oversight

St. Louis Housing Authority Overhoused Section 8 Tenants and Had Inaccurate Tenant Data

Published by the Department of Housing and Urban Development, Office of Inspector General on 2005-07-28.

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

                                                               Issue Date
                                                                        July 28, 2005
                                                               Audit Report Number
                                                                            2005-KC-1008




TO:        Patricia Straussner, Public Housing Program Center Coordinator, 7EPH

           //signed//
FROM:      Ronald J. Hosking, Regional Inspector General for Audit, 7AGA

SUBJECT: The St. Louis Housing Authority Overhoused Section 8 Tenants and Had
           Inaccurate Tenant Data


                                    HIGHLIGHTS

 What We Audited and Why

             We reviewed the St Louis Housing Authority’s (Authority) Section 8 Housing
             Choice Voucher program to identify cost savings that the Authority could attain
             by eliminating excess subsidy payments for overhoused tenants and to verify
             whether the Authority ensures the accuracy of data entry of key identification
             information. We selected the Authority for review due to its size, its amount of
             funding for its Section 8 and public housing programs, the length of time since its
             last Office of Inspector General (OIG) audit, and its risk level score assigned by
             the U.S. Department of Housing and Urban Development (HUD) for both
             programs. In addition, we identified overhousing and the accuracy of data entry
             as two higher risk areas during the initial phase of our audit.

 What We Found


             The Authority has 15 tenants who are overhoused with excess subsidy payments
             and 167 tenants who are overhoused with the potential to have excess subsidy
             payments. The Authority does not have adequate procedures in place to ensure
             that its tenants receive the proper voucher size. The Authority’s 15 tenants with
             excess subsidy payments caused the payment of $24,750 in excess housing
           assistance payments. By enhancing its procedures, the Authority could avoid
           incurring $173,618 in additional losses of Section 8 funds, which would allow it
           to provide vouchers to additional tenants.

           In addition, the Authority does not ensure the accuracy of data entry of key tenant
           identification information. The Authority’s staff does not always reverify the
           tenant identification information after its initial entry; therefore, data entry errors
           by staff go undetected. Without accurate tenant identification information, HUD
           and the Authority cannot be assured that tenant income information is available
           from the Enterprise Income Verification system when calculating tenant rent and
           subsidy payments.


What We Recommend


           We recommend that the public housing program center coordinator require the
           Authority to repay HUD the $24,750 in excess subsidy payments from its
           administrative fee reserves. We also recommend that HUD ensure that the
           Authority develops and implements procedures to ensure that each tenant receives
           the proper voucher size. In addition, we recommend that the Authority review the
           accuracy of the input of the tenant’s name, Social Security number, and date of
           birth at initial entry and at each recertification.

           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 Authority generally agreed with our findings, but disagreed with parts of the
           recommendations. We provided the draft report to the Authority on July 7, 2005.
           The Authority provided written comments on July 20, 2005. It also provided
           documentation showing that it has initiated corrections to the subsidy amounts for
           all of the 15 overhoused tenants.

           The complete text of the 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: The Authority Is Paying Excess Subsidies for 15 Overhoused          5
                 Tenants
      Finding 2: The Authority Does Not Ensure the Accuracy of Tenant Information    8

Scope and Methodology                                                               10

Internal Controls                                                                   12

Appendixes
   A. Schedule of Questioned Costs and Funds to Be Put to Better Use                13
   B. Auditee Comments and OIG’s Evaluation                                         14




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                     BACKGROUND AND OBJECTIVES

The St. Louis Housing Authority (Authority) is a municipal corporation created by state statute,
formed in 1939. The Authority is governed by a seven-member board of commissioners; five
members are appointed by the mayor, and two are elected by the public housing residents. The
Authority has 98 employees with an annual operating budget of approximately $60 million and is
funded entirely by federal funds from the U.S. Department of Housing and Urban Development
(HUD).

The Authority operates two major housing programs, public housing and the Housing Choice
Voucher program. Public housing units are owned by the Authority and rented to qualified
applicants. The Housing Choice Voucher program provides rental assistance to qualified
applicants to facilitate rental of privately owned units. The Authority presently administers
5,675 Section 8 housing choice vouchers.

Through HUD’s Housing Choice Voucher program, public housing authorities assist families
and individuals with their housing needs. Housing assistance under the Housing Choice Voucher
program is provided on behalf of the family or individual, and participants are responsible for
locating their own housing. HUD pays the housing authority the subsidy for the family, along
with an administrative fee. As long as the family remains otherwise eligible, the family may take
the subsidy to a new acceptable unit. Rental units must meet minimum standards of health and
safety, as determined by the housing authority. The housing authority must inspect the dwelling
and determine that the rent requested is reasonable.

The public housing authority also determines a payment standard, based on HUD’s fair market
rent, which is the amount generally needed to rent a moderately priced dwelling unit in the local
housing market. The housing authority calculates the maximum subsidy allowable, based on the
payment standard and gross rent of the unit, and pays the monthly subsidy directly to the
landlord on behalf of the participant. The participant pays the difference between the actual rent
charged by the landlord and the amount subsidized by the program.

Our overall objective was to identify Housing Choice Voucher program cost savings that the
Authority could attain by eliminating overhousing of tenants and to verify whether the Authority
is ensuring the accuracy of data entry of key identification information.




                                                4
                                RESULTS OF AUDIT

Finding 1: The Authority Is Paying Excess Subsidies for 15 Overhoused
Tenants
The Authority has 15 tenants who are overhoused with excess subsidy payments and 167 tenants
who are overhoused with the potential to have excess subsidy payments. The Authority does not
have adequate procedures in place to ensure that its tenants receive the proper voucher size. The
Authority’s 15 tenants with excess subsidy payments caused the payment of $24,750 in excess
housing assistance payments. If the proper procedures are implemented, the Authority could
avoid incurring $173,618 in additional losses of Section 8 funds, which would allow it to provide
vouchers to additional tenants.


 Excess Subsidies Totaled
 $24,750


              The Authority has 182 tenants with Section 8 vouchers larger than the number of
              people in their households (overhoused tenants). HUD’s Housing Choice
              Voucher Guidebook explains that when determining unit size, the subsidy
              standards must provide for the smallest number of bedrooms needed to house a
              family without overcrowding. In addition, the Authority’s administrative plan
              says that there must be at least one person per bedroom on the voucher.

              Of the 182 overhoused tenants, 15 tenants are overhoused with excess subsidy
              payments, and 167 tenants have the potential to result in subsidy overpayments
              due to the following situations:

                  •   The tenant is currently overhoused, but he has not yet reached his next
                      annual recertification since his household composition changed. If the
                      Authority continues to pay at the same rate after the next recertification, it
                      will be paying an excessive subsidy.
                  •   The tenant is currently overhoused, but his gross rent is below the
                      payment standard; an increase in the contract rent could raise the gross
                      rent above the payment standard, resulting in an excess subsidy payment.
                  •   The tenant currently has a larger voucher than the number of family
                      members and his unit size; the tenant can obtain a larger unit because he
                      has a larger voucher, and if the larger unit has a higher rent, this would
                      increase the subsidy payment to an excessive amount.

              For some of these 182 tenants, their family report form does not accurately reflect
              the number of persons residing in the unit. For example, the Authority frequently
              does not list live-in aides and foster children on the forms, even though there is a


                                                5
             space on the form for them. This omission leads to the appearance that the
             voucher size is excessive for the household size.

             The Authority does not have adequate procedures in place to ensure that its
             tenants receive the proper voucher size. In some cases, the Authority issued the
             wrong size voucher from the beginning of the tenant’s participation in the Section
             8 program and did not detect the error. In other cases, it failed to downgrade the
             voucher at the next annual recertification when there were changes in family
             composition, as required by the guidebook. In addition, the Authority did not
             always list live-in aides on the family report form, making a comparison of the
             household composition to the voucher size more difficult.

             By not documenting all household members on the family report form, the
             Authority does not have assurance that the tenant has received the correct voucher
             size and has less certainty that the live-in aides are still residing in the unit.
             Further, when the Authority grants a larger unit for a medical reason, such as
             storage of wheelchairs or medically necessary exercise equipment, this is based
             on a doctor’s note. It is thereby documenting need but not verifying actual use.

             The Authority’s 15 overhoused tenants caused the payment of $24,750 in excess
             subsidy payments. The Authority’s maximum exposure risk from all 182
             overhoused tenants is $1,362,168 ($37,838 per month x 36 months). We
             reviewed 33 of the 182 tenants and found that 12 of these tenants at one point
             were overhoused with no resulting overpayments but later caused the housing
             authority to pay excessive subsidies. Based on the circumstances of these 12
             tenants, we estimate that the housing authority may pay $173,618 in excess
             subsidies for the tenants with oversize vouchers over the next 36 months.


Conclusion


             The Authority does not have adequate procedures in place to ensure that its
             tenants receive the proper voucher size. The household composition on the
             family report form should be appropriate for the family’s voucher size unless
             there is a medical justification. The Authority could strengthen its controls by
             having its inspectors ensure that tenants are using larger units for the intended
             purposes when performing housing quality standards inspections. The
             Authority’s 15 overhoused tenants caused the payment of $24,750 in excess
             housing assistance payments. If the proper procedures are implemented, the
             Authority could avoid incurring $173,618 in additional losses of Section 8 funds,
             which would allow it to provide vouchers to additional tenants.




                                              6
Recommendations

          We recommend that the public housing program center coordinator ensure that
          the Authority

          1A. Reimburses HUD the $24,750 in excess housing assistance payments from its
          administrative fee reserves.

          1B. Develops and implements procedures to ensure that each tenant receives the
          proper voucher size to put $173,618 to better use.

          1C. Develops and implements procedures to verify that when a tenant is granted
          a larger unit for medical reasons, the additional space is used for the reason
          intended.




                                         7
Finding 2: The Authority Does Not Ensure the Accuracy of Tenant
Information
The Authority does not ensure the accuracy of data entry of key tenant identification
information. The Authority’s staff does not always reverify the tenant identification information
after its initial entry; therefore, data entry errors by staff go undetected. Without accurate tenant
identification information, HUD and the Authority cannot be assured that accurate tenant income
information is available from the Enterprise Income Verification system when calculating tenant
rent and subsidy payments.


 Inaccurate Tenant Identification
 Information

           The Authority does not ensure the accuracy of data entry of key identification
           information. The Code of Federal Regulations explains that complete and accurate
           Social Security numbers are required for housing assistance participants. In addition,
           the Authority’s administrative plan states that Social Security numbers will be
           verified by reviewing the household members’ Social Security cards. We identified
           30 cases in which staff did not ensure the accuracy of data entry of key identification
           information. The Authority’s computer system contained five cases with invalid
           Social Security numbers and 25 cases with an incorrect date of birth. Of the 30
           errors, 13 of the tenants are new tenants that have not gone through a recertification.
           The remaining 17 tenants have had a recertification with the errors not detected.

           The incorrect tenant information in the Authority’s computer system was due to data
           entry errors by staff responsible for entering the information, as well as staff
           responsible for verifying the accuracy of the data. The Authority’s staff does not
           always reverify the tenant identification information after its initial entry; therefore,
           data entry errors are not detected.

           Without accurate tenant identification information, such as name, Social Security
           number, and date of birth, HUD and the Authority cannot be assured that accurate
           tenant income information is available from the Enterprise Income Verification
           system when calculating tenant rent and subsidy payments. This system provides
           wage, unemployment, and Social Security Administration benefit information for
           households covered by a family report form. The system uses a data matching
           process to verify tenant identities against Social Security Administration records by
           using the tenant’s name, Social Security number, and date of birth. If the verification
           fails, the income information will not be displayed. In summary, the Enterprise
           Income Verification system provides the Authority with tenant income information
           only if the family report form contains accurate tenant information.




                                                  8
Conclusion

        The Authority’s staff does not always reverify the tenant identification information
        after its initial entry; therefore, data entry errors are not detected. The Enterprise
        Income Verification system requires accurate tenant information to obtain tenant
        income information. Without accurate tenant identification information, tenant
        income information is not available from the Enterprise Income Verification system
        when calculating tenant rent and subsidy payments.


Recommendation



        We recommend that the public housing program center coordinator ensure that the
        Authority

             2A. Develops and implements procedures to review the tenant’s name, Social
                 Security number, and date of birth at initial entry and at each recertification.




                                               9
                         SCOPE AND METHODOLOGY

Our review generally covered the period from October 1, 2003, through May 1, 2005. We
expanded our review to the time when overhousing began.

To achieve our objectives, we conducted interviews of the Authority’s staff, HUD’s Section 8
Financial Management Center staff, and staff of the local public housing office. We also
reviewed the Authority’s policies and procedures, hard-copy and computer tenant files, records
of payments to tenants and property owners, and audited financial statements. We reviewed
federal regulations and the Authority’s administrative plan.

During the initial phase of our audit, we conducted limited testing to determine whether the
Authority was operating its Housing Choice Voucher program in compliance with HUD
requirements. We selected five tenants that most recently were issued vouchers to test waiting
list selection. We tested 20 tenants to verify that the Authority properly determined eligibility
and rent and subsidy payments. We conducted onsite inspections of 10 units that had received
housing quality standards inspections in January and February 2005 to test for adequate
inspections by Authority staff. We selected 20 tenants that were identified as overhoused by
computer formulas to test the Authority’s use of Section 8 funding, which includes the issuance
of proper voucher sizes to tenants. Finally, we selected five tenants from the St. Louis Baseline
Income Discrepancy Report, as of December 18, 2004, that have had a recertification since the
Authority obtained access to HUD’s income verification system to test the Authority’s use of the
system. We obtained an understanding of the Authority’s controls in each of these areas. We
identified overhousing and the accuracy of data entry as two higher risk areas during this testing,
and therefore decided to focus our audit on these areas.

To determine the number and effect of overhoused tenants, we applied a computer formula to the
Authority’s data to identify potentially overhoused tenants. We reviewed the family report form
and notes in the tenant files of those overhoused tenants who appeared to cause overpayments.
This review enabled us to determine the voucher size, the number in household, the unit size, the
payment standard used to calculate rent and subsidy, the length of time the tenant had been
overhoused, and the amount of subsidy overpayment. We discussed the results of the file review
with the Authority’s Section 8 staff, as well as HUD staff, to obtain clarification.

To determine the accuracy of tenant identification information, we queried all of the Section 8
residents’ Social Security numbers through a database that confirms whether the Social Security
number is valid or if it was issued before the date of birth provided. We interviewed the
Authority’s staff to obtain an understanding of their process for obtaining and verifying tenant
information. We had the Authority attempt to access the Enterprise Income Verification
information for some of these tenants to confirm that results were unavailable.

To achieve our audit objectives, we relied in part on computer-processed data contained in the
Authority’s database. We assessed the reliability of these data and found them to be adequate.



                                                10
We also conducted sufficient tests of the data. Based on these tests and assessments, we
conclude the data are sufficiently reliable to be used in meeting our audit objectives.

We conducted our review from February through May 2005 in accordance with generally
accepted government auditing standards.




                                               11
                              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 assigning voucher sizes
                  •   Controls over the accuracy of the data entry of tenant identification
                      information


              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 Authority does not have adequate procedures in place to ensure
                          that its staff will assign the proper voucher size (see finding 1).

                      •   The Authority does not have adequate procedures in place to ensure that
                          its staff review and verify tenant identification information (see finding
                          2).




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                                    APPENDIXES

Appendix A

               SCHEDULE OF QUESTIONED COSTS
              AND FUNDS TO BE PUT TO BETTER USE

                                        Ineligible 1/   Funds to be put
                                                        to better use 2/
                          1A          $24,750
                          1B                               $173,618



1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or federal, state, or local
     policies or regulations.

2/   “Funds to be put to better use” are quantifiable savings that are anticipated to occur if an
     Office of Inspector General (OIG) recommendation is implemented, resulting in reduced
     expenditures at a later time for the activities in question. This includes costs not incurred,
     deobligation of funds, withdrawal of interest, reductions in outlays, avoidance of
     unnecessary expenditures, loans and guarantees not made, and other savings.




                                              13
Appendix B

      AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 2




                         14
Comment 3




Comment 4




            15
                       OIG Evaluation of Auditee Comments


Comment 1   We agreed to the Authority's proposed wording changes to the draft audit report.
            We added information regarding the other areas reviewed in the scope and
            methodology section of the report.


Comment 2   We changed the wording of recommendation 1C by replacing the word
            "bedroom" with the word "space" so that it was clear we are not dictating how
            people arrange their living space.

            Representatives from HUD's Office of Fair Housing and Equal Opportunity,
            Office of General Counsel, and Office of Public Housing agreed that this
            recommendation could be implemented without a problem from their perspective.
            They stated that a reasonable accommodation requires medical documentation
            and that documentation must be specific, or have a direct correlation, to the
            person's medical condition. Also, the housing authority has a right to follow-up
            with the doctor if the medical documentation provided is not specific, and the
            housing authority should not feel that they have to accept any documentation
            provided by a tenant if the information is vague. The housing authority can ask
            for specific information regarding the reason for the accommodation (such as
            specifying what type of equipment is needed - treadmill, bike, oxygen tank, etc.)
            Also, the housing authority can question the tenant's reasonable accommodations
            if an inspector verifies that the tenant is not using the space for its intended
            purpose. As long as the policy is applied consistently, the housing authority will
            not have a problem with the fair housing regulations.

            We are not suggesting that the Authority use its judgment to override a doctor's
            note in regards to the tenant's medical condition, but use its judgment in regards to
            the legitimacy of the doctor's note when it feels the need for reasonable
            accommodation is questionable. We are suggesting that the Authority follow-up
            with the doctor and obtain specific information regarding the type of reasonable
            accommodation needed and a correlation to the additional space. We are not
            suggesting that the Authority request information regarding the tenant's medical
            condition, which would be a violation of privacy laws.


Comment 3   We do not think it will be overly burdensome because from our review, it appears
            the Authority has granted a relatively small number of equipment exceptions.
            Manual tracking should not be overly burdensome for the number of units in
            question. We suggested the Authority accomplish the verification by having
            inspectors observe whether the equipment is present during the course of their
            normal annual inspections. The Authority is free to design and implement
            another verification method that it feels is less burdensome.




                                             16
Comment 4   We do not agree with the Authority's methodology of calculating the overpayment
            amount. Our calculations were based upon the tenant's lease date. When a
            tenant's family composition decreases, the tenant is allowed a grace period, until
            the end of the lease, before his voucher is downgraded. We allowed the grace
            period when we calculated the overpayment amount. The tenant's rent amount is
            locked-in during the life of the lease, tenant family composition changes are not
            evaluated until the end of the lease, and the tenant's rent was calculated based
            upon the payment standard that was in effect at the time of the start of the lease.
            We believe our methodology provides an accurate accounting of the Authority's
            overpayment amount, through May 2005.




                                            17