oversight

The Miami Dade Housing Agency, Miami, Florida, Paid Housing Choice Voucher Program Funds for Some Overhoused Tenants

Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-06-28.

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

                                                               Issue Date
                                                                        June 28, 2006
                                                               Audit Report Number
                                                                        2006-AT-1012




TO:         Karen Cato-Turner, Director, Office of Public Housing, 4DPH


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

SUBJECT: The Miami Dade Housing Agency, Miami, Florida, Paid Housing Choice
         Voucher Program Funds for Some Overhoused Tenants


                                  HIGHLIGHTS

 What We Audited and Why

             As part of the U.S. Department of Housing and Urban Development (HUD),
             Office of the Inspector General’s (OIG) strategic plan, we audited the Miami
             Dade Housing Agency’s (Agency) Section 8 Housing Choice Voucher program to
             determine whether it paid excess subsidies for overhoused tenants. We selected
             the Agency for review based on risk factors associated with a Section 8 risk
             assessment.

 What We Found


             The Agency overhoused 17 tenants and unnecessarily paid $61,862 in excess
             subsidies on behalf of 13 of these tenants. In addition, the Agency has 228
             tenants who could be overhoused with the potential to incur excess subsidy
             payments. The Agency does not have adequate procedures to ensure that tenants
             receive the proper voucher size. By improving its procedures, the Agency could
             avoid future losses of $81,828, which would allow it to provide vouchers to
             additional tenants.



      Table of Contents
What We Recommend


           We recommend that the Director of the Office of Public Housing require the
           Agency to (1) submit a corrective action plan to correct the 17 overhoused tenant
           vouchers; (2) reimburse its program $61,862 in non-federal funds; (3) submit a time
           schedule to review the additional 228 tenants for overhousing, a corrective action
           plan to correct any overhoused tenant vouchers, and reimburse its program in non-
           federal funds; and (4) develop and implement procedures to ensure that tenants
           receive the proper voucher size to avoid future losses of $81,828.

           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 findings with Agency and HUD officials during the audit. We
           provided a copy of the draft report to Agency officials on May 8, 2006, for their
           comments and discussed the report with the officials at the exit conference on
           May 19, 2006. The Agency provided its written comments to our draft report on
           May 26, 2006. The Agency generally concurred with our recommendations and
           has begun to take corrective action. The Agency agreed that tenants were
           overhoused. However, they disagreed with certain conclusions of the audit.

           The complete text of the auditee’s response, along with our evaluation of that
           response, can be found in appendix B of this report. The Agency also provided an
           attachment with its response that is available for review upon request.




   Table of Contents
                                            2
                             TABLE OF CONTENTS

Background and Objectives                                                 4

Results of Audit
        Finding 1: The Agency Paid Excess Subsidies for Some Overhoused   5
                   Tenants

Scope and Methodology                                                     8

Internal Controls                                                         9

Appendixes
   A.   Schedule of Questioned Costs and Funds to Be Put to Better Use    10
   B.   Auditee Comments and OIG’s Evaluation                             11
   C.   Criteria                                                          16
   D.   Schedule of Overhoused Tenants                                    19




                                              3
                     BACKGROUND AND OBJECTIVES

The Miami-Dade Housing Agency (Agency) is a department of Miami-Dade County, Florida.
The Agency reports directly to the County Manager, who reports to the Mayor and a 13-member
board of County Commissioners. The Agency’s objective is to provide low- and moderate-
income residents with quality, affordable housing opportunities.

The Agency administers the Section 8 Housing Choice Voucher program, funded by the U.S.
Department of Housing and Urban Development (HUD). The program provides rental
assistance to eligible families and elderly residents. For fiscal year 2005, the Agency
administered 13,636 housing choice vouchers and received more than $122 million in rental
housing assistance.

The Agency determines the family voucher size (number of bedrooms) based on occupancy
standards prescribed in its Section 8 administrative plan. The assigned voucher size and the
payment standard are used to calculate the maximum monthly subsidy the Agency will pay on
behalf of the tenant. The payment standard is the amount generally needed to rent a moderately
priced housing unit in the local market, not to exceed HUD’s fair market rent for the number of
bedrooms. The Agency pays the monthly subsidy directly to the landlord, while the tenant pays
the difference between the rent charged by the landlord and the monthly subsidy. Tenants may
incur excess subsidies if the Agency assigns a larger voucher size than allowed by its occupancy
standards.

Our objective was to determine whether the Agency paid excess subsidies for overhoused
tenants.




     Table of Contents
                                               4
                             RESULTS OF AUDIT

Finding 1: The Agency Paid Excess Subsidies for Some Overhoused
           Tenants
The Agency overhoused 17 tenants and unnecessarily paid $61,862 in excess subsidies on behalf
of 13 of these tenants. In addition, the Agency has 228 tenants who could be overhoused with
the potential to incur excess subsidy payments. The overhousing of tenants occurred because the
Agency does not have adequate procedures to ensure that tenants receive the proper voucher size
in accordance with the Agency’s Section 8 administrative plan. By improving its procedures, the
Agency could avoid incurring $81,828 in additional subsidies, which would allow it to provide
vouchers to additional tenants.


 Overhoused Tenants Resulted
 in Excess Subsidies of $61,862


              The Agency overhoused tenants by issuing vouchers for larger units than supported
              by the family composition. HUD’s Housing Choice Voucher Program 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 Agency’s administrative plan states that vouchers are assigned based on
              family composition.

              We identified 253 potentially overhoused tenants and reviewed Agency records for
              25 of these tenants to verify whether the appropriate voucher size was assigned. Our
              review identified 17 tenants who were overhoused. The Agency unnecessarily paid
              $61,862 in excess subsidies on behalf of 13 of these tenants. Based on the
              circumstances of the 17 tenants identified, we estimate that the Agency may pay
              $81,828 in excess subsidies over the next 36 months. Appendix D provides a
              summary of our results.

              Agency officials agreed that there was no supporting documentation to justify the
              tenants retaining a larger voucher size and that the voucher size should have been
              decreased.




      Table of Contents

                                                5
Tenants Were Overhoused Due
to Inadequate Procedures


          The Agency needs to improve its procedures to ensure that tenants receive the
          proper voucher size in accordance with the Agency’s Section 8 administrative
          plan. It needs to improve its procedures for conducting tenant recertifications and
          quality control reviews.

          Our review found that the Agency properly housed tenants and provided the
          appropriate voucher during the initial certification. However, when the family
          composition decreased and was reported during the tenant recertification, the
          Agency often failed to reduce the tenant’s voucher size to comply with the
          occupancy standards established in its administrative plan. In other instances, the
          Agency failed to conduct timely recertifications that would have provided a
          greater opportunity to detect the overhousing and reduce the excessive subsidies
          paid to the landlords.

          Agency officials explained that tenant recertification procedures are not specific
          and allow for personal interpretation and judgment by the staff. For example,
          although occupancy standards allow for a family of three to receive either a two-
          or three-bedroom voucher, procedures do not specify a standard for the voucher
          size assigned.

          The Agency conducts quality control reviews on initial certifications and change
          of dwelling transactions. Since the 17 tenants were not initial certifications or
          change of dwelling transactions, they were not selected for a quality control
          review. Agency procedures to select tenants for quality control reviews allowed
          the overhousing and payment of excess subsidies to continue. The Agency needs
          to strengthen its quality control procedures to ensure that tenants are selected for
          quality control reviews regardless of the transaction type.

          The Agency has recently reorganized its Section 8 Department. The new
          management team has begun to revise the Section 8 administrative plan and
          quality control procedures. In addition, the Agency has provided training on the
          entire tenant certification process.




  Table of Contents

                                            6
Conclusion

             Overhousing 17 tenants caused the Agency to pay excess subsidies of $61,862
             from January 2003 to February 2006. If the Agency strengthens its procedures, it
             could avoid additional overpayments of $81,828. The Agency could strengthen
             its procedures by (1) providing detailed guidance to ensure that voucher sizes are
             assigned consistently and (2) selecting tenants for quality control reviews based
             on a representative sample of the various transactions that may occur.


Recommendations

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

             1A.    Submit a corrective action plan to correct the 17 overhoused tenant
                    vouchers. Per HUD Notice 2005-7, a housing authority not responding to
                    its corrective action plan within the timeframe specified and approved by
                    the field office will have 10 percent of its monthly scheduled administrative
                    fee advance withheld beginning the month the field office imposes the
                    sanction and lasting until the housing authority has complied with the
                    corrective action plan.

             1B.    Reimburse its program $61,862 in non-federal funds.

             1C.    Submit a time schedule to review the additional 228 tenants for
                    overhousing, a corrective action plan to correct any overhoused tenant
                    vouchers, and reimburse its program in non-federal funds.

             1D.    Develop and implement procedures to ensure that tenants receive the proper
                    voucher size to avoid future losses of $81,828.




    Table of Contents
                                              7
                        SCOPE AND METHODOLOGY

Our audit objective was to determine whether the Agency paid excess subsidies for overhoused
tenants. To accomplish our audit objective, we did the following:

       •      Interviewed HUD and Agency program staff;

       •      Reviewed applicable laws, regulations, and other HUD program requirements;

       •      Reviewed the Agency’s Section 8 policies and procedures and administrative
              plan;

       •      Reviewed the Agency’s latest independent public accountant report and HUD
              program monitoring reviews; and

       •      Obtained a download of the Agency’s Section 8 tenants in the Housing Choice
              Voucher program as of February 2006. We then performed limited tests of the
              reliability of the data, such as the tenant family composition, housing assistance
              payments, and voucher sizes. Based on the tests, we assessed the data as
              sufficiently reliable, given our objective and intended use.

The download resulted in 12,073 Section 8 tenants. Using an analysis software program, we
identified 253 potentially overhoused tenants who may have incurred excess subsidies. From the
253 tenants, we randomly selected 25 tenants to determine whether the Agency assigned the
appropriate voucher size and to calculate any excess subsidies. We reviewed 25 tenant files to
determine whether the voucher size exceeded the number of persons in the household and
whether justification was provided to allow the tenant to retain the larger bedroom voucher size.
If no justification was found, we considered the tenant to be overhoused. We identified 17
tenants who were overhoused. We calculated the overhoused period from the recertification date
(limited to January 1, 2003) when the Agency should have identified the change in family
composition and reduced the voucher size to the date the Agency actually reduced the tenant
voucher, (or February 28, 2006, our cutoff date). We used the largest voucher size allowed by
the administrative plan in computing the monthly housing assistance payment. We compared
our monthly calculation to monthly landlord payments from Agency accounting records to
compute the monthly excess subsidy. We totaled the monthly excess subsidies for the
overhoused period. At February 28, 2006, eight tenants received excess subsidies and would
continue to receive excess subsidies because the Agency’s review procedures did not detect the
overhousing. We estimated the funds that could be put to better use for the eight tenants by
multiplying the monthly excess subsidy by 36 months. We used the 36-month period because
the Agency had overhoused some tenants for at least 36 months, and a HUD study indicates the
36-month period is the average number of months that a tenant stays in a unit.

We conducted our fieldwork from February to April 2006 at the Agency’s office in Miami,
Florida. Our audit period was from January 1, 2003, through February 28, 2006. We conducted
the audit in accordance with generally accepted government auditing standards.


  Table of Contents                             8
                              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,
   •   Compliance with applicable laws and regulations, and
   •   Safeguarding of assets.

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 objective:

                  •   Controls over program operations.
                  •   Controls over the reliability of data.
                  •   Controls over compliance with laws and regulations.
                  •   Controls over the safeguarding of assets.

              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 do not believe a significant weakness exists for assigning
              voucher sizes. However, we believe the Agency could improve its procedures by
              (1) providing detailed guidance to ensure that voucher sizes are assigned
              consistently and (2) selecting tenants for quality control reviews based on a
              representative sample of the various transactions that may occur.




       Table of Contents
                                                9
                                   APPENDIXES

Appendix A

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

                                                           Funds to be put
                 Recommendation         Ineligible 1/      to better use 2/
                        1B                  $ 61,862
                        1D                                        $ 81,828
                                            _______               _______
                       Total                $ 61,862              $ 81,828


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 estimates of amounts that could be used more
     efficiently if an Office of Inspector General (OIG) recommendation is implemented.
     This includes reductions in outlays, deobligation of funds, withdrawal of interest subsidy
     costs, costs not incurred by implementing recommended improvements, avoidance of
     unnecessary expenditures noted in preaward reviews, and any other savings which are
     specifically identified. In this instance, if the Agency implements our recommendation, it
     will cease to incur Section 8 costs for eight tenants who have a larger voucher size than
     warranted, and, instead can use the funds to provide vouchers for additional tenants.
     Once the Agency successfully improves its controls, this will be a recurring benefit. Our
     estimate reflects three years for these recurring benefits, because a HUD study indicates
     the 36-month period is the average number of months that a tenant stays in a unit.




     Table of Contents
                                             10
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION

Ref to OIG Evaluation   Auditee Comments




  Table of Contents
                           11
Comment 1




Table of Contents

                    12
Comment 1




Comment 2




Comment 3




Table of Contents
                    13
Table of Contents

                    14
                         OIG Evaluation of Auditee Comments


Comment 1   Based on our review of Section 8 policies and procedures in effect when the
            overhousing occurred, and discussions with Agency officials, we concluded that
            the Agency had inadequate procedures to identify overhousing conditions.

            The Agency stated that while the annual reexamination procedure is specific and
            detailed, not every scenario could be anticipated by written procedures. They
            added that in order to adequately serve the participant families, certain discretion
            and judgment should be granted to staff to make decisions appropriate to each
            family’s individual situation. During the audit, Agency officials told us that
            tenant recertification procedures are not specific and allow for personal
            interpretation and judgment by the staff. Agency officials also informed us that
            they planned to revise their policies and procedures to ensure more
            standardization among the staff. We recognize that not every scenario can be
            anticipated by written procedures. However, by revising its policies and
            procedures to ensure more standardization in assigning voucher sizes consistently,
            the Agency could avoid future losses.


Comment 2   The Agency stated that during fiscal year 2005, the quality control review staff
            reviewed more than 4,100 files or approximately 30% of case files for all assisted
            families. This number of reviews well exceeds the requirements of the SEMAP
            for quality control reviews.

            We do not dispute the number of quality control reviews conducted by the
            Agency in fiscal year 2005 or that staff confirmed the families were housed in
            appropriate unit sizes according to their family composition. We do take
            exception with the Agency’s procedures in selecting tenant files for quality
            control reviews. The Agency conducts quality control reviews on initial
            certifications and change of dwelling transactions. Since the 17 overhoused
            tenants were not initial certifications or change of dwelling transactions, they
            would not have been selected for a quality control review based on Agency
            procedures. We maintain that the Agency needs to strengthen its quality control
            procedures to ensure that tenants are selected for quality control reviews
            regardless of the transaction type.


Comment 3   The Agency questioned our methodology in computing any future savings. We
            removed one tenant from our calculations and revised the amount of funds that
            could be put to better use. These funds represent what would have been overspent
            for the eight tenants had the problem not been identified because the overhousing
            would not have been caught at annual recertification. We clarified our
            calculations for ineligible costs and funds to be put to better use in the Scope and
            Methodology section of this report.


Table of Contents
                                             15
Appendix C

                                         CRITERIA


Federal Regulations at 24 CFR [Code of Federal Regulations] 982.153

The public housing authority must comply with the consolidated annual contributions contract,
the application, HUD regulations and other requirements, and the authority’s administrative plan.

Federal Regulations at 24 CFR [Code of Federal Regulations] 982.54(a) to (d)

The public housing authority must adopt a written administrative plan that establishes local
policies for administration of the program in accordance with HUD regulations and
requirements. The authority must administer the program in accordance with its administrative
plan. Among other authority policies, the plan must cover the subject of subsidy standards.

Federal Regulations at 24 CFR [Code of Federal Regulations] 982.4

Subsidy standards are defined as standards established by a public housing authority to
determine the appropriate number of bedrooms and amount of subsidy for families of different
sizes and compositions. The family unit size is the appropriate number of bedrooms for a family
as determined by the authority under its subsidy standards.

HUD Housing Choice Voucher Program Guidebook

Chapter 5.9 of the guidebook requires that when determining the family unit size, the subsidy
standards must provide for the smallest number of bedrooms needed to house a family without
overcrowding. Chapter 22.1 states that public housing authorities should address program errors,
omissions, fraud, or abuse through both prevention and detection.

Chapter 22.3 requires the following:

Public housing authorities are ultimately responsible for ensuring that the right people receive
the right amount of subsidy, and they must maintain a high degree of accuracy in administering
the Housing Choice Voucher program. Nonetheless, errors, omissions, fraud, and abuse will
occur, and authorities must have preventive measures in place so that any irregularity can be
quickly detected and resolved as efficiently, professionally, and fairly as possible.

One approach to preventing and detecting errors, omissions, fraud, and abuse is to establish
quality control procedures. A good quality control system will ensure that staff’s daily decisions
about tenant eligibility, tenant rent, rent reasonableness, housing assistance payments, and
housing quality conform to program requirements and are based on accurate information.
Information obtained during quality control reviews should not only help identify individual
errors or omissions, but it should also be collected on an aggregate basis so that the authority can


  Table of Contents                              16
determine error rates by category and the extent and causes of errors. Samples (of tenant files,
new admissions, housing units, inspection files, etc.) should include the work of all staff
responsible for the processing function being reviewed. The sample should also include a
representative sample of the various transactions that may occur.

Another approach to preventing and detecting errors, omissions, fraud, and abuse is to provide
adequate training to staff and monitor performance. Staff training on the objectives, rules, and
regulations governing the Housing Choice Voucher program and authority discretionary policies
and procedures significantly reduces the likelihood of errors and omissions. Training staff as a
group helps to promote consistency and standardization of processing. In addition, it helps staff
to understand how their work responsibilities relate to others’ work and the overall goals of the
authority.

The authority’s administrative plan and written operating procedures are also vehicles for
preventing errors and omissions. To provide better guidance to front-line staff, procedures
should clearly define program terms and items that may be interpreted differently. The more
simplified the policy or procedure, the less opportunity there is for error. Public housing
authority management must also ensure that authority policies and procedures are consistently
applied by both staff and management.

Agency’s Section 8 Administrative Plan: Chapter 5 – Occupancy Policies

The Agency’s administrative plan, adopted in December 2001, outlines the occupancy standard
that was used to determine the voucher bedroom size assigned to a family.

                        Voucher size    Minimum # of    Maximum # of
                          allowed        persons in      persons in
                                         household       household
                              0              1                1
                              1              1                2
                              2              2                4
                              3              3                6
                              4              4                8
                              5              6               10
                              6              8               12

The Agency would grant exceptions upon written request for a larger unit as an accommodation
to a family member with disabilities or a verifiable medical or health reason or to adult members
of the same gender.

Federal Regulations at 24 CFR [Code of Federal Regulations] 982.505

A payment standard is used to calculate the monthly housing assistance payment for a family.
The payment standard is the maximum monthly subsidy payment. The public housing authority
shall pay a monthly housing assistance payment on behalf of the family that is equal to the lower
of
    (1) The payment standard for the family minus the total tenant payment or


Table of Contents                               17
   (2) The gross rent minus the total tenant payment.

The payment standard for the family is the lower of

           (i)    The payment standard amount for the family unit size or

           (ii)   The payment standard amount for the size of the dwelling unit rented by the
                  family.

Irrespective of any increase or decrease in the payment standard amount, if the family unit size
increases or decreases during the housing assistance contract term, the new family unit size must
be used to determine the payment standard amount for the family beginning at the family’s first
regular reexamination following the change in family unit size.




    Table of Contents

                                               18
   Appendix D

                    SCHEDULE OF OVERHOUSED TENANTS



Sample    Client     (1) Overhoused period              (2) Excess     (3) Monthly (3) Funds to be
 item    number                                      subsidy for the excess subsidy put to better
number                                                 overhoused     for February    use for 36
                                                          period           2006        months
   1      093855    Sept. 1, 2004 – Feb. 28, 2006        $    3,114   $   159         $    5,724
   2      096763    Dec. 1, 2003 – Feb. 28, 2006         $    3,007   $   195         $    7,020
   3      094958    June 1, 2005 – Feb. 28, 2006         $    1,329   $     9         $     324
   4      003365    Apr. 1, 2005 – Feb. 28, 2006         $    3,840   $   195         $    7,020
   5      007409    Nov. 1, 2005 – Dec. 31, 2005         $            $               $
   6      056127    Aug. 1, 2004 – Feb. 28, 2006         $     645    $               $
   7      069146    June 1, 2005 – June 30, 2005         $            $               $
   8      076258    Jan. 1, 2003 – Feb. 28, 2006         $    2,470   $   216         $    7,776
   9      010123    Apr. 1, 2003 – Feb. 28, 2006         $   11,839   $               $
  10      075437    Sept. 1, 2004 – Feb. 28, 2006        $   21,366   $   961         $   34,596
  11      070921    Jan. 1, 2003 – Feb. 28, 2006         $    7,642   $   256         $    9,216
  12      075293    Jan. 1, 2004 – Jan. 31, 2006         $    2,782   $               $
  13      069903    Mar. 1, 2005 – Feb. 28, 2006         $    2,964   $   282         $   10,152
  14      073195    May 1, 2005 – Sept. 30, 2005         $            $               $
  15      058306    Mar. 1, 2004 – Feb. 28, 2006         $     134    $               $
  16      054686    July 1, 2004 – Feb. 28, 2006         $            $               $
  17      032543    Oct. 1, 2004 – Oct. 31, 2005         $     730    $               $
 Total                                                   $   61,862                   $ 81,828




Table of Contents

                                                    19
(1) The overhoused period is from the recertification date (limited to January 1, 2003) when the
    Agency should have identified the change in family composition and reduced the voucher
    size to when the Agency actually reduced the tenant voucher. However, if the Agency failed
    to reduce the voucher size, we used February 28, 2006, as a cutoff date because we began our
    review at that time. We used the overhoused period to compute the excess subsidy.

(2) Since the Agency administrative plan allows for different voucher sizes for the same number
    of persons in a household, we calculated the monthly housing assistance payment by using
    the largest voucher size allowed by the administrative plan. We compared our monthly
    calculation to monthly landlord payments from Agency accounting records. The difference
    is the monthly excess subsidy. We totaled the monthly excess subsidies for the overhoused
    period.

(3) We determined that eight tenants were paid excess subsidies for February 2006. Had we not
    identified this issue, these eight tenants would have continued to incur excess subsidies. As a
    result, we estimated funds to be put to better use for these eight tenants by multiplying the
    monthly excess subsidy for February by 36 months. A HUD study indicates the 36-month
    period is the average number of months that a tenant stays in a unit.1




1
    PDR Publication “Housing Choice Voucher Location Patterns,” page 94, table A-7, “Median
    Length of Time in Program (Years) for Those Receiving Assistance as of 9/30/00.”


                                                20
    Table of Contents