroom, single family, detached unit. This miscalculation caused a $40 per month overpayment of rent by the tenant and underpayment of subsidy by HUD. Authority Plans Improvements We performed our review on 50 tenant files selected from the Housing Authority’s 2003 fiscal year. In early 2004, the Housing Authority provided HUD with a Corrective Action Plan in response to a September 2002 Rental Integrity Monitoring review performed by HUD, and a subsequent follow-up review performed by a HUD contractor in December 2003. The Corrective Action Plan addresses the cause of our finding, and calls for the Housing Authority to establish a quality control plan, provide employee training in the areas addressed in this finding, and to establish a reporting system to management to ensure that the tenant files are correctly processed. Our audit did not include testing the Corrective Action Plan; however, as of March 2004, HUD had approved the plan, and the Housing Authority told us that it has implemented the plan. 6 Table of Contents Recommendations We recommend that the Director, Office of Public Housing, Kansas City HUB ensure that the Housing Authority of Kansas City, Missouri 1A. Fully implemented an adequate quality control plan, as stated in the Corrective Action Plan approved by HUD in response to the Rental Integrity Monitoring review findings. 1B. Assessed all tenant files noted as exceptions in this report and made the appropriate corrections; including documenting and verifying required information, and making all appropriate current and retroactive adjustments to rents and subsidies. 7 Table of Contents SCOPE AND METHODOLOGY We performed on-site work from March through May 2004. During our audit, we interviewed HUD program staff to obtain background information on the Housing Authority’s Section 8 Program. We interviewed Housing Authority personnel to gain an understanding of their policies and procedures. We interviewed Section 8 tenants and landlords to confirm required Housing Quality Standards inspections were performed. We also reviewed HUD rules and regulations, as well as the Housing Authority’s written policies and procedures regarding their Section 8 Program. We selected and reviewed a representative sample of tenant files to determine if the Housing Authority followed established rules and regulations by performing timely Housing Quality Standards inspections, determining tenant eligibility, and performing required calculations. We chose to perform nonstatistical sampling on a representative selection because we did not plan to project error rates to the universe. We selected 50 tenant files for review from a universe of 5,279 tenant files identified in HUD’s Public and Indian Housing Information Center. We used a random sample generator to select a representative sample from the list of tenants. We reviewed the 50 tenant files for evidence that the Housing Authority complied with HUD requirements for establishing tenant eligibility and calculating tenant income and rent. We noted a number of exceptions, which are detailed in Finding 1. We also reviewed the 50 tenant files for evidence that the Housing Quality Standards inspections had taken place, and that the Housing Authority conducted the inspections within the required timeframes. We noted only two minor exceptions, which we discussed with the Housing Authority. To confirm that the inspections were actually conducted, we contacted tenants and landlords, and concluded that the Housing Authority conducted the inspections as shown in the tenant files. We did not evaluate the adequacy of the Housing Quality Standards inspections, but determined only that the Housing Authority completed the inspections timely and properly documented them. The audit covered the period from January 1, 2003, through December 31, 2003, the Housing Authority’s 2003 fiscal year. We performed our review in accordance with generally accepted government auditing standards. 8 Table of Contents INTERNAL CONTROLS Internal Control is an integral component of an organization’s management that provides reasonable assurance that the following objectives are being achieved: • Effectiveness and efficiency of operations, • Reliability of financial reporting, and • Compliance with applicable laws and regulations. Internal controls relate to management’s plans, methods, and procedures used to meet its mission, goals, and objectives. Internal controls include the processes and procedures for planning, organizing, directing, and controlling program operations. They include the systems for measuring, reporting, and monitoring program performance. Relevant Internal Controls We determined the following internal controls were relevant to our audit objectives: • Controls over tenant eligibility • Controls over verification • Controls over Housing Quality Standards inspections • Controls over calculating housing assistance payments, tenant payments, and utility allowances We assessed the relevant controls identified above. A significant weakness exists if management controls do not provide reasonable assurance that the process for planning, organizing, directing, and controlling program operations will meet the organization’s objectives. Significant Weaknesses Based on our review, we believe the following items are significant weaknesses: • The Housing Authority lacked an established Quality Control plan to ensure errors would be identified and corrected (See Finding 1). 9 Table of Contents Appendix A TENANT FILE EXCEPTIONS Street Address Exception Explanation of Exception Tenant Effect PHA used the wrong utility allowance, Inaccurate Utility causing the HAP to be incorrect. HUD Allowance and HAP Form 52667 shows correct utility allowance Tenant overcharged 2616 E. 30th St. #2E Payment as $116 - PHA used $108 $8/month PHA used the wrong utility allowance, causing the HAP to be incorrect. HUD Form 52641 states utilities are electric. PHA used allowance for gas, causing HAP to be incorrect by $6/month. In addition, there was no current verification of Tenant overcharged childcare costs. PHA used a childcare $6/month on utility No Childcare Cost reimbursement cost of $1,768 from a miscalculation. Verification and verification dated January 2002. This Tenant effect cannot Inaccurate Utility amount was used for the July 2003 be determined on 4318 Northern Ave. Allowance and HAP recertification. non-verified childcare #2731 Calculation PHA HAP $264 / OIG HAP $270 costs PHA used wrong utility allowance, causing the HAP to be incorrect. PHA used the apartment table for a 4 bedroom single family detached structure and did not allow for air conditioning. The correct utility Inaccurate Utility allowance is $40/month higher that PHA's Allowance and HAP calculation. Tenant overcharged 9401 Bristol Payment PHA HAP $943 / OIG HAP $983 $40/month PHA used the wrong utility allowance, causing the HAP to be incorrect. PHA figured cooking as gas instead of electric. Inaccurate Utility The correct utility allowance is $3 higher 7811 East 86th Street Allowance and HAP than PHA's calculation. Tenant overcharged #B Payment PHA HAP $911 / OIG HAP $914 $3/month No current verification of childcare expenses. PHA used a notarized statement verifying childcare expenses of $500/month, dated September 2002. This No Verification of amount was used for the July 2003 Tenant effect cannot 9316 Cleveland Childcare Expenses recertification. be determined PHA used incorrect child support amount, Inaccurate Income causing the HAP to be incorrect. Court Calculation and documents show tenant receives Total Tenant $300/month in child support. Tenant Tenant effect cannot 9820 Linden Circle Payment actually receives $277/month be determined 10 Table of Contents Street Address Exception Explanation of Exception Tenant Effect No Income Tenant effect cannot 1930 Cleveland Verification No income verification in file be determined PHA used wrong hourly wage for income calculation, and wrong utility allowance, Inaccurate Income causing the HAP to be incorrect. PHA Calculation, Total included water & sewer in utility allowance Tenant Payment, when HUD 52517 says owner is Tenant Utility Allowance, responsible for water & sewer. undercharged 5843 E. 19th Terrace and HAP Payment PHA HAP $321 / OIG HAP $286 $35/month Inaccurate Income Inaccurate income calculation. PHA Calculation, Total verification shows tenant works 40 Tenant Payment, hrs/week. PHA calculation sheet shows 32 Tenant Utility Allowance, hrs/week. In addition, PHA used the wrong undercharged 3876 E. 59th Terrace and HAP Payment utility allowance. $63/month No Zero income verification in file. No No Zero Income 2003 recertification done. Tenant Tenant effect cannot 1538 Lexington Verification terminated from program 3/31/03. be determined PHA used the wrong utility allowance, causing the HAP to be incorrect. PHA Inaccurate Utility figured utilities on a 2 bedroom, single Tenant Allowance and HAP family detached. The tenant lives in a undercharged 3240 Roberts Payment duplex. PHA HAP $509 / OIG HAP $494 $15/month Inaccurate Income Inaccurate income calculation. Tenant Calculation, Total receives $323/month TANF. PHA used Tenant Payment, $388/month in their income calculation. Tenant overcharged 2723 Grove and HAP Payment PHA HAP $908 / OIG HAP $927 $19/month No Zero Income Verification, and PHA used the wrong utility allowance Inaccurate Utility causing the HAP to be incorrect. In Allowance and HAP addition, the tenant's Zero income Tenant effect cannot 2619 E. Linwood #2E Payment statement was not notarized. be determined No Timely Recert and HQS Inspection, 2525 Euclid Ave. No documented No documentation for disability medical Tenant effect cannot #108B medical expenses expenses. No paperwork in file for 2002 be determined PHA used wrong utility allowance, causing the HAP to be incorrect. PHA figured Inaccurate Utility utilities on a one-bedroom unit. The unit 4842 NW Homestead Allowance and HAP actually has 2 bedrooms. Tenant overcharged Terrace Payment PHA HAP $372 / OIG HAP $383 $11/month 11 Table of Contents Street Address Exception Explanation of Exception Tenant Effect No Timely HQS Tenant files contain no supporting Inspection. No documentation for income, no Income Verification, documentation on how the PHA calculated and Inaccurate Utility utility allowance, and no documentation for Allowance and HAP the latest HQS inspection. Tenant Tenant effect cannot 8230 Virginia #1 Payment Calculation terminated from program on 4/30/03. be determined No verification of disability, and verification No Income of Social Security income is not adequate Verification or because the name of the recipient is now Tenant effect cannot 3315 E. 62nd Disability Verification shown on both letters. be determined No Family No verification of family composition in file. Composition Need to verify names, SSN, citizenship, Tenant effect cannot 1467 E. 76th Terrace. Verification etc. be determined PHA figured childcare for 360 days per year. The actual cost is $4/day averaging Inaccurate Total 23 days per month. This miscalculation Tenant Tenant Payment and caused the HAP to be incorrect. undercharged 901 E. 25th Apt. #L HAP Payment PHA HAP $262 / OIG HAP $253 $9/month PHA did not perform the recertification on Tenant effect cannot 9410 Cleveland #56 No Timely Recert time. There is no paperwork in the file. be determined All documentation for 2002 is missing from files; therefore, there is no proof of a timely Tenant effect cannot 3237 Harrison #1B No Timely Recert recertification be determined PHA used the wrong utility allowance, No Income and causing the HAP to be incorrect. HUD Asset Verification, Form 52641 shows tenant only pays other also Inaccurate electric and A/C. PHA included heating Tenant 1620 Bellefontaine Utility Allowance and and water as well. undercharged Ave. #4 HAP payment PHA HAP $313 / OIG HAP $266 $47/month Income verification documentation does not have tenant's name, and the income is listed as food stamp income, which is No Income excluded from gross income. Proper Tenant effect cannot 2308 Topping Verification income documentation is not in file. be determined Childcare expenses were not verified. The verification must include provider's name, address, phone number, names of children cared for, SSN, frequency of care, rate of pay, and typical yearly amount. The No Childcare verification in file contains only the rate per Tenant effect cannot 10311 E. 42nd Street Expense Verification week, provider name, and phone number. be determined 12 Table of Contents Appendix B AUDITEE COMMENTS AND OIG'S EVALUATION Ref to OIG Evaluation Auditee Comments 13 Table of Contents Comment 1 Comment 2 14 Table of Contents Comment 3 Comment 4 15 Table of Contents Comment 5 Comment 6 Comment 7 16 Table of Contents 17 Table of Contents OIG Evaluation of Auditee Comments Comment 1 We commend the Housing Authority for taking steps to implement the HUD- approved corrective action plan. If fully implemented, the plan should ensure accurate assessment and documentation of tenant information. Comment 2 Due to the volume of documents provided by the Housing Authority as evidence of its tenant file reviews and corrections, we did not include the detailed documentation in this report; however, we did provide HUD officials with a copy of the documents, and can provide them upon request. Comment 3 We agree that the unit is a four bedroom single-family detached unit. The utility allowance is incorrect because the Housing Authority used the four-bedroom apartment table to figure the allowance rather than the single-family detached unit table. Comment 4 Upon review of the documents provided, we agree that the imputed welfare income used for the income calculation was correct. Although there was no income verification in the file at the time of our review, there was no monetary effect on the tenant; therefore, we have removed this tenant file from the exceptions included in this report. Comment 5 The Housing Authority provided no documentation regarding this tenant file; therefore, we have retained the exception in this report. Comment 6 The Housing Authority provided no documentation regarding this tenant file; therefore, we have retained the exception in this report. Comment 7 Upon review of the documents provided, we agree that the income amount was properly verified. We have removed this tenant file from the exceptions included in this report. 18 Table of Contents
The Housing Authority of Kansas City, Missouri Did Not Consistently Follow HUD Rules Over its Housing Choice Voucher Program
Published by the Department of Housing and Urban Development, Office of Inspector General on 2004-09-30.
Below is a raw (and likely hideous) rendition of the original report. (PDF)