oversight

The Housing Authority of the City of Raleigh, North Carolina, Generally Administered Its Housing Choice Voucher Program in Accordance with Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-06-19.

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

                                                                Issue Date:
                                                                         June 19, 2006
                                                                Audit Report Number:
                                                                          2006-AT-1011




TO:        Michael A. Williams, Director, Office of Public Housing, 4FPH


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

SUBJECT: The Housing Authority of the City of Raleigh, North Carolina,
         Generally Administered Its Housing Choice Voucher Program in Accordance
         with Requirements


                                   HIGHLIGHTS

 What We Audited and Why

             We reviewed the Section 8 Housing Choice Voucher program of the Housing
             Authority of the City of Raleigh, North Carolina (Authority), pursuant to a
             citizen’s complaint. The complainant alleged that the Authority mismanaged its
             Section 8 program by incorrectly determining tenant rent and unit sizes and not
             leasing or inspecting units in a timely manner. Our objective was to determine
             whether the complainant’s allegations were valid and whether the Authority
             effectively administered its Section 8 program.

 What We Found

             The Authority generally administered its Section 8 Housing Choice Voucher
             program in accordance with requirements; however, it did not always terminate
             housing assistance payments in a timely manner, paid excess housing assistance
             payments of more than $7,000; did not conduct all required quality control


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             reviews; and did not properly update some information in the Public and Indian
             Housing Information Center, a management information system used by the U.S.
             Department of Housing and Urban Development’s (HUD) Office of Public and
             Indian Housing, which resulted in inaccurate data.


What We Recommend


             We recommend that the director of the Office of Public Housing, Greensboro,
             North Carolina, require the Authority to

                     •   Obtain the balance remaining on the $7,012 in housing assistance
                         overpayments and properly account for the funds as part of its year-
                         end settlement,

                     •   Perform quarterly quality control reviews in accordance with HUD
                         requirements and the Authority’s policies and procedures, and

                     •   Verify tenant data in the management information system upon each
                         family’s recertification and include spot checks of data during its
                         quality control reviews.

             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 discussed the finding with Authority and HUD officials during the audit. We
             provided a copy of the draft report to Authority officials on May 18, 2006, for
             their comments and discussed the report with the officials at the exit conference
             on May 31, 2006. At the exit conference, we agreed to make revisions to the draft
             report based on discussions with the Authority. The Authority provided its
             written comments to our draft report on June 6, 2006. The Authority generally
             agreed with the finding based on the agreed upon changes.

             The complete text of the auditee’s response, along with our evaluation of the
             response and our revisions to the draft report, can be found in appendix B of this
             report.




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                            TABLE OF CONTENTS

Background and Objectives                                                   4

Results of Audit                                                            5
Finding 1: Some Areas of The Authority’s Section 8 Housing Choice Voucher
           Program Need Improvement

Scope and Methodology                                                       9

Internal Controls                                                           10

Appendixes
   A. Schedule of Questioned Costs                                          12
   B. Auditee Comments and OIG’s Evaluation                                 13




                                            3
                         BACKGROUND AND OBJECTIVES

The Housing Authority of the City of Raleigh, North Carolina (Authority), was incorporated in
1938 pursuant to the North Carolina Housing Authorities Law. The Authority’s primary
objective is to provide safe, quality, affordable housing to low- and moderate-income families in
the Raleigh community and promote personal responsibility and self-sufficiency of residents
while maintaining the fiscal integrity of the agency. The Authority administers 3,468 housing
choice vouchers.

The Authority’s total 2005 housing assistance payment and administrative fee renewal funding
was more than $29 million. A seven-member board of commissioners governs the Authority.

We initiated the audit based on a citizen’s complaint to our hotline. Our objectives were to
determine whether the complainant’s allegations were substantiated and whether the Authority
effectively administered its Section 8 program.




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                                RESULTS OF AUDIT


Finding 1: Some Areas of the Authority’s Section 8 Housing Choice
           Voucher Program Need Improvement
The Authority generally administered its Section 8 Housing Choice Voucher program in
accordance with HUD requirements; however, it did not always terminate housing assistance
payments in a timely manner, conduct all required quality control reviews, or properly update
certain information in the Public and Indian Housing Information Center, a management
information system used by HUD’s Office of Public and Indian Housing. As a result, the
Authority overpaid more than $7,000 in housing assistance payments, delayed tenants’
acquisition of housing, and provided inaccurate data to HUD. These conditions occurred
primarily due to the Authority’s failure to implement adequate procedures and its failure to
follow prescribed and suggested procedures.



 The Authority Did Not Always
 Terminate Housing Assistance
 Payments in a Timely Manner

              HUD requirements and the Authority’s policies require that housing assistance
              payments be made only during the lease term and when the family is residing in
              the unit. The Authority’s policy required owners to notify it if units were vacated
              before the lease expired so the Authority could discontinue housing assistance
              payments in a timely manner.

              While the Authority’s policy was adequate, the Authority did not always follow
              its prescribed procedures. For example, the complainant notified the Authority in
              August 2005 that tenants had moved out of one of her units. However, the
              Authority continued to pay the housing assistance payments through November
              2005, resulting in overpayments of $2,847. The Authority has requested
              repayment, but the complainant disputes the amount owed. The Authority should
              recover the $2,847, or other agreed upon amount from the complainant.

              The complainant also provided documentation to us indicating that although she
              advised the Authority in August 2005 that another of her units was vacated, the
              Authority continued to make assistance payments through November 2005,
              resulting in over payments of $3,384. The Authority claimed it was not aware the
              unit was vacated until it received notification from HUD in November 2005, at
              which time it terminated the assistance payments. We were unable to find any
              record of the complainant’s notification in the Authority’s files. The Authority
              and complainant have executed a repayment agreement requiring the complainant
              to repay $3,384 for this unit.


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           We reviewed a statistical sample of 18 of the 222 vouchers that were terminated
           from January 1 through September 1, 2005. The Authority did not terminate
           assistance payments in a timely manner for two of the terminated vouchers.
           Although the lease contract ended for these two units without renewal, in
           violation of its policy, the Authority continued to make housing assistance
           payments, resulting in overpayments of $781. In its response to this report, the
           Authority claimed it had received repayment of $245. We were not provided
           documentation of the repayment, thus the Authority should provide the
           documentation to the director of the Office of Public Housing. Projecting the
           results of the statistical sample indicates the Authority may not have terminated
           housing assistance payments in a timely manner for 24 of the 222 terminated
           vouchers.


The Authority Did Not Always
Perform Quality Control
Reviews


           The Housing Choice Voucher Handbook, chapters 9 and 10, and the Authority’s
           policies and procedures require quality control reviews of tenant files at least
           quarterly. The quality control reviews are a part of the Authority’s management
           controls that are designed to provide reasonable assurance that its operations are
           effective and efficient and that it complies with applicable laws and regulations.

           The Authority did not provide evidence that it performed quarterly quality control
           reviews of tenant files. It had not performed any reviews since February 2005.
           The Section 8 director informed us that the former director, who passed away in
           September 2005, had done the quality control reviews. The official stated that the
           Authority did not have any other staff familiar with the quality control process;
           therefore, it had not performed the required reviews.

           Failure to perform quality control reviews increases the risk that errors, fraud,
           waste, and abuse could go undetected.


The Authority Did Not Always
Maintain Accurate Data


           Housing authorities are required by 24 CFR [Code of Federal Regulations]
           908.101 to electronically submit information to HUD. The Public and Indian
           Housing Information System is a HUD management information system designed
           to contain complete, consistent, and accurate data that allow users to make
           informed decisions regarding critical business activities. HUD also uses this
           information to assess an authority’s ability to accurately, thoroughly, and clearly
           determine housing assistance payments, conduct recertifications in a timely


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    manner, and place residents in the correct size units within the required time
    limits.

    Notice PIH 2005-17 requires housing authorities to submit accurate records with
    no fatal edits (edits that cause the system to reject records to maintain the integrity
    of the data) for HUD to consider the records successfully submitted. It further
    states that it is essential that the data be current, complete, and accurate. If a
    family has a composition or status change after its annual recertification, housing
    authorities should update the family’s information in its management information
    system on or before of the family’s next annual recertification. The Authority did
    not always update the data in a timely manner, thus the data was not always
    accurate.

    We reviewed the Authority’s data to determine whether tenants were housed in
    units with the appropriate number of bedrooms. According to the data, 564
    families appeared to be overhoused. Our review of a statistical sample of 15 files
    for the 564 families showed that either the families had changes in their family
    composition, were approved for larger units based on special needs, or were
    paying any additional rent amounts to occupy the larger units. Thus, the tenants
    appeared to be overhoused when they were not. Twelve of these families had
    changes after their last recertification; thus, the Authority was not required to
    update the data until the next annual recertification. However, even though the
    Authority had performed recertifications for the remaining three families since
    their changes occurred, it did not update the data. Projecting the results of the
    statistical sample indicates the Authority may not have updated the data for 113 of
    the 564 families.

    We also reviewed the Authority’s data to determine whether the rental rates were
    correct based on the number of bedrooms. The data indicated that rental rates for
    469 units were above the allowed rates for the area. Our review of a statistical
    sample of 15 tenant files showed that 11 of the units were originally leased at or
    below acceptable rent rates. After the original lease expired, either the family
    composition or the contract rent changed. In all 11 instances, the tenants opted to
    pay any additional rent themselves rather than move to another unit. Thus, the
    housing assistance payments made by the Authority were appropriate. For the
    other four units, the tenants had moved when their family composition changed,
    and the housing assistance payments and rents were correctly based on the new
    units. However, the Authority had not updated its data. Thus, the rents appeared
    to be excessive when they were not. Projecting the results of the sample indicates
    that the rents in HUD’s management information system may be incorrect for 125
    of the 469 families.




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Recommendations

          We recommend that the director of the Office of Public Housing require the
          Authority to

          1A.     Obtain the balance remaining on the $7,012 in housing assistance
                  overpayments and properly account for the funds as part of its year-end
                  settlement on form HUD-52681 (Voucher for Payment of Annual
                  Contributions and Operating Statement).

          1B.     Perform quarterly quality control reviews in accordance with HUD
                  requirements and the Authority’s policies and procedures, and

          1C.     Verify tenant data in the management information system upon each
                  family’s recertification and include spot checks of data during its quality
                  control reviews.




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                         SCOPE AND METHODOLOGY

Our objective was to determine whether the complainant’s allegations were valid and whether
the Authority effectively administered its Section 8 program. The Authority is currently the
defendant in an ongoing class action suit in which current and former Section 8 tenants are the
plaintiffs. We eliminated the plaintiffs’ tenant files from our review.

To accomplish our objectives, we

   •   Interviewed HUD program staff and reviewed their monitoring reports,
   •   Interviewed Authority management and staff,
   •   Reviewed minutes of board meetings,
   •   Reviewed the Authority’s controls related to the administration of its Section 8 Housing
       Choice Voucher program,
   •   Performed various random and statistical tests, and
   •   Conducted other interviews and reviewed other documents as necessary.

We used a statistical software program to select samples for various tests of the 3,468 units from
the HUD management information system data as of February 2, 2006. For each of the statistical
sample selections, we used an 80 percent confidence rate, a 14 percent expected error rate, and a
10 percent precision rate.

Our review of a statistical sample of 18 of the 222 vouchers that were terminated from January 1
through September 1, 2005, showed that the Authority did not terminate assistance payments in a
timely manner for two of the terminated vouchers. Projecting the results of the statistical sample
indicates the Authority may not have terminated housing assistance payments in a timely manner
for 24 of the 222 terminated vouchers.

We reviewed a statistical sample of 15 files for the 564 families who appeared to be overhoused
according to the HUD data. The review showed the Authority did not update information for
three of the families, or 20 percent of the sample. Projecting the results of the statistical sample
indicates the Authority may not have updated data for 113 of the 564 families.

We reviewed a statistical sample of 15 files for the 469 units for which the rents appeared to be
above the allowed rates. The review showed the Authority did not update data for four units.
Projecting the results of the sample indicates that the rents in HUD’s management information
system may be incorrect for 125 of the 469 families.

We conducted our fieldwork from January through March 2006 at the Authority’s offices in
Raleigh, North Carolina. Our audit period was from January 1, 2004, through January 31, 2006.
We expanded our audit period as needed to accomplish our objectives. We conducted the audit
in accordance with generally accepted government auditing standards and included tests of
management controls that we considered necessary under the circumstances.



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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 the validity and reliability of data – Policies and procedures that
                  management has implemented to reasonably ensure that valid and reliable data
                  are obtained, maintained, and fairly disclosed in reports.

              •   Compliance with laws and regulations – Policies and procedures that
                  management has implemented to reasonably ensure that resource use is
                  consistent with laws and regulations.

              •   Safeguarding of resources – Policies and procedures that management has
                  implemented to reasonably ensure that resources are safeguarded against
                  waste, loss, and misuse.

           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.




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Significant Weaknesses

      Based on our review, we do not believe the Authority has a significant weakness.
      However, we believe the Authority could improve some procedures.




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                                    APPENDIXES

Appendix A

                 SCHEDULE OF QUESTIONED COSTS


                  Recommendation                               Ineligible 1/
                         1A                                         $ 7,012
                                                                     _____
                        Total                                       $7,012


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.




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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




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Comment 3




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                        OIG Evaluation of Auditee Comments


Comment 1   We agree with the Authority that the full amount of the overpayments should
            be repaid to the Authority and that the Authority should properly account for
            the funds. As stated in the finding, the total overpayments were $7,012.

            The Authority stated that it concurs that $513 is due back from two other
            landlords and that it had received repayment of $245. Thus, the Authority is
            implying that a total of $758 was overpaid to the two landlords. We found that
            the total was $781. This is comprised of an overpayment of one months
            assistance to one landlord of $245 and overpayment of two months assistance
            to another landlord totaling $536. We were not provided evidence that $245
            was repaid. The Authority should provide evidence of all repayments,
            including any that it had already received, to the director of the Office of
            Public Housing.

Comment 2   While the Authority may have been faced with difficult challenges, it should
            not sacrifice control procedures that could increase its risk potential. We
            believe the Authority recognizes the importance of the quality control reviews
            and has taken actions to resume its reviews. The director of the Office of
            Public Housing will make the determination if the actions are adequate to
            resolve the recommendation.

Comment 3   The director of the Office of Public Housing will determine if the actions taken
            by the Authority are adequate to resolve the recommendation.




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