oversight

Section 8 Housing Choice Voucher Program, Montgomery Housing Authority Montgomery, Alabama

Published by the Department of Housing and Urban Development, Office of Inspector General on 2005-09-07.

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




September 7, 2005                                                             MEMORANDUM NO:
                                                                                   2005-AT-1803



MEMORANDUM FOR:              R. Edmond Sprayberry, Director, Public Housing Division, 4CPH



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

SUBJECT:      Section 8 Housing Choice Voucher Program
              Montgomery Housing Authority
              Montgomery, Alabama


                                     INTRODUCTION

We completed a review of the Montgomery Housing Authority’s (Authority) Section 8 Housing
Choice Voucher program. The review was conducted as part of our strategic plan goal to assist
the U.S. Department of Housing and Urban Development (HUD) in reducing erroneous rental
assistance payments. We selected the Authority for review because it ranked tenth in the
Section 8 risk assessment conducted by our region. The primary objectives of our review were
to determine whether the Authority made Section 8 subsidy payments only for eligible housing
and tenants and whether additional audit work was warranted.

The review results show that the areas reviewed do not warrant additional audit coverage.
However, the review identified that the Authority’s controls over processing Section 8 tenant
files need improvement. We have discussed our review results with HUD and the Authority, and
they generally agreed with the finding.

For each recommendation without a management decision, please respond and provide status
reports in accordance with HUD Handbook 2000.06, REV-3. Also, please furnish us copies of
any correspondence or directives issued because of the review.
                               METHODOLOGY AND SCOPE

To achieve our objectives, we reviewed

   •   Applicable laws, regulations, and other HUD program requirements;
   •   Procedures and controls used by the Authority related to the administration of its
       Section 8 Housing Choice Voucher program; and
   •   Files and documents obtained from HUD and the Authority.

We reviewed a sample of 14 tenant files from a universe of 1,425, which included three
portables and four tenants identified on the HUD income discrepancy report, dated
February 5, 2005. We inspected a sample of 10 units the Authority recently inspected from
March 16 through May 16, 2005.

We examined and reviewed the tenant files to determine whether the Authority (1) performed
recertifications (annual or interim) in accordance with HUD requirements; (2) adequately
supported the eligibility requirements of each family; and (3) accurately calculated the
participant’s annual income and expenses, deductions, unit utility allowances, housing assistance
payments, and total tenant payments.

In addition, we interviewed appropriate officials and staff from the HUD Public and Indian
Housing Birmingham office and the Authority.

The review generally covered the period October 1, 2002, through March 31, 2005, and we
extended the period as necessary. We performed our onsite work at the Authority’s Section 8
office and the HUD Birmingham field office. Our onsite review was conducted between May
and June 2005.


                                        BACKGROUND

Under the United States Housing Act of 1937, the State of Alabama granted a charter to the
Authority on June 9, 1939, to help fill the need for decent, safe, sanitary, and affordable housing.
The Authority is a separate public corporation pursuant to the laws of the state of Alabama, and
was organized to provide low-rent housing for qualified individuals in accordance with the rules
and regulations prescribed by HUD and other federal agencies. A nine-member board of
commissioners governs the Authority. The Authority administers 1,825 housing choice vouchers
with a value of about $8.2 million, including $646,094 in administrative fees.

A rental integrity monitoring review conducted by HUD in July 2003 disclosed that the
Authority did not (1) adequately and consistently obtain third party verifications related to
family composition, income (including assets), and deductions, or document the use of other
methods when third party verifications were not available; (2) provide allowances for all tenant-
paid utilities as required; (3) perform reexaminations within the 12-month reexamination period;
and (4) document the formal request from the owner or properly notify tenants by offering a new
lease for rent increases.




                                                 2
HUD conducted a rental integrity monitoring re-review in July 2004 and found that although the
Authority had made improvement, it had not fully implemented intended corrective actions from
the prior findings. The rental integrity monitoring re-review disclosed an additional finding that
the Authority did not accurately and consistently report data to the Multifamily Tenant
Characteristics System on the HUD 50058 family report. HUD cleared all of the findings on
June 22, 2005.

As a result, HUD approved technical assistance contractors to assist the Authority with
performing assessments of its Section 8 program, implementing its corrective action plan, and
providing other technical assistance needed to improve the overall performance of the
Authority’s Housing Choice Voucher program and Section 8 Management Assessment Program
score. The initial contractor defaulted on the contract and had to be replaced.

The new technical assistance contractors began their assessment of the Authority on
May 24, 2005. HUD designated the Authority as a troubled Section 8 public housing authority
in fiscal year 2003. Although the Authority’s Section 8 Management Assessment Program score
increased to “standard performer” in fiscal year 2004, the Authority’s troubled status will remain
until the technical assistance contractor has completed its assessment.

The Authority’s independent public accountant report for fiscal year 2004 contained one Section
8 finding. The report disclosed that the Authority did not comply with requirements regarding
certain documentation, income verification, dependent eligibility verification, and rent
calculation requirements related to its Section 8 Housing Choice Voucher program.


                                   RESULTS OF REVIEW

Our review identified that the Authority is generally administering its Section 8 program in
accordance with the program’s requirements. However, the review disclosed weaknesses over
the controls relating to the Authority’s procedures for processing Section 8 tenant files. We
identified minor errors with the tenant files regarding subsidy calculations, missing documents,
recertifications, and third party verifications.

The Authority’s Internal Controls over Processing Section 8 Tenant Files Are Inadequate

The Authority has made improvements; however, its internal controls over processing Section 8
tenant files are inadequate. We identified problems with the tenant files regarding overpaid
housing assistance payments, missing documents (i.e., expired housing assistance payment
contracts), late recertification, and no third party verification of employment. These problems
occurred because the Authority’s housing specialists were not adequately trained. Further, the
Authority did not establish adequate controls regarding Section 8 tenant file processing. As a
result, the Authority overpaid $3,348 in housing assistance payments and paid $572 in erroneous
housing assistance payments.




                                                3
Section 8 Tenant Files Contained Errors

Based on our review of 14 files, 7 files contained the following errors:

      •   Three (21 percent) had missing documents (two had expired housing assistance payment
          contracts; one was missing a current HUD 50058 family report);
      •   Two (14 percent) had overpayments (totaling $3,348) of housing assistance payments;
      •   One (7 percent) had incorrect information on the HUD 50058 family report (it did not
          affect the housing assistance payment subsidy calculation);
      •   One (7 percent) had late recertifications;
      •   One (7 percent) had no recertification;
      •   One (7 percent) had an underpayment of the housing assistance payment;
      •   One (7 percent) had no third party verification of employment; and
      •   One (7 percent) had an unsigned lease.

The Code of Federal Regulations at 24 CFR 5.240(c) requires the responsible entity to verify the
accuracy of the income information received from the family and change the amount of the total
tenant payment as appropriate, based on such information. In addition, 24 CFR 982.516(a)
requires the Authority to conduct a reexamination of family income and composition at least
annually and document in the tenant file third party verification or why third party verification
was not available.

We also identified one instance in which the Authority paid a housing assistance payment of
$572 in June 2005 for a tenant who had moved out of the unit as of May 31, 2005. The tenant
notified the Authority of her intent to move from the unit by May 31, 2005. However, when we
inquired with the housing specialist, she could not provide the status of the unit occupancy. We
visited the unit on June 22, 2005, and determined that the tenant had moved from the unit as of
May 31, 2005. We notified the Section 8 director, who stated that she would request a refund
from the landlord immediately.


                                      RECOMMENDATIONS

We recommend that the director of the Office of Public Housing

1A.       Require the Authority to repay HUD $3,920 from nonfederal funds for ineligible housing
          assistance payments.

1B.       Establish and implement an internal control plan to ensure the cited deficiencies are
          corrected and all Section 8 tenant files are adequately processed.

Should you or your staff have any questions, please contact Sonya D. Lucas, assistant regional
inspector general for audit, at (404) 331-3369.




                                                   4
    Attachment




5
6