oversight

Inglewood Housing Authority, Inglewood, California, Did Not Comply with the Housing Choice Voucher Program Portability Procedures and Responsibilities

Published by the Department of Housing and Urban Development, Office of Inspector General on 2005-08-26.

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

                                                              Issue Date
                                                                      August 26, 2005
                                                              Audit Report Number
                                                                       2005-LA-1008




TO:         Glenda Giffee, South Team Division Director of the Financial Management
            Center, PEVFB

            Cecilia J. Ross, Director, Los Angeles Office of Public and Indian Housing,
            9DPH




FROM:       Joan S. Hobbs, Regional Inspector General for Audit, Region IX, 9DGA

SUBJECT: Inglewood Housing Authority, Inglewood, California, Did Not Comply with the
            Housing Choice Voucher Program Portability Procedures and
            Responsibilities

                                    HIGHLIGHTS

 What We Audited and Why

             We audited Inglewood Housing Authority (Authority) in Inglewood, California,
             in response to a request for audit from the U.S. Department of Housing and Urban
             Development’s (HUD) Los Angeles Office of Public and Indian Housing. This is
             one of four audit reports resulting from our audit of the Authority.

             Our objective was to determine whether the Authority complied with the Housing
             Choice Voucher program’s portability procedures and responsibilities contained
             in HUD’s Housing Choice Voucher Guidebook and Office of Public and Indian
             Housing notices.
What We Found


           Contrary to the provisions in HUD’s Housing Choice Voucher program
           requirements, the Authority did not comply with portability procedures and
           responsibilities. We reviewed the 143 portable tenant files, in which the initial
           public housing agency, Housing Authority of the City of Los Angeles, refused to
           pay the housing assistance payments because the Authority did not submit the
           initial bill within the required timeframe causing the Authority to exceed their
           budget by $1.9 million. We also found that the Authority did not submit the
           appropriate documentation to ensure duplicate payments were not made on behalf
           of the ported tenants.


What We Recommend


           We recommend that HUD’s Financial Management Center not reimburse the
           Authority’s Section 8 program for the $1,991,283 in excess of its budget authority
           as was requested in its fiscal year 2004 yearend settlement statement. We also
           recommend that HUD’s Los Angeles Office of Public and Indian Housing ensures
           the Authority develops and implements adequate portability procedures to ensure
           billings and documentation are submitted on time.

           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


           We provided the Authority with a draft report on July 5, 2005, and held an exit
           conference on July 28, 2005. The Authority provided written comments on
           August 11, 2005. The Authority disagreed with our report finding. The complete
           text of the Authority’s response, along with our evaluation of that response, can
           be found in appendix B of this report.




                                            2
                            TABLE OF CONTENTS

Background and Objectives                                                     4

Results of Audit
      Finding: The Authority Did Not Comply with Portability Procedures and   5
      Responsibilities

Scope and Methodology                                                         9

Internal Controls                                                             10

Appendixes
   A. Schedule of Questioned Costs and Funds to Be Put to Better Use          11
   B. Auditee Comments and OIG’s Evaluation                                   12
   C. Schedule of Tenants Without Billing Records for the First Six Months    26




                                             3
                      BACKGROUND AND OBJECTIVES

The City of Inglewood, located at Inglewood City Hall, One Manchester Boulevard, Inglewood,
California, incorporated in 1908. The city administrator is responsible for setting operational
goals, implementing legislative action, making policy decisions approved by the mayor and city
council, monitoring the annual operating budget, overseeing the personnel system, and providing
direction to all city departments to ensure they meet the needs of the community. The Authority
is a blended component unit of the Community Development Department. The governing body
is comprised of members of the city council and the mayor. Among its duties are the approval of
the Authority’s budget and appointment of management. The financial activities of the
Authority are reported as a special revenue fund of the city. The housing manager has three
levels of oversight: the director of community development, the deputy city administrator/
community development and social services, and the city administrator/executive director of the
Authority. The director of community development is the housing manager’s immediate
supervisor.

The Housing Choice Voucher program was created under the Housing and Urban Rural
Recovery Act of 1983 to enable eligible lower income families to obtain modest housing in the
private sector that is decent, safe, and sanitary. An eligible family may use a tenant-based
voucher to lease a unit anywhere in the United States, leaving the first (initial) public housing
agency that issued the voucher for the second (receiving) public housing agency. The receiving
public housing agency decides whether it will administer or absorb an incoming portable family
based on its leasing rate or utilization rate, the administrative cost of billing, and the location of
the public housing agency. The receiving public housing agency must then promptly inform the
initial public housing agency of its decision to administer and bill the initial public housing
agency for the rental assistance or absorb the family into its own program.

The housing assistance payment contract is a written agreement between the public housing
agency and the owner of a unit occupied by a Housing Choice Voucher program participant.
Under the housing assistance payment contract, the public housing agency agrees to make
housing assistance payments to the owner on behalf of a specific family leasing a specific unit.

This audit report is one of four audit reports resulting from our audit of the Authority. Our
objective was to determine whether the Authority complied with the Housing Choice Voucher
program’s portability procedures and responsibilities contained in HUD’s Housing Choice
Voucher Guidebook 7420.10G and Notice 2004-12.




                                                  4
                                 RESULTS OF AUDIT

Finding: The Authority Did Not Comply with Portability Procedures
and Responsibilities

Contrary to HUD’s Housing Choice Voucher program requirements, the Authority did not
comply with portability procedures and responsibilities. We reviewed the 143 portable tenants
for whom the initial public housing agency, Housing Authority of the City of Los Angeles,
refused to pay the housing assistance payments because the Authority did not submit the initial
bill to the Housing Authority of the City of Los Angeles within the six month timeframe. We
also found that the Authority did not submit the family portability information form within 10
days to ensure duplicate payments were not made on behalf of tenants.

This occurred because the Authority did not establish or implement procedures to ensure
compliance with the portability procedures in the Housing Choice Voucher Guidebook. As a
result, the Authority had to unnecessarily absorb the 143 portable tenants and incurred excess
costs of $1,991,283 in housing assistance payments that exceeded the maximum allowed for
fiscal year 2004. Ultimately, these families are at risk of losing their housing assistance.



 The Authority Did Not Submit
 the Initial Bill within Six Months
 of the Voucher Issuance Date nor
 Keep Records of the Initial
 Billings


               The Housing Authority of the City of Los Angeles refused to pay the housing
               assistance payments for 143 portable tenants because the Authority did not bill the
               Housing Authority of the City of Los Angeles within 180 days of the voucher
               issuance dates, as required by the Housing Choice Voucher Guidebook. We
               found that for 140 of the 143 portable tenants, the Authority billed the Housing
               Authority of the City of Los Angeles between 2 and 412 days late.

               We also determined that for 28 of the 143 absorbed tenants the Authority did not
               keep adequate records of the initial billings to the Housing Authority of the City
               of Los Angeles. Therefore, the Authority had no record of whether it actually
               billed the Housing Authority of the City of Los Angeles, and if it did, the date of
               the billing. We had to rely on records kept by the Housing Authority of the City
               of Los Angeles to conclude that 25 of the Authority’s initial billings were late (see
               appendix C). For the remaining three tenants, the Authority was unable to refute
               claims by the Housing Authority of the City of Los Angeles that the billings were


                                                 5
            late. Consequently, the Authority had no alternative but to absorb these 28
            portable tenants.

            These 143 tenants had to be absorbed by the Authority because it does not have
            procedures in place to ensure that each incoming portable tenant is processed in a
            timely manner. We found that it took an average of 67 days for the Housing
            Authority of the City of Los Angeles to port the tentants to the Authority. That
            left 113 days for the Authority to bill the Housing Authority of the City of Los
            Angeles. The Authority has several steps to do within that 113 days including
            issuing a voucher, approving tenancy, executing a housing assistance payments
            contract, and submit the bill to the initial public housing agency.

            The Authority must approve the assisted tenancy by ensuring that the

               •   owner is eligible,
               •   unit is eligible,
               •   unit has been inspected and meets housing quality standards,
               •   lease includes a tenancy addendum, and
               •   rent charged to the owner is reasonable.

            Upon completion of these items, the owner and the Authority can execute a
            housing assistance payment contract.


The Authority Did Not Submit
Part II of Form HUD-52665
within 10 Days of the Contract
Execution Date

            Our review also disclosed that for 142 of the 143 portable tenants, the Authority
            did not submit part II of the family portability information form (HUD-52665)
            within 10 days of the execution of the housing assistance payment contracts to the
            Housing Authority of the City of Los Angeles as required in the Housing Choice
            Voucher Guidebook and ranged from 20 to 481 days late. While the families are
            searching for units in the Authority’s jurisdiction they are still under housing
            assistance payment contracts at the Housing Authority of the City of Los Angeles.
            Therefore, it is important that the Authority submits the form within 10 days to
            assure that the current housing assistance payment contract is terminated at the
            right time. This eliminates the potential risk that HUD could pay housing
            assistance payments for the same family at both public housing agencies. We
            were unable to determine whether any duplicate payments were made for these
            tenants, however the possibility exists. The problem occurred because the
            Authority did not establish or implement portability procedures to ensure they
            complied with the portability procedures in the Housing Choice Voucher
            Guidebook.



                                             6
        The Authority Spent $1.9 Million
        In Housing Assistance Payments In
        Excess of the Maximum Amount
        Allowed

                 As a result of the Authority’s failure to bill the Housing Authority of the City of
                 Los Angeles in a timely manner, the Authority had to absorb the 143 tenants and
                 cover the cost of the housing assistance payments for these tenants. The
                 Authority already reported to HUD it was fully utilizing all 1,002 units of their
                 baseline allocation, the maximum number of vouchers the Authority is allowed to
                 issue. When the Authority absorbed the portable tenants, it exceeded the baseline
                 allocation and became overleased.

                 The Authority submitted its voucher for payment of annual contributions and
                 operating statements, also known as their year end settlement statement, to
                 HUD’s Financial Management Center for submission and approval of the actual
                 amount the Authority spent on housing assistance payments for each fiscal year.
                 We reviewed the Authority’s fiscal year 2004 year end settlement statement and
                 determined that it is requesting reimbursement from HUD for $8,868,765 in
                 housing assistance payments versus $6,877,482, the maximum amount allowed
                 for the Authority to spend on housing assistance payments. Therefore, the
                 Authority spent $1,991,283 in additional housing assistance payments and in
                 excess of its budget authority by not following HUD’s portability procedures and
                 should not be reimbursed for the overpayment it caused


        Families Are At Risk of Losing
        Their Housing Assistance

                 The Authority’s failure to assure compliance with the portability requirements
                 caused the Authority to become over leased, and ultimately the families being
                 assisted above the Authority’s baseline allocation as at risk of losing their housing
                 assistance. The Authority has developed an attrition list1 and plan to cancel the
                 housing assistance payment contracts for the 143 portable tenants by the end of
                 fiscal year 2005.




1
 During our review we identified inaccuracies with the attrition list and found at least three tenants in which the
housing assistance payment contract may not need to be cancelled because the Housing Authority of the City of Los
Angeles has agreed to pay the housing assistance payments (two tenants) or the tenant is no longer a program
participant (one tenant). The details were communicated to the Authority under separate cover.


                                                         7
Recommendations


       We recommend that the south team division director of the Financial
       Management Center

       1A. Deny reimbursement to the Authority’s Section 8 program for the payment
       in excess of its budget authority of $1,991,283 that was requested in the fiscal
       year 2004 year-end settlement statement.

       We recommend that the director of the Los Angeles Office of Public and Indian
       Housing

       1B. Ensure the Authority develops and implements adequate portability
       procedures to ensure billings and documentation are submitted on time.




                                       8
                         SCOPE AND METHODOLOGY

We performed the audit work from September 2004 through March 2005. The audit covered the
portable tenants during the audit period of October 1, 2001, through September 30, 2003. We
expanded the scope when necessary. We reviewed applicable guidance and discussed operations
with management and staff personnel at the Authority and other responsible City of Inglewood
officials.

To determine whether the Authority was billing public housing agencies before the six-month
billing deadline and whether the Authority is following HUD’s current portability procedures,
we

       •   Reviewed applicable HUD regulations at 24 CFR [Code of Federal Regulations] Part
           982, Housing Choice Voucher Guidebook 7420.10G, and HUD’s Public and Indian
           Housing Notice 2004-12.

       •   Selected a sample of 143 portable tenants (100 percent) that the Housing Authority of
           the City of Los Angeles rejected for payment and reviewed the corresponding tenant
           files.

       •   Obtained additional supporting documentation from the Housing Authority of the City
           of Los Angeles related to the portable tenants.

       •   Verified the Authority’s attrition list and the schedule of rejected Authority/rejected
           Housing Authority of the City of Los Angeles ports to absorb to the portable tenants
           from the Housing Authority of the City of Los Angeles report to determine whether
           there were portable tenants in addition to the 143 tenants included on the Authority’s
           list.

       •   Tested a nonstatistical sample of five tenants, using the lease date/execution of the
           housing assistance payment contract obtained from the Authority’s HAPPY system,
           with the Multifamily Tenant Characteristic System port-in dates for tenants that ported
           from the Housing Authority of the City of Los Angeles to the Authority after July 19,
           2004, to determine whether the Authority was following HUD’s current portability
           procedures.

We performed our audit in accordance with generally accepted government auditing standards and
included tests of management controls that we considered necessary under the circumstances.




                                                  9
                              INTERNAL CONTROLS

Internal controls are an integral component of an organization’s management that provide
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:

                      •   Policies and procedures to ensure the Authority performs portability
                          billing procedures in accordance with HUD regulations,
                      •   Policies and procedures to ensure the Authority is safeguarding Section 8
                          program resources, and
                      •   Policies and procedures to ensure the Authority has complete and
                          accurate billing records for the tenant-based Section 8 program in
                          accordance with HUD regulations.

              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 item is a significant weakness:

              The Authority did not establish or implement procedures to ensure that the
              timeframes were met for billing and submitting required forms (finding 1).




                                               10
                                    APPENDIXES

Appendix A

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

                       Recommendation        Funds to be put
                           number            to better use 1/
                              1A                   $1,991,283




1/   “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,
     de-obligation of funds, withdrawal of interest, reductions in outlays, avoidance of
     unnecessary expenditures, loans and guarantees not made, and other savings.




                                              11
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                         12
Comment 2




Comment 3




            13
14
Comment 4




Comment 3




            15
Comment 5




            16
17
Comment 6




            18
Comment 7




            19
20
21
22
                       OIG Evaluation of Auditee Comments



Comment 1   Contrary to the Authority’s claim, the billing deadline is not in direct
            conflict with Chapter 13.5, page 13-7. This section of the Guidebook
            is referring to issuing extensions to allow families more time to
            search for housing, not the billing that must occur within 180 days of
            the voucher issuance date. While we acknowledge that the
            Guidebook does not address the issue of an extension that exceeds
            the 180-day billing requirement, this was not an issue in this
            situation. The Authority had sufficient time to bill for the 143
            portable tenants we reviewed, but did not do so. Further, as clarified
            in section 6 of Notice PIH 2004-12, “if the receiving public housing
            agency provides the family with search time beyond the expiration
            date of the initial public housing agency’s voucher, it must inform the
            initial public housing agency of the extension and should bear in
            mind the billing deadline provided by the initial public housing
            agency. Unless willing and able to absorb the family, the receiving
            public housing agency should ensure that any voucher expiration date
            would leave sufficient time to process a Request for Lease Approval,
            execute a housing assistance payment contract, and cover the
            anticipated delivery time so that it will be received by the initial
            public housing agency by the deadline date.”

Comment 2   We agree that the Housing Authority of the City of Los Angeles
            ported families to the Authority after the 180-day billing deadline
            expired; however, the Housing Authority of the City of Los Angeles
            has been paying the housing assistance payments for these tenants,
            and these were not included in our finding. The scope of our finding
            only included the 143 portable tenants that the Housing Authority of
            the City of Los Angeles refused to pay the Authority because there
            was sufficient time to bill within the 180-day requirement, and either
            the bill was late or the billings were not recorded and maintained.




                                           23
Comment 3   The Authority was not forced to absorb the portable families as
            claimed; the lack of adequate procedures caused the Authority to
            absorb the portable families. Had the Authority established and
            implemented adequate procedures to ensure compliance with the
            portability procedures in the Housing Choice Voucher Guidebook, the
            Authority would have billed within 180 days as required, and then the
            Housing Authority of the City of Los Angeles would have been
            obligated to pay the housing assistance payments and administrative
            costs on these tenants.

            HUD did not instruct the Authority to terminate families from the
            program. HUD instructed the Authority to ascertain the appropriate
            means and methods for assuring budget funds were sufficient to absorb
            the number of families renting. The Authority decided to rely solely on
            termination of families as a means of balancing the budgeted funds
            with the number of families being assisted through the section 8
            voucher program.

            Notice PIH 2004-12 does not apply to the circumstances in our finding
            because the vouchers for the 143 portable tenants were issued during
            2002 and 2003, before the July 19, 2004 issuance of the Notice.
            Nevertheless, we wanted to point out that the Authority’s citation in its
            response is incomplete and misconstrued the requirements. While the
            Authority correctly stated that the receiving public housing agency may
            absorb the family into its own program, the Authority left out the
            provision in the Notice that this may only be done if such a decision
            will not result in overleasing. Further, the Authority cited that HUD
            may in certain instances require the initial public housing agency to
            honor a billing submission that is received after the deadline.
            However, the Authority left out the next part of the requirement that
            stated that HUD may take action to address the receiving public
            housing agency’s failure to submit the notification timely, which may
            include reducing the public housing agency’s administrative fee and
            subsequently transferring units from the receiving public housing
            agency to the initial public housing agency.

            We also noted the Authority failed to include important provisions in
            Notice PIH 2004-7. The Notice also stated that federal fiscal year
            (FFY) 2004 appropriations do not permit the public housing agencies
            to over lease or continue the practice of maximized leasing. “Any
            costs for over leasing will be disallowed from federal fiscal years 2003
            and 2004 funds on the year-end settlement. HUD has no authority to
            provide funds to




                                           24
            support units leased in excess of the public housing agency’s baseline
            and will not do so.” The federal fiscal year 2004 Appropriation Act
            provides very direct language concerning the use of funds. HUD is
            directed to ensure prudent management and is authorized to take
            administrative actions, including sanctions, against public housing
            agencies that over-lease in a manner that displays a negligent or
            intentional disregard for the leasing limitations set by Congress.

            The Authority faulted the Housing Authority of the City of Los Angeles’
Comment 4   poor recordkeeping for the billing problems. If that is the case, then that
            only strengthens our position that it is incumbent upon the Authority to
            establish and maintain a billing system that included maintaining
            documentation evidencing when the bills were submitted. Had the
            Authority done so, it would not have been required to unnecessarily
            absorb the 143 tenants.

            We disagree with the Authority’s statement that untimely billing cannot
            result in HUD making housing assistance payments for the same family
            at both public housing agencies. If the tenant has an existing contract
            with the initial public housing agency, the initial public housing agency
            must remove the tenant from their system, thereby stopping the housing
            assistance payments before the payments start at the receiving public
            housing agency.

            The section 8 voucher is a document allowing the family to go anywhere
Comment 5   in the United States and rent a unit. By not issuing a revised voucher, the
            family did not have a valid voucher and cannot use the voucher to locate
            housing in another location. Consequently, the Authority inappropriately
            constrained the families’ mobility by not issuing the new voucher as
            required by the section 8 voucher program. Nevertheless, we agreed that
            in the Authority’s situation issuing another voucher may have been
            redundant since the families may have already located section 8 units in
            Inglewood. Therefore, we removed this section from our report.

            We did not take issue with the attrition list or the need to terminate
            housing assistance payment contracts to correct the overleased situation.
Comment 6   Had the Authority implemented adequate billing procedures it could have
            avoided becoming overleased.

            We disagree with the Authority’s request that HUD should approve the
            reimbursement of funds. In our opinion, it is not appropriate that HUD
Comment 7   violate Notice PIH 2004-7’s prohibition against paying for overleasing
            costs (see Comment 3) simply because the Authority chose to disregard
            the Housing Choice Voucher Guidebook requirements to comply with
            portability procedures.



                                           25
Appendix C

                       SCHEDULE OF TENANTS WITHOUT BILLING
                       RECORDS FOR THE FIRST SIX MONTHS

                           1            2          3                 4                     5
                       Tenant         Issue      Billing        Billing date          Number of
                    identification    date2     due date    (based on Housing          days late
                       number                              Authority of the City
                                                              of Los Angeles’
                                                               spreadsheet)
                1      1V2572         1/3/03    7/2/03            9/10/03                70
                2      1V2772         3/25/03   9/25/03            3/4/04                161
                3      1V2615         3/4/03    8/31/03           10/3/03                33
                4      1V2573        12/12/02   6/12/03           4/29/04                322
                5      1V2503         3/6/03    9/2/03            9/29/03                27
                6      1V2473         3/7/03    9/7/03            9/29/03                22
                7      1V2492         2/19/03   8/18/03           9/29/03                42
                8      1V2577         2/20/03   8/19/03           9/10/03                22
                9      6V6580        11/13/02   5/12/03           8/23/03                103
               10      2V2550         3/11/03   9/11/03           9/29/03                18
               11      2V2513         3/25/03   9/25/03           10/3/03                 8
               12      2V2543         3/6/03    9/6/03            9/15/03                 9
               13      1V2616         3/31/03   9/30/03           10/3/03                 3
               14      1V2449         1/30/03   7/29/03           9/21/03                54
               15      2V2709         3/6/03    9/2/03            2/19/04                170
               16      2V2486        10/25/02   4/23/03            9/2/03                132
               17      2V2421         1/10/03   7/9/03            9/29/03                82
               18      2V2246         8/14/02   2/10/03           11/5/03                268
               19      1V2467         3/14/03   9/14/03           9/29/03                15
               22      2V2622         2/25/03   8/25/03           10/9/03                45
               21      1V2897         7/18/03   1/13/04            4/2/04                80
               22      1V2613         1/23/03   7/22/03           10/3/03                73
               23      2V2562         3/28/03   9/26/03           10/9/03                13
               24      2V2832         8/19/03   2/15/04           2/19/04                 4
               25      ABS007        12/11/02   6/11/03           7/24/03                43




2
  On dates in the appendix of this report, we numerically formatted them in the sequence month, day and year
instead of spelling it out. For example, the date March 12, 2003 was formatted as 3/12/03.


                                                          26