oversight

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)

                                                                           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.




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          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.




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                           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




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                               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.




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                                         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



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                      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.




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          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.




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                                      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.




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                                      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).




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         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




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            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




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            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




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         Appendix B

                    AUDITEE COMMENTS AND OIG'S EVALUATION


         Ref to OIG Evaluation      Auditee Comments




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         Comment 1




         Comment 2




                     14

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         Comment 3




         Comment 4




                     15

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         Comment 5




         Comment 6


         Comment 7




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                                  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.




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