oversight

Boston Housing Authority, Boston, Massachusetts, Used Voucher Program Funds to Pay State Housing Assistance Program Expenses and Needs to Improve Its Reasonableness Process

Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-07-26.

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

                                                                 Issue Date
                                                                         July 26, 2006
                                                                 Audit Report Number
                                                                              2006 BO 1010




TO:        Donna J. Ayala, Director, Office of Public Housing, Boston, Massachusetts,
           Regional Office, 1APH



FROM:      John A. Dvorak, Regional Inspector General for Audit, 1AGA

SUBJECT: Boston Housing Authority, Boston, Massachusetts, Used Voucher Program
         Funds to Pay State Housing Assistance Program Expenses and Needs to Improve
         Its Rent Reasonableness Process


                                   HIGHLIGHTS
 What We Audited and Why



             We reviewed the Section 8 Housing Choice Voucher program (Voucher program)
             at the Boston Housing Authority (Authority) as part of our fiscal year 2006 annual
             audit plan. Our audit objectives were to determine whether the Authority
             properly used Voucher program funds as required by U.S. Department of Housing
             and Urban Development (HUD) annual contributions contracts and to evaluate
             whether rent reasonableness determinations were conducted as required by HUD
             regulations.


 What We Found


             The Authority generally administered the Voucher program according to its
             administrative plan but did not always comply with its annual contributions
             contracts and HUD requirements. The Authority used Voucher program funds to
             subsidize state housing programs. It also did not conduct rent reasonableness
           determinations according to requirements cited in its administration plan and
           HUD regulations. These conditions occurred because the Authority had not
           established or always followed its internal controls to ensure compliance with its
           annual contributions contracts and HUD regulations.


What We Recommend


           We recommend that the director of the Office of Public Housing require the
           Authority to stop using Voucher program funds to pay for nonprogram costs,
           implement changes to separate its federal and state leased housing data into two
           databases, and improve its rent reasonability determinations procedures and the
           accuracy of unit data in its databases.

           For each recommendation in the body of the report without a management
           decision, please respond and provide status reports in accordance with HUD
           Handbook 2000.06, REV-3. Please also furnish us copies of any correspondence
           or directives issued because of the audit.


Auditee’s Response


           The auditee generally did not agree with our findings, although they have initiated
           the planning of some corrective actions that should eliminate the conditions noted
           in this report. The auditee’s response, along with our evaluation of that response,
           can be found in appendix A of this report.




                                             2
                                TABLE OF CONTENTS

     Background and Objectives                                                        4

     Results of Audit
      Finding 1: The Authority Used Voucher Program Funds to Pay State Housing        5
      Assistance Program Expenses
      Finding 2: The Authority’s Rent Reasonableness Process Needs Changes to Fully   8
      Comply with HUD Requirements

     Scope and Methodology                                                            11

     Internal Controls                                                                12

     Appendixes
A.        A - Auditee Comments and OIG’s Evaluation                                   14

B.        B - Selected Criteria for the Section 8 Program                             26




                                                 3
                         BACKGROUND AND OBJECTIVES

The United States Housing Act of 1937 established the federal framework for government-
owned affordable housing. This act also authorized public housing as the nation’s primary
vehicle for providing jobs and building and providing subsidized housing through the
Department of Housing and Urban Development (HUD). HUD disperses funds to public
housing agencies under annual contributions contracts to provide subsidy payments or housing
assistance payments for participating low-income families.

In addition, the United States Housing Act of 1937, as amended by the Quality Housing and
Work Responsibility Act of 1998, authorizes operating subsidies for public housing agencies
administering HUD low-income housing programs. HUD provides annual operating subsidies,
through the Public Housing Operating Fund program, to help public housing agencies pay some
of the cost of operating and maintaining public housing units. The Quality Housing and Work
Responsibility Act of 1998 also created the Housing Choice Voucher program (Voucher
program). The Voucher program allows public housing authorities to pay HUD subsidies
directly to housing owners on behalf of the assisted family.

HUD contracts with the Boston Housing Authority (Authority) for the administration and
management of 11,372 low-income units through annual contributions contracts. As of March
31, 2006, there were 10,789 housing choice voucher units under lease. 1 The annual
contributions contracts require the Authority to follow appropriations laws, public housing
notices, and the Authority’s administrative plan.

The Authority is under the control of an administrator, who is appointed by and serves under the
direction of the mayor of Boston pursuant to Chapter 88 of the Acts of 1989. The Authority does
not have a board of commissioners but has an executive committee appointed by the
administrator. This committee manages and controls the day-to-day operations of the Authority.
The executive committee also makes recommendations to the administrator regarding the
acceptability and/or appropriateness of procurement matters, funding documents, agency policy
statements and other matters requiring the administrator’s review and acceptance, and/or
execution.

Our overall audit objective was to determine whether the Authority employed acceptable
management practices to effectively and efficiently administer its Voucher program while
creating decent, safe, and sanitary housing opportunities in compliance with its annual
contributions contracts and HUD requirements. The specific audit objectives were to determine
whether the Authority properly used Voucher program funds as required by HUD annual
contributions contracts and to evaluate whether rent reasonableness determinations were
conducted as required by HUD regulations.


1
The Authority currently administers 10,789 vouchers in total, which includes 10,122 total vouchers (net of HOPE
VI and tenant protection), 159 HOPE VI Section 8 vouchers, and 508 tenant protection vouchers.




                                                       4
                                       RESULTS OF AUDIT

Finding 1: The Authority Used Voucher Program Funds to Pay State
Housing Assistance Program Expenses
The Authority used federal Voucher program funds to pay expenditures of state-subsidized housing
assistance programs. This occurred because the internal controls the Authority implemented did
not prevent the use of federal funds to pay expenses of its state-subsidized housing programs.
Instead, the Authority’s payment processing allowed the use of federal Voucher program funds
for nonprogram expenses. As a result, the Authority did not fully comply with its annual
contributions contracts which require that funds for the Voucher program be used only for
program purposes.



    The Authority Used Federal
    Funds Inappropriately


                 The Authority’s consolidated annual contributions contracts require records that
                 allow HUD to determine whether the Authority expended funds appropriately.
                 The Authority’s records consist of a series of fund accounts, which track the
                 source and use of funds for its federal Voucher and state housing assistance
                 programs. The Authority also uses a leased housing fund account as a
                 “allocating” or revolving fund to further assist in tracking the source and
                 application of funds. Generally, the Voucher program funds received flow
                 through the program account into an allocating fund, from which program
                 expenditures are paid. However, the Authority’s payment processing system 2
                 also uses federal Voucher program funds in an allocating fund to pay state
                 housing assistance payments, and the funds are reimbursed to the federal
                 allocating fund account through interfund transfers for the expenses paid.

                 Between April 2004 and January 2006, the Authority had 31 interfund transfers
                 totaling more than $9 million from its state leased housing program to its federal
                 Voucher program account. The state fund transfers to the federal fund program
                 account were made relatively shortly after the State funds were recieved3 to repay
                 the federal account. In addtion, all interprogram funds transfered were properly
                 accounted for. However, the use of the federal funds to pay state program costs
                 violates the Authority’s annual contributions contract with HUD. These fund
                 transfers occurred because the Authority set up three allocating funds in its

2
  Due to the size of the federal leased housing assistance program (more than 12,790 units as compared to the state
housing program with 750 units), the federal Voucher program provides a majority of the housing assistance funds.
3
  Transfers occurred between 1 and 19 days after receipt with an average of six days before the funds were
transferred.


                                                         5
                   acounting system, and interfund transfers were automatically created to account
                   for transactions occurring among housing assistance funds. These three allocating
                   funds are used to pay commercial vendors, the payroll for Authority employees,
                   and the leased housing fund for housing assistance payments to landlords and
                   utility payments. The federal Section 8 leased housing account 4 is used as the
                   allocating fund for all housing assistance payments including the state leased
                   assistance housing payments.


     The Authority Needs to Change
     Its Payment Processing


                   The Authority processes housing assitance payments and disburses funds to the
                   landlord from the federal Section 8 leased housing account monthly. The
                   Authority’s fiscal department prepares reports that identify the expense allocation
                   for the housing assitance payments to the applicable funds, including the state
                   leased housing assistance fund. When the expense allocation is identified for the
                   state leased housing fund, reimbursement is made from the state leased housing
                   account3 to the federal account. The Authority believes that it is more efficient to
                   pay the state leased housing assistance payments along with the federal Voucher
                   program payments and reimburse the federal account. The Authority also
                   believed that its systems could not accommodate separate federal and state
                   housing assistance payment processing. However, it is revising its payment
                   processing system and is giving consideration to new leased housing software that
                   separates federal and state program data into two different databases with separate
                   payment processing modules.


    Conclusion



                   The Authority’s housing assitance payment processing allowed use of federal
                   Voucher program funds for nonprogram expenses, but the Authority accounted
                   for all interprogram transfers and reimbursed the Voucher program in a timely
                   manner. However, it had not established the appropriate internal controls to
                   ensure the proper use of federal Voucher program funds in compliance with the
                   financial provisions of its annual contributions contracts. The Authority’s use of
                   these funds violated the provisions in its annual contributions contract with HUD,
                   and the Authority needs to establish internal controls to ensure federal Voucher
                   program funds are used for appropriate program expenses and prevent use of
                   federal funds to pay nonprogram expenditures. Also, if the Authority implements
                   a separate database for federal and state housing programs, the different


4
    The account is with Bank of America.


                                                    6
          processing modules will clearly identify and separately process state and federally
          funded transactions.


Recommendations


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

          1A.     Cease using Section 8 funds to pay for nonprogram costs.
          1B.     Implement system changes for its leased housing database to separately
                  process federal and state housing assistance payments and ensure that the
                  payments are funded from the appropriate state and federally funded
                  accounts.




                                            7
                                           RESULTS OF AUDIT


Finding 2: The Authority’s Rent Reasonableness Process Needs Changes
to Fully Comply with HUD Requirements
The Authority’s rent reasonableness determinations were not conducted in full compliance with
HUD requirements or its own administrative plan for the Voucher program. This occurred
because the Authority did not always use the relevant rental factor information identified in HUD
regulations for making rent reasonableness determinations. Instead, it used alternate rental
factors from its rental databases to compare unit rents, and it made post determination
adjustments to compensate for the insufficient factor information in the databases. In addition,
the Authority did not always document its determinations or use of alternate factors. As a result,
it could not fully demonstrate the reasonability of its new unit rents even when the rents
negotiated were below the fair market value.




      Reasonability Procedures Did
      Not Follow the Administrative
      Plan

                     The Authority conducts rent reasonableness determinations 5 to establish rents for
                     new leased units. The determination should consider such factors as location;
                     bedroom size; quality; type; age of the contract unit; comparable units; and the
                     amenities, housing services, maintenance, and utilities to be provided by the
                     owner. However, the Authority’s rent determinations did not always consider
                     relevant rental factors such as those identified above. The Authority used
                     alternate factors to compensate for variances in unit information and other
                     inadequate or inaccurate information contained in its rent databases.
                     Additionally, post determination adjustments were frequently made to
                     compensate for large rent price variances and to keep rents below fair market
                     rents.

                     The Authority’s administrative plan states that the Authority established a point
                     system to help assess the reasonable rent for each unit. However, the system fails
                     to consider the quality and characteristics of the comparison units used or units of
                     the same bedroom size. This results in a wide range of units being compaired in
                     the rent reasonability determinations, some of which do not have comparable
                     factor attributes in accordance with HUD requirements. The plan also states that
                     the Authority uses other sources of rental information such as leases of similar
                     unassisted units and affidavits from realtors. However, the use of other sources
                     was not described in any written procedures or entered into a database. During

5
    As stated in chapter 8, section 2, of the Authority’s administrative plan.


                                                              8
          the audit, we found no evidence that such information was used in making the
          determinations, and it is unclear whether these other sources of information were
          considered in the rent determination completed by the Authority.


Relevant Rental Factors and
Documentation Are Needed


          The Authority has three rent databases with rental information: a historical
          database, which is no longer in use, and a market information landlord contract
          rents database and market rent database, which are used to make rent
          reasonableness determinations. The information in the market rent database
          establishes parameters for unit rents, and the information in the contract rents
          database is used for rent comparisons to the rent rolls. However, the reasonability
          comparisons using information from both databases are incomplete. The market
          information database contains only data on location, bedroom size, and rent
          charged, while the private market rents database from the rent rolls is biased
          toward higher rental rates. The comparisons completed fail to consider the
          relevant factors stated in the authority’s administrative plan, which HUD wants
          authorities to consider. In addition, rent reasonableness documentation is not
          centrally located with other tenant-related documentation. HUD requires rent
          reasonableness documentation to be located in an easily accessible central
          location where it is available for review.

          Currently the Authority’s market rent database system allows for an initial
          comparison of units in the database to determine that the general characteristics of
          the new unit are comparable to the surveyed units. In the second stage,
          comparable units are filtered to match preselected factors of comparison within
          tolerances defined by the Authority to determine the optimal rent. However, the
          Authority’s market rent database is being modified to add a new rent
          reasonableness module to store and organize the information gathered in surveys
          of nonsubsidized housing. This information could be used to evaluate potential
          program units for reasonableness of the requested rent. Also, the module would
          have the flexibility to allow it to be tailored to perform accurate unit comparisons
          by a variety of methods and under a variety of assumption sets from one central
          location. In addtion, the module could be used to document the methodology and
          tolerances chosen by the Authority through print screens. It could also be used to
          provide a standard set of documentation for the Authority for each individual rent
          reasonableness determination by generating checklists and rent comparability
          forms and data on the units used in the comparison.




                                           9
Conclusion


             The Authority needs to improve the documentation of its rent reasonableness
             determinations. Also, market data needs to be collected for use in showing
             greater comparability with the units being reviewed for rent reasonableness. In
             addition, the methodology used in the determination process needs to be clear
             with fewer exceptions. When large variances in rent results occur, the processes
             used to moderate the results need be identified, understood, and controlled. As
             the process becomes more consistent, rent reasonableness determinations should
             become more routine and easier to document. If the new module for the market
             database is implemented, it could also consolidate the rent reasonability
             documentation so that data remain centrally located and available for future use.
             In addition, changes in rent reasonableness procedures need to be documented in
             the administrative plan.



Recommendations

             We recommend that the director of the Office of Public Housing monitor the
             Authority on rent reasonability until the office is assured that the Authority has

             2A.     Improved documentation and procedures for its reasonability determinations
                     and improved the content the accuracy of unit data in its databases.
             2B.     Modified its administrative plan to reflect the improvements and/or the
                     implementation of the new rent reasonableness system module.




                                               10
                         SCOPE AND METHODOLOGY

We conducted the audit between January and May 2006. Our fieldwork was completed at the
Authority’s central office located at 52 Chauncy Street, Boston. Massachusetts, and at the Leased
Housing Inspections’ offices located at 125 Amory Street, Roxbury, Massachusetts. In addition,
we performed physical inspections of tenant units throughout the city of Boston. Our audit
covered the period April 1, 2003, to March 31, 2005, and was extended when necessary to meet
our objectives. To accomplish our audit objectives, we

       •   Interviewed the Authority’s directors on accounting, financial reporting, occupancy and
           leased housing, inspections, and budget management to determine policies and
           procedures to be tested.

       •   Reviewed the financial statements, general ledgers, tenant files, rent reasonableness
           data, and cost allocation plans as part of our testing for control weaknesses.

       •   Reviewed program requirements including federal laws and regulations, Office of
           Management and Budget circulars, and the consolidated annual contributions contract
           between the Authority and HUD and the Authority’s administrative plan to determine
           its compliance to applicable HUD procedures.

       •   Selected and reviewed a statistical sample of Voucher program tenant files to ensure
           program participants were eligible, housing assistance payments were properly
           supported and calculated, housing deficiencies were corrected in a timely manner,
           and rents paid were reasonable.

       •   Selected for our tests of rent reasonability a representative statistical sample of 94
           units from a population of 363 units. The population of 363 units represents units
           leased using the Authority’s rent reasonableness procedures. The sample was
           reduced to 20 units, since our tests of the files yielded consistent results.

       •   For the period April 2004 through January 2006, selected 100 percent of all of
           interfund receivables (due from) for major fund 25-HCVP (Section 8 Rental
           Certificate program) for the state leased housing program (070 EOCD regular leased
           housing) to determine 1) whether these interfund receivables are considered a long-
           term debt and 2) the amount of time it takes the Authority to ensure that all funds are
           accounted for in a timely manner.

       •   Summarized the results of our analyses.

We performed our review 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 tenant eligibility, calculating housing assistance payments, tenant
       payments, and utility allowances;
   •   Controls over rent reasonableness;
   •   Controls over voucher use (eligibility, waiting lists, and use);
   •   Controls over housing quality standards inspections;
   •   Controls over expenditures to ensure that they were necessary and reasonable;
   •   Controls over Section 8 program accounting and reporting; and
   •   Controls over accounting for portable voucher accounts.

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 to be significant weaknesses:
   •   The Authority did not ensure that federal Voucher program funds were only used for
       federal programs in compliance with its annual contribution contracts (finding 1).



                                                  12
•   The Authority’s rent reasonableness determination process did not have controls to ensure
    that the determinations of rents for new units were based on the relevant rent factors
    identified in HUD regulations and its own administrative plan (finding 2).




                                            13
                        APPENDIXES

Appendix A

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation      Auditee Comments




                            14
Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 2




Comment 3




Comment 4




                         15
Ref to OIG Evaluation   Auditee Comments




Comment 4




Comment 5




Comment 6




                         16
Ref to OIG Evaluation   Auditee Comments




Comment 6




Comment 7




Comment 8




                         17
Ref to OIG Evaluation   Auditee Comments




Comment 8




Comment 9




Comment 10




                         18
Ref to OIG Evaluation   Auditee Comments




Comment 11




Comment 12




                         19
Ref to OIG Evaluation   Auditee Comments




Comment 13




Comment 14




                         20
Ref to OIG Evaluation   Auditee Comments




Comment 15




Comment 16




Comment 17




                         21
Ref to OIG Evaluation   Auditee Comments

Comment 5




                         22
                           OIG Evaluation of Auditee Comments

Comment 1     The audit objectives were not inconsistent, and the overall and specific objectives
              are stated in the Background and Objectives section. As in all our audit reports,
              the specific objectives were summarized in the Highlights section of the report.
              Initially at the entrance conference for the audit, we informed the Authority
              management of the overall objectives during the survey phase of our review, and
              stated that we would determine whether there would be any further changes to the
              audit scope and objectives as the survey progressed. At the conclusion of the
              survey, we informed the Authority management of our initial results, and
              indicated the specific objectives that we would address during the audit phase of
              our review.

Comment 2     The Internal Controls section of our report identifies the internal controls and
              management practices and policies relevant to our audit objectives, and it
              summarizes the significant control weaknesses we identified. Also, the report in
              the Highlights section under “What We Found” states: “The Authority generally
              administered the Voucher program according to its administrative plan but did not
              always comply with its annual contributions contracts and HUD requirements.”
              The requested information is in the final report, as indicated.

Comment 3 The report does not state it was a conscious decision to use federal Voucher
          program funds to cover the state expenses, but rather points out that the payment
          process used by BHA allows the use of federal funds to pay landlords
          participating in the state funded voucher program. This occurred even when the
          state Voucher program (MRVP) had funds available to pay those expenses. After
          payment from the federal Voucher funds and usually within a few days, funds
          were transferred from the state account to the federal account as reimbursement
          for these payments. As this is the accepted practice and standard operating
          procedure of the BHA to pay landlords in the state program using federal funds, it
          is clear that federal Voucher program funds were being used for non-program
          (state program) expenses.

Comment 4 The report was changed to reflect that BHA transfers funds from its state program
          account to its federal account to cover the MRVP (state) HAP disbursements drawn
          on the federal leased housing fund “allocating” account. Also, the number of days
          cited indicated the minimum time that the state funds remained in the state account
          before the federal account was reimbursed. However, the number of days is not a
          true indicator of how long it took before the federal fund account was reimbursed for
          the disbursements made at the beginning of the month.

Comment 5 The report was changed to note that between April 2004 and January 2006, the
          Authority had 31 interfund transfers totaling more than $9 million. Also,
          although the schedule indicated prepay for some transfer, it does not appear that




                                              23
              these funds were available for the associated disbursements made at the beginning
              of the month.

Comment 6 The potential is not that federal funds may be inadvertently used (they are used) to
          pay state HAP payments, but that reimbursement transfers from the state program
          account made be overlooked for extended periods of time. This potential problem
          is in addition to the deficiency that already exits and is cited in the report; BHA
          disburses funds for state program expenses from an account that contains federal
          funds. However, the Authority’s planned implementation of new leased housing
          system software, with separate state and federal databases and payment
          processing modules, would correct the conditions cited in the finding.

Comment 7 The finding clearly describes the condition and the violation relating to the use of
          federal Voucher program funds. In this finding, two specific criteria were used as
          the basis for our position: the Federal Appropriation Act for FY 2004, and the
          HUD Consolidated Annual Contributions Contract (ACC). The Appropriation
          Act for FY 2004, Title II, Department of Housing and Urban Development,
          Public and Indian Housing, Tenant-Based Rental Assistance, states “That all
          amounts provided under this paragraph shall be only for activities related to the
          provision of tenant-based rental assistance authorized under section 8, including
          related development activities.” Also, Section 11a of the ACC, Use of Program
          Receipts, provides the following: The housing authority must use program
          receipts to provide decent, safe, and sanitary housing for eligible families in
          compliance with the U.S. Housing Act of 1937 and all HUD requirements.
          Program receipts may only be used to pay (Section 8) program expenditures.

Comment 8 It was not HUD’s intention nor ours to require PHAs to consider all nine criteria
          in determining rent reasonableness of each assisted unit, in order to fully comply
          with 24 CFR 982.507. However, PHAs are required to determine reasonability
          between similar or “comparable,” units, and we maintain it is not reasonable to
          determine if a unit is comparable based on only the following three factors:
          location, bedroom size and market rent as is currently being done.

Comment 9 The current practice used by BHA does not utilize the comprehensive information on
          units to be subsidized its collects or consider all relevant factors when determining
          rents of subsidized units. The comparability between a subsidized unit and a market
          unit can not be established based on only three common factors (location, bedroom
          size and market rent). If comparable data on relevant factors is not considered for
          both contract and market units, then a true comparison cannot be made and the
          determination as to rent reasonableness is incomplete.

Comment 10 During the course of the audit, several discussions with BHA management were
           held in which various alternative methods of determining rent reasonableness
           were mentioned. These alternatives were not included as part of the finding or the
           audit recommendation.




                                              24
Comment 11 During rent reasonableness determinations, the BHA does not check or compare
           the rent for the approved unit to the fair market rents (FMRs). The approved
           unit’s rent reasonableness determination is therefore incomplete.

Comment 12 As noted in comment 9 (above), we disagree that comparability between a
           subsidized unit and a market unit can be established based on only three common
           factors (location, bedroom size and market rent).

Comment 13 The use of alternative sources of rental information should be adequately
           addressed in BHA’s administrative plan. Also, the use of all available resources
           is encouraged, and these possible sources should be sufficiently described and
           defined in the administrative plan.

Comment 14 During the exit conference, and in its written response, BHA provided
           clarification on its 3 databases used for rent reasonableness determinations.
           However, the information provided in the clarification is different from what the
           auditors were told during the review, and therefore differs from what the auditors
           understood about the databases used by BHA in making its determinations. The
           sample selected of tenant unit reviews was based upon the information contained
           in the third database described (newspaper sources). BHA management now
           states that this is not its main or primary database. During our review, BHA
           management claimed that its 2003 database (the second database described in the
           response) was inaccurate because landlords of subsidized units dictated the rents.

Comment 15 Housing Authorities customarily maintain rent reasonableness documents in the
           tenant files, and these files are usually kept in one location. BHA’s plans for
           implementation of new software which will electronically consolidate all file
           information should allow for easier and centralized access to the rent
           reasonableness documentation.

Comment 16 The first two suggestions were part of informal discussions with BHA
           management, and were not included as part of the audit finding or
           recommendations. The suggestions relevant to the condition described were
           included in the audit finding or recommendations. However, we did note in the
           draft finding that BHA needed to update its administrative plan, and our report
           was revised to note that the administrative plan was modified, and issued for
           public comment. The process for public comment is now complete, and BHA
           will be submitting its final administrative plan to HUD in August for approval.

Comment 17 As indicated in the above comments, the OIG contends that the finding is valid,
           and that the Authority did not always obtain relevant rental factor information in
           making its rent reasonableness determinations, nor did it document these
           determinations accordingly.




                                              25
Appendix B

     SELECTED CRITERIA FOR THE SECTION 8 PROGRAM

Consolidated Annual Contributions Contract, Section 11 a., Use of Program Receipts: The HA
[housing authority] must use program receipts to provide decent, safe, and sanitary housing for
eligible families in compliance with the U.S. Housing Act of 1937 and all HUD requirements.
Program receipts may only be used to pay program expenditures.

24 CFR [Code of Federal Regulations] 985.3B(ii)(b), SEMAP [Section 8 Management
Assessment Program] Indicator 2, Form Reasonable Rent: The Authority must report
performance under 24 CFR 985.3B(ii)(b), SEMAP Indicator 2, Form Reasonable Rent. The
Authority self-certifies that it “takes into consideration the location, size, type, quality, and age
of the program units and of similar unassisted units and any amenities, housing services,
maintenance or utilities provided by the owners.”

24 CFR [Code of Federal Regulations] 982.54, “Administrative Plan,” states: (a) The PHA
[public housing authority] must adopt a written administrative plan that establishes local policies
for administration of the program. (b) The PHA must revise the administrative plan if needed to
comply with HUD requirements. (c) The PHA must administer the program in accordance with
the PHA administrative plan.

24 CFR [Code of Federal Regulations] 982.507(4)(b) requires consideration for rent
reasonableness determinations be given to not only location and bedroom size but quality, size,
type, and age of the contract unit and any amenities, housing services, maintenance and utilities
to be provided by the owner.




                                                  26