oversight

Rockford Housing Authority, Rockford, Illinois, Needs to Improve Its Controls over Program Housing Assistance and Utility Allowance Payments

Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-09-29.

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

                                                                   Issue Date
                                                                           September 29, 2006
                                                                   Audit Report Number
                                                                            2006-CH-1020




TO:         Steven E. Meiss, Director of Public Housing Hub, 5APH


FROM:       Heath Wolfe, Regional Inspector General for Audit, 5AGA

SUBJECT: Rockford Housing Authority, Rockford, Illinois, Needs to Improve Its Controls
           over Program Housing Assistance and Utility Allowance Payments

                                    HIGHLIGHTS

 What We Audited and Why

             We audited the Rockford Housing Authority’s (Authority) Section 8 Housing
             Choice Voucher program (program). The audit was part of the activities in our
             fiscal year 2005 annual audit plan. We selected the Authority based upon a risk
             analysis that identified it as having a high-risk program. Our objective was to
             determine whether the Authority managed its program in accordance with the
             U.S. Department of Housing and Urban Development’s (HUD) requirements.


 What We Found

             The Authority’s program administration regarding housing assistance and utility
             allowance payments was inadequate. The Authority did not ensure that its
             households’ files contained required documentation to support its housing
             assistance and utility allowance payments. Of the 85 files statistically selected for
             review, 73 did not contain documentation required by HUD and the Authority’s
             program administrative plan to support more than $547,000 in housing assistance
             and utility allowance payments.

             The Authority incorrectly calculated households’ payments, resulting in nearly
             $50,000 in overpayments and more than $2,500 in underpayments for the period
             October 2003 through November 2005. Based on our statistical sample, we
           estimate that over the next year the Authority will overpay more than $338,000 in
           housing assistance and utility allowance payments.

           We informed the Authority’s interim executive director and the director of HUD’s
           Chicago Office of Public Housing of minor deficiencies through a memorandum,
           dated September 29, 2006.

           Based on our review, the Authority ensured that program units met HUD’s
           housing quality standards.


What We Recommend

           We recommend that the director of HUD’s Chicago Office of Public Housing
           require the Authority to provide documentation or reimburse its program from
           nonfederal funds for the unsupported housing assistance and utility allowance
           payments and associated administrative fees, reimburse its program from nonfederal
           funds for the improper use of program funds, reimburse the appropriate households
           for the underpayment of housing assistance and utility allowance payments, and
           implement adequate procedures and controls to address the deficiencies cited in this
           audit report.

           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 issued because of the audit.

Auditee’s Response

           We provided our discussion draft audit report to the Authority’s interim executive
           director, its board chairman, and HUD’s staff during the audit. We held an exit
           conference with the Authority’s interim executive director on September 13, 2006.

           We asked the Authority’s interim executive director to provide comments on our
           discussion draft audit report by September 22, 2006. The interim executive director
           provided written comments dated September 21, 2006. The Authority generally
           agreed with our findings and recommendation to implement procedures and controls
           to address the issues contained in the report. However, the Authority disagreed with
           our recommendation to provide supporting documentation or reimburse its program
           more than $750,000 from nonfederal funds for the unsupported payments and
           associated administrative fees. The complete text of the auditee’s response, along
           with our evaluation of that response, can be found in appendix B of this report
           except for 488 pages of documentation that was not necessary for understanding the
           Authority’s comments. A complete copy of the Authority’s comments plus the
           documentation was provided the director of HUD’s Chicago Office of Public
           Housing.




                                            2
                             TABLE OF CONTENTS

Background and Objective                                                            4

Results of Audit

        Finding : Controls over Housing Assistance and Utility Allowance Payments   5
                  Were Inadequate

Scope and Methodology                                                               9

Internal Controls                                                                   11

Appendixes

   A.   Schedule of Questioned Costs and Funds to Be Put to Better Use              13
   B.   Auditee Comments and OIG’s Evaluation                                       14
   C.   Criteria                                                                    22
   D.   Tenant File Reviews – Missing or Incomplete Documentation                   26
   E.   Housing Assistance and Utility Allowance Payment Errors                     28




                                              3
                      BACKGROUND AND OBJECTIVE

The Rockford Housing Authority (Authority) is a municipal corporation established by the City
of Rockford, Illinois (City) in 1951 under chapter 310 of the Illinois Compiled Statutes to
provide decent, safe, and sanitary housing for low-income families under the United States
Housing Act of 1937. The Authority is governed by a five-member board of commissioners
appointed by the City’s mayor to five-year staggered terms. The board of commissioners’
responsibilities includes overseeing the operations of the Authority, as well as the review and
approval of its policies. The Authority’s board of commissioners appoints the executive director,
who is responsible for the general supervision of the administration of the Authority’s business
and affairs.

The Authority administers a Section 8 Housing Choice Voucher program (program) funded by
the U.S. Department of Housing and Urban Development (HUD) in the City. The Authority
provides assistance to low- and moderate-income individuals seeking decent, safe, and sanitary
housing by subsidizing rents with owners of existing private housing. As of August 15, 2006,
the Authority had 1,504 units under contract with annual housing assistance payments totaling
more than $8.2 million in program funds.

Our objective was to determine whether the Authority managed its program in accordance with
HUD’s requirements.




                                               4
                               RESULTS OF AUDIT

Finding: Controls over Housing Assistance and Utility Reimbursement
                     Payments Were Inadequate
The Authority did not to comply with HUD’s regulations and its program administrative plan
regarding housing assistance and utility allowance payments. It lacked documentation to support
housing assistance and utility allowance payments to program landlords and households,
respectively, and incorrectly calculated payments because it lacked adequate procedures and
controls to ensure that HUD’s regulations and the Authority’s administrative plan were
appropriately followed. As a result, it was unable to support more than $547,000 in housing
assistance and utility reimbursement payments made, and overpaid nearly $50,000 and underpaid
more than $2,500 in housing assistance and utility allowance payments. Based on our statistical
sample, we estimate that over the next year the Authority will overpay more than $338,000 in
payments.



 The Authority Lacked
 Documentation to Support
 More Than $706, 000 in
 Housing Assistance and Utility
 Allowance Payments

              The Authority lacked documentation to support issuing housing assistance and
              utility allowance payments totaling $547,238 for the period October 2003 through
              November 2005. Of the 85 households’ files statistically selected for review, 73
              (86 percent) were missing or had incomplete documents as follows:

                  •   39 were missing proof of criminal activity screening,
                  •   29 were missing 30 or 90-day zero-income certifications,
                  •   24 were missing or had incomplete signed United States citizen
                      certifications,
                  •   15 were missing signed lease agreements,
                  •   12 were missing or had incomplete HUD Form 9886, Authorization for
                      the Release of Information and Privacy Act Notice,
                  •   6 were missing proof of legal identity,
                  •   4 were missing rent reasonableness certifications, and
                  •   2 were missing proof of Social Security numbers.

              The 73 files did not include documentation required by HUD’s regulations and
              the Authority’s program administration plan. Appendix D of this report shows
              the results of our household file reviews.




                                              5
           In addition, the Authority failed to conduct timely annual certifications for six
           households for one or more years and one annual certification was not performed.

           HUD performed a rental integrity monitoring review in 2002 and rental integrity
           re-review in 2004. The 2002 review identified that the Authority’s household
           files contained errors similar to the ones cited in this finding. HUD’s 2004 re-
           review revealed that the Authority’s household files still included errors. HUD
           and the Authority have been aware of the file errors since October 2002. As
           previously discussed, the Authority’s maintenance of required documentation in
           its household files is still a problem. The Authority has failed to correct this issue
           for more than three years.

The Authority Incorrectly
Calculated and Made
Inaccurate Housing Assistance
and Utility Allowance Payments


           The Authority incorrectly calculated and made inaccurate housing assistance and
           utility allowance payments, resulting in overpayments of $49,034 and
           underpayments of $2,550 from October 2003 through November 2005. To
           determine whether the Authority correctly calculated housing assistance and
           utility allowance payments, we reviewed the Authority’s certifications affecting
           payments from October 2003 through November 2005 for 85 program households
           statistically selected for review. The Authority incorrectly calculated and/or made
           inaccurate housing assistance and/or utility allowance payments for 48 (56
           percent) of the 85 households for one or more certifications. The 48 household
           files contained the following errors:

               •   18 had payments that were not in accordance with one or more
                   certifications,
               •   18 had annual income calculation errors for one or more certifications,
               •   13 had inappropriate use of income allowances for one or more
                   certifications,
               •   11 had incorrect utility allowances for one or more certifications,
               •   10 had failures to establish or enforce repayment agreements,
               •   10 had incorrect payment standards for one or more certifications, and
               •   6 did not use the Authority’s minimum rent.

           Appendix E of this report details the housing assistance and utiltiy allowance
           payment errors that resulted from the Authority’s incorrect calculations.




                                             6
The Authority’s Procedures
and Controls Had Weaknesses

             The weaknesses regarding missing documentation, incorrect calculations, and
             inappropriate payments occurred because the Authority lacked adequate
             procedures and controls to ensure that it appropriately followed HUD’s
             regulations and the Authority’s administrative plan. The Authority did not ensure
             that it fully implemented HUD’s regulations and its administrative plan, and
             standardized tenant certifications and file management procedures.

             The director of assisted housing said the Authority performed criminal
             background checks on households’ members, but destroyed the documentation.
             She did not realize it was necessary to keep a record of the criminal background
             checks. The overpayments and underpayments occurred because the Authority
             did not use the appropriate annual income figures, program payment standards,
             and utility allowances; made payments based on prior calculations; and failed to
             establish or enforce repayment agreements. The Authority’s administrative plan
             also did not address how households would be reimbursed when the Authority
             underpaid housing assistance and/or utility allowance payments.

Conclusion

             The Authority did not properly use its program funds when it failed to comply
             with HUD’s regulations and the Authority’s administrative plan. In accordance
             with 24 CFR [Code of Federal Regulations] 982.152(d), HUD may reduce or
             offset any administrative fee to public housing authorities (authorities), in the
             amount determined by HUD, if the authorities fail to perform their administrative
             responsibilities correctly or adequately under the program.

             As previously mentioned , the Authority disbursed $547,238 in housing assistance
             and utility allowance payments without proper documentation, and overpaid
             $49,034 and underpaid $2,550 in housing assistance and utility allowance
             payments. In addition, the Authority received $67,430 in program administrative
             fees related to the unsupported and inappropriate payments for 79 of the 85
             program households.

             If the Authority implements adequate procedures and controls over its housing
             assistance and utility allowance payments to ensure compliance with HUD’s
             regulations and its program administrative plan, we estimate that more than
             $338,000 in payments will be accurately spent over the next year based on the error
             rate found in our sample. Our methodology for this estimate is explained in the
             Scope and Methodology section of this audit report.




                                              7
Recommendations

          We recommend that the director of HUD’s Chicago Office of Public Housing
          require the Authority to

          1A.     Provide supporting documentation or reimburse its program $582,926
                  ($547,238 in housing assistance and utility allowance payments and $35,688
                  in associated administrative fees) from nonfederal funds for the unsupported
                  payments and associated administrative fees related to the 73 household files
                  cited in this finding.

          1B.     Reimburse its program $80,776 ($49,034 for the overpayment of housing
                  assistance and utility allowance payments for 34 households and $31,742 in
                  administrative fees associated with the overpayment and underpayment of
                  housing assistance and utility allowance payments for 48 households) from
                  nonfederal funds.

          1C.     Reimburse the appropriate households $2,550 for the underpayment of
                  housing assistance and utility allowance payments for the 14 households.

          1D.     Implement adequate procedures and controls over its housing assistance and
                  utility allowance payments to ensure that they meet HUD’s regulations and
                  the Authority’s program administration plan. The procedures and controls
                  should include, but not be limited to ensuring, that all required
                  documentation is maintained in the Authority’s current household files to
                  support housing assistance and utility allowance payments and payment
                  calculations are correct. By implementing adequate procedures and controls,
                  the Authority should help ensure that $338,477 in program funds is
                  appropriately used for future payments.

          1E.     Revise its program administrative plan to address how households will be
                  reimbursed when an underpayment of housing assistance or utility allowance
                  occurs.




                                            8
                         SCOPE AND METHODOLOGY

To accomplish our objective, we reviewed:

               •   Applicable laws; regulations; and the Authority’s program administrative
                   plans effective prior to and as of February 2004; and HUD program
                   requirements at 24 CFR [Code of Federal Regulations] Parts 5, 35, 982, 984,
                   and 985; HUD’s Public and Indian Housing Notice 2005-9; and HUD’s
                   Housing Choice Voucher Guidebook 7420.10.

               •   The Authority’s accounting records; annual audited financial statements for
                   2002, 2003, 2004, and 2005; general ledgers; checks; household files;
                   computerized databases; by-laws; policies and procedures; board meeting
                   minutes from October 2004 through September 2005; organizational chart;
                   and program annual contributions contract.

               •   HUD’s files for the Authority.

We also interviewed the Authority’s employees, HUD staff, and program households.

We statistically selected 85 of the Authority’s program households’ files using Excel and ACL
Services Limited software from the 1,523 households to which the Authority made housing
assistance payments from October 2003 through November 2005. The 85 households were
selected to determine whether the Authority had supporting documentation for and correctly
calculated their housing assistance and utility allowance payments. Our sampling criteria used a
90 percent confidence level, 10 percent estimated error rate, and a precision of plus or minus 10
percent.

Our sampling results determined that the Authority incorrectly calculated and/or made inaccurate
housing assistance and/or utility allowance payments for 48 (56 percent) of the 85 households.
The Authority made $874,480 in housing assistance and utility allowance payments for the 85
households from October 2003 through November 2005. The Authority made net overpayments
totaling $46,484 ($49,034 in overpayments minus $2,550 in underpayments). The net
overpayments consisted of 5.3 percent ($46,484 divided by $874,480) of the total housing
assistance and utility allowance payments.

The Authority’s September 2005 through November 2005 housing assistance and utility
allowance payments registers showed that the average payment was $458. Using the lower limit
of the estimate of the number of units and the average payment, we estimated that the Authority
will annually make $338,477 (1,162 units times $458 average payment times 12 months times
5.3 percent) in overpayments of housing assistance and utility allowance payments for its
program households. This estimate is presented solely to demonstrate the annual amount of
program funds that could be put to better use on appropriate payments if the Authority
implements our recommendation. While these benefits would recur indefinitely, we were
conservative in our approach and only included the initial year in our estimate.



                                                9
We performed our on-site audit work from October 2005 through February 2006 at the
Authority’s central office, located at 223 South Winnebago Street, Rockford, Illinois. The audit
covered the period October 1, 2004, through November 30, 2005, and was expanded as
determined necessary.

We performed our audit in accordance with generally accepted government auditing standards.




                                               10
                             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 resources.

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 objective:

                  •   Program operations – Policies and procedures that management has
                      implemented to reasonably ensure that a program meets its objectives.

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

              We assessed all of 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.




                                                11
Significant Weakness

            Based on our review, we believe the following item is a significant weakness:

               •   The Authority lacked adequate procedures and controls to ensure
                   compliance with HUD’s regulations and its administrative plan regarding
                   housing assistance and utility allowance payments (see finding).




                                            12
                                    APPENDIXES

Appendix A

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

          Recommendation                                              Funds to be put
              number            Ineligible 1/        Unsupported 2/   to better use 3/
                 1A                                       $582,926
                 1B                  $80,776
                 1C                                                            $2,550
                 1D                                                           338,477
                Totals               $80,776              $582,926           $341,027


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
     polices or regulations.

2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.

3/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an OIG recommendation is implemented. This includes
     reduction in outlays, deobligation of funds, withdrawal of interest subsidy costs not
     incurred by implementing recommended improvements, avoidance of unnecessary
     expenditures noted in preaward reviews, and any other savings that are specifically
     identified. In this instance, if the Authority implements our recommendation, it will
     cease to make overpayments of housing assistance and utility allowance, and instead will
     expend those funds for allowable housing assistance and utility allowance payments.
     Once the Authority successfully improves its procedures and controls, this will be a
     recurring benefit. Our estimate reflects only the initial year of these recurring benefits.




                                                13
Appendix B

        AUDITEE COMMENTS AND OIG’s EVALUATION

Ref to OIG Evaluation   Auditee Comments




                         14
Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 2




                         15
Ref to OIG Evaluation   Auditee Comments




Comment 2




Comment 1

Comment 3




Comment 1




                         16
Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 1
Comment 4




Comment 1




Comment 1




                         17
Ref to OIG Evaluation   Auditee Comments




Comment 5




                         18
Ref to OIG Evaluation   Auditee Comments




Comment 5



Comment 6




Comment 7


Comments 1,
5, and 6




                         19
                         OIG Evaluation of Auditee Comments

Comment 1   We reduced the housing assistance and utility allowance payments in which the
            Authority lacked documentation to support from $706,656 to $547,238 for the
            period October 2003 through November 2005. We reduced the number of
            household files that were missing or had incomplete documentation from 76 (89
            percent) to 73 (86 percent).

            We reduced the number of household files that were missing or had incomplete:

               ™   Proof of criminal activity screening from 50 to 39;
               ™   30 or 90-day zero-income certifications from 38 to 29;
               ™   Signed United States citizen certifications from 34 to 24;
               ™   Signed lease agreements from 18 to 15;
               ™   HUD Form 9886 from 20 to 12;
               ™   Proof of legal identity from eight to six,
               ™   Rent reasonableness certifications from nine to four; and
               ™   Proof of Social Security numbers from three to two.

            We adjusted the recommendation to state the Authority provide supporting
            documentation or reimburse its program $582,926 ($547,238 in housing assistance
            and utility allowance payments and $35,688 in associated administrative fees) from
            nonfederal funds for the unsupported payments and associated administrative fees
            related to the 73 household files cited in this finding.

            We also made the necessary adjustments to Appendix D.

Comment 2   Prior to February 2004, the Authority’s program administrative plan, section D of
            chapter 6, stated that families who report zero income must complete a written
            certification of zero income every 30 days. As of February 2004, the Authority’s
            program administrative plan, section D of chapter 6, states that families who
            report zero income must complete written certifications of zero income every 90
            days. The written certifications require a signature.

Comment 3   HUD’s regulations at 24 CFR [Code of Federal Regulations] 5.508 require
            evidence of citizenship or eligible immigration status for each family member,
            regardless of age. For U.S. citizens or U.S. nationals, the evidence consists of a
            signed declaration of U.S. citizenship or U.S. nationality.

Comment 4   HUD’s regulations at 24 CFR [Code of Federal Regulations] 982.158(a) state that
            authorities must maintain complete and accurate accounts and other records for
            the program and in accordance with HUD requirements in a manner that permits a
            speedy and effective audit. Section 982.158(e) states that during the term of each
            assisted lease and for at least three years thereafter, authorities must keep a copy
            of the executed lease. HUD’s regulations at 24 CFR [Code of Federal
            Regulations] 982.308(b) state the household and the owner must enter a written
            lease for the unit. The owner and the household must execute the lease.




                                             20
Comment 5   We reduced the housing assistance and utility allowance payments in which the
            Authority made overpayments and underpayments from $53,348 to $49,034 and
            $2,473 to $2,550, respectively, from October 2003 through November 2005. We
            reduced the number of households that the Authority incorrectly calculated and/or
            made inaccurate housing assistance and/or utility allowance payments from 49
            (58 percent) to 48 (56 percent).

            We reduced the number of household files that contained the following errors:

               •   Payments that were not in accordance with one or more certifications from
                   19 to 18; and
               •   Failures to establish or enforce repayment agreements from 13 to 10.

            We adjusted the recommendation to state the Authority reimburse its program
            $80,776 ($49,034 for the overpayment of housing assistance and utility allowance
            payments for 34 households and $31,742 in administrative fees associated with the
            overpayment and underpayment of housing assistance and utility allowance
            payments for 48 households) from nonfederal funds.

            We adjusted the recommendation to state the Authority reimburse the appropriate
            households $2,550 for the underpayment of housing assistance and utility allowance
            payments for the 14 households.

            We also made the necessary adjustments to Appendix E.

Comment 6   We adjusted the report by removing the section regarding the Authority
            inappropriately making $1,146 in housing assistance payments the month after
            tenants passed away. We also removed the recommendation for the Authority to
            pursue reimbursement from the applicable landlords or its program $1,146 from
            nonfederal funds for the inappropriate housing assistance payments made the month
            after three heads of household passed away.

Comment 7   The Authority receives an administrative fee of 6.5 percent of gross collections
            for providing management services for Concord Commons, a Section 221
            apartment complex owned by the Rockford Housing Development Corporation
            (Corporation). The Corporation is a nonprofit organization affiliated with the
            Authority.




                                            21
Appendix C
                                         CRITERIA

HUD’s regulations at 24 CFR [Code of Federal Regulations] 5.216 require that each assistance
applicant submit the following information to the processing entity when the assistant applicant’s
eligibility under the program involved is being determined.

   ™   A complete and accurate Social Security number assigned to the assistance applicant and
       to each member of the assistance applicant’s household who is at least six years of age, or

   ™   If the assistance applicant or any member of the assistance applicant’s household who is
       at least six years of age has not been assigned a Social Security number, a certification
       executed by the individual involved.

HUD’s regulations at 24 CFR [Code of Federal Regulations] 5.230(a) require each member of
the family of an assistance applicant or participant who is at least 18 years of age and each
family head and spouse regardless of age to sign one or more consent forms.

HUD’s regulations at 24 CFR [Code of Federal Regulations] 5.240(c) state that authorities must
verify the accuracy of the income information received from a household and change the amount
of the total tenant payment, tenant rent, or program housing assistance payment, or terminate
assistance, as appropriate, based on such information.

HUD’s regulations at 24 CFR [Code of Federal Regulations] 5.508 require evidence of
citizenship or eligible immigration status for each family member, regardless of age. For U.S.
citizens or U.S. nationals, the evidence consists of a signed declaration of U.S. citizenship or
U.S. nationality.

HUD regulations at 24 CFR [Code of Federal Regulations] 982.54 require authorities to adopt a
written administrative plan that establishes local policies for the administration of the program in
accordance with HUD requirements. The administrative plan states the authorities’ policies on
matters for which authorities have discretion to establish local policies. The authorities must
administer the Program in accordance with their administrative plan.

HUD’s regulations at 24 CFR [Code of Federal Regulations] 982.158(a) state that authorities
must maintain complete and accurate accounts and other records for the program, and in
accordance with HUD requirements in a manner that permits a speedy and effective audit.
Section 982.158(e) states that during the term of each assisted lease and for at least three years
thereafter, authorities must keep a copy of the executed lease, the housing assistance payment
contract, and the application from the family. Section 982.158(e) states that authorities must
keep the following records for at lease three years: records that provide income, racial, ethnic,
gender, and disability status data on program applicants and participants, and records to
document the basis for authorities’ determination that rental payments are reasonable (initially
and during the term of a housing assistance payments contract).

HUD’s regulations at 24 CFR [Code of Federal Regulations] 982.305(a) state that authorities
may not execute a housing assistance payments contract until the authorities determine that the



                                                 22
lease includes the tenancy addendum and the rent to the owner is reasonable. Section 982.305(b)
requires that the owner and the household execute a lease before the beginning of the initial term
of the lease. Section 982.305(c) states that a housing assistance payment contract must be
executed no later than 60 calendar days from the beginning of the lease term. The authorities
may not pay any housing assistance payment to an owner until the housing assistance payment
contract has been executed.

HUD’s regulations at 24 CFR [Code of Federal Regulations] 982.308(b) state the household and
the owner must enter a written lease for the unit. The owner and the household must execute the
lease.

HUD regulations at 24 CFR [Code of Federal Regulations] 982.451 require authorities to
determine the amount of the monthly housing assistance payment in accordance with HUD
regulations and other requirements.

HUD regulations at 24 CFR [Code of Federal Regulations] 982.505(b), state that authorities
should pay a monthly housing assistance payment on behalf of a family participating in the
program that is equal to the lower of the payment standard for the family minus the total tenant
payment or the gross rent minus the total tenant payment. Section 982.505(c)(4) states that if the
payment standard amount is increased during the term of the contract, the increased payment
standard amount shall be used to calculate the monthly housing assistance payment for the
family beginning at the effective date of the family’s first regular reexamination on or after the
effective date of the increase in the payment standard amount.

HUD regulations at 24 CFR [Code of Federal Regulations] 982.507 require authorities to re-
determine reasonable rent before providing any increase in rent to the owner.

HUD regulations at 24 CFR [Code of Federal Regulations] 982.514(b) state that when the
housing assistance payment exceeds the rent to the owner, authorities may pay the balance of the
housing assistance payment (utility reimbursement) either to the family or directly to the utility
supplier to pay the utility bill on behalf of the family.

HUD’s regulations at 24 CFR [Code of Federal Regulations] 982.516(a)(1) require authorities to
conduct a reexamination of family income and composition at least annually. The authorities
must obtain and document in the household file third-party verification or why third-party
verification was not available for the following factors: (i) reported family annual income, (ii)
the value of assets, (iii) expenses related to deductions from annual income, and (iv) other factors
that affect the determination of adjusted income. At any time, authorities may conduct an
interim reexamination of family income and composition. Interim examinations must be
conducted in accordance with policies in the authorities’ administrative plans. As a condition of
admission to or continued assistance under the program, the authorities shall require the family
head and such other family members as the authorities designate, to execute a HUD-approved
release and consent form (including any release and consent as required under 5.230 of this title)
authorizing any depository or private source of income or any federal, state or local agency to
furnish or release to the authorities or HUD such information as the authorities or HUD
determine to be necessary. The authorities and HUD must limit the use or disclosure of
information obtained from a family or from another source pursuant to this release and consent
to purposes directly in connection with administration of the program.



                                                23
HUD’s regulations at 24 CFR [Code of Federal Regulations] 982.517 state that authorities must
use the appropriate utility allowance for the size of dwelling unit leased by the family and the
utility allowance schedules must take into consideration unit size and unit types.

Form HUD 9886, Authorization for the Release of Information/Privacy Act Notice, states that
each member of an applicant’s or participant’s household, 18 years of age or older, of the
program is required to sign the form.

                        The Authority’s program administrative plans

Section L of chapter 1 states that to demonstrate compliance with HUD’s and other pertinent
regulations, the Authority will maintain records, reports, and other documentation for a time that
is in accordance with HUD requirements and in a manner that will allow an auditor, housing
professional, or other interested party to follow, monitor, and or assess the Authority’s
operational procedures objectively and with accuracy.

Chapter 2 states that to be eligible for participation, an applicant must meet HUD's criteria, as
well as any permissible additional criteria established by the Authority. Among other
requirements, HUD eligibility criteria include that applicants must be within the appropriate
income limits, furnish Social Security numbers or certify that they do not have one, and furnish
evidence of citizenship or eligible immigrant status.

Section E(5) of chapter 2 states that the Authority will screen all applicants for criminal activity
as part of the processing of an application for assistance. Applicants or applicant family
members, who are found to have engaged in drug related or violent criminal activity within 36
months of the date of the initial application, will be denied admission.

Section A of chapter 6 states households are required to pay a minimum rent of $25. Prior to
February 2004, section D of chapter 6, stated that families who report zero income must
complete a written cerification of zero income every 30 days. As of February 2004, section D of
chapter 6, states that families who report zero income must complete written certifications of
zero income every 90 days. Section N states that minimum rent hardship exceptions are required
to be in writing. Section P states that an air conditioning allowance will only be granted when
the Authority has confirmed that the unit has an operable air conditioner in the unit.

Section A of chapter 7 states families are required to submit an affidavit or notarized statement to
certify income when verification cannot be made by third-party verification or through a review
of documents. Prior to February 2004, section A also stated that documents for verification
purposes may not be more than 60 days old. As of February 2004, section A states that
documents for verification purposes may not be more than 90 days old.

Section D of chapter 7 states that items to be verified include: all income from all sources,
monetary or non-monetary; zero-income status of a household; family composition; full-time
student status, to include students who are 18 years of age or older; assets and asset income; U.S.
citizenship or eligible immigrant status; Social Security numbers; and disability for the
determination of preferences, allowances, or deductions. Section E considers written verification
from the registrar's office or other school official and school records indicating enrollment for a
sufficient number of credits to be considered a full-time student by the educational institution as
verification of full time student status. Section I requires applicants to furnish verification of


                                                 24
legal identity for all family members and consider receipt of supplemental security income or
Social Security Administration disability payments as verification of disability.

Prior to February 2004, section D of chapter 11, stated and as of February 2004, section C of
chapter 11, states that at least three units will be used for each rent determination and all
comparable units must be based on current market rents.

Section E of chapter 12 states that families must report interim changes in income and assets to
the Authority within 30 days after the change occurs. Increases in the household rent are
effective on the first of the month following at least 30 days’ notice. Increase in household rent
will be effective retroactive to the date it would have been effective had it been reported on a
timely basis. The family will be liable for any overpaid housing assistance and may be required
to make a lump sum repayment. Decreases in household rent will be effective on the first of the
month following completion of processing by the Authority and not retroactively.

Chapter 18 states that the Authority will use repayment agreements to recover overpayments of
assistance for families. The Authority’s repayment agreements state that a household under a
repayment agreement is required to fully comply with the terms and conditions of the agreement.
If the initial payment or any subsequent payment is not received on or before the due date, the
household’s assistance will be terminated.




                                                25
Appendix D

 HOUSEHOLD FILE REVIEWS – MISSING OR INCOMPLETE
                DOCUMENTATION
                                                                                      30-day                           Housing/
                                                                                       and/or                           utility
            Criminal     Social    United States    Proof                           90-day zero-                      assistance
Household    activity   Security      citizen      of legal           Information     income             Rent        payments not
 number     screening   number     certification   identity   Lease     release     certification   reasonableness    supported
  14784         X                                                          X              X                               $13,585
  14818                                 X                                                                                        0
  14890                                                        X                                                           13,646
  18586                                                                                  X                                 11,115
  19506        X                                                                         X                                   6,146
  21210        X                                                                                                             3,019
  21297        X                                                                                                             1,324
  21311        X                                                                                                             1,996
  21352        X                                                                                                               922
  22003        X                                               X                                                             1,824
  2801         X                                                                                                             6,042
  5071                                                         X                                                               172
  5147         X                                                                                                             8,096
  5282                                                         X                                                             5,586
  5345                                                                                   X                                   2,974
  5425         X                                                                                                           20,520
  5449                                  X                                                                                        0
  5612         X                                                                                                             8,404
  5623                                                                    X                                                  3,091
  5710                                  X             X                                  X                                 15,871
  5747         X                                                                         X                                 12,076
  5818         X                                                                                                           12,124
  5861         X                                                                                                             6,588
  5873         X                        X                                                X                                 12,157
  5973         X                        X                                                                                  10,928
  6001         X                                                                         X                                 19,705
  6048                                  X                                                                                        0
  6056         X                        X             X        X                                                           10,002
  6149                                                         X                                                             2,659
  6186         X                                                                         X                                 11,449
  6343         X                                                                                                             8,190
  6383         X                        X                                 X              X                                   7,187
  6575                                  X                                                X                                   2,460
  6593                                  X                      X                                                             8,053
  6611         X                        X                                                                                    9,967
  6624                                                         X                         X                                   7,005
  6630         X                                                          X              X                                 16,224
  6762         X                                               X          X              X                                 14,766
  6830         X                                                                                          X                  9,542
  6848                                                         X                                                             7,734
  6934                                  X                      X                         X                                 19,312
  6967         X                                                                                                           13,567
  6985                                  X             X                                                                      6,036
  7044                                                         X                         X                                 11,484
  7134         X                                               X                                                             5,866
  7143                                  X                      X                                                             9,852
  7149                                  X                                 X              X                                 14,573
  7203                                  X             X                                  X                                 13,650
  7285                                                                                   X                                   3,906




                                                              26
  HOUSEHOLD FILE REVIEWS – MISSING OR INCOMPLETE
            DOCUMENTATION (CONTINUED)
                                                                                      30-day                           Housing/
                                                                                       and/or                           utility
            Criminal     Social    United States    Proof                           90-day zero-                      assistance
Household    activity   Security      citizen      of legal           Information     income             Rent        payments not
 number     screening   number     certification   identity   Lease     release     certification   reasonableness    supported
  7363                                   X                                                X                                $2,492
  7372         X                                                                                          X                10,055
  7456                                                                                                    X                  7,769
  7517         X                        X                                                                                    3,430
  7623         X                                                                                                             8,011
  7741         X                        X                                                                                  13,728
  7978                                                                    X              X                                   6,864
  8144                                  X                      X                                                             5,258
  8159         X                        X                                                                                    4,692
  8372                                                                    X                                                  1,236
  8461         X                        X                                                                                      944
  8598                     X            X                                 X              X                                   9,102
  8612                                                                    X              X                                   3,548
  8673                     X            X             X                   X              X                                 10,567
  8681                                                                                   X                                   9,759
  9047         X                                                                                                             1,364
  12294                                                                                  X                                   6,908
  12318        X                                                                                                             1,770
  21285        X                                                                                                             3,046
  23563        X                                                                         X                                   1,912
  23659        X                                      X                                                                      1,764
  5136                                                                                   X                                   5,033
  6644         X                                                          X                               X                10,711
  6933                                                                                   X                                   5,880
 Totals        39          2            24            6        15         12             29               4             $547,238


Note: An “X” identifies the missing or incomplete documentation in the tenant’s file.




                                                                27
Appendix E

       HOUSING ASSISTANCE AND UTILITY ALLOWANCE
                    PAYMENT ERRORS
            Total 2003 housing and       Total 2004 housing and        Total 2005 housing and      Total housing and utility assistance
               utility assistance           utility assistance            utility assistance                   payments
Household   payments over(under)-        payments over(under)-         payments over(under)-
 number            payments                     payments                      payments             Overpayment            Underpayment
  14784                            $0                           $0                           $60                 $60                  $0
  14818                          N/A                         (125)                         (178)                   0               (303)
  14890                            45                        3,431                         1,596               5,072                   0
  18586                              0                        (24)                             0                   0                (24)
  19506                          N/A                            (1)                            0                   0                 (1)
  22003                          N/A                          N/A                             80                  80                   0
  5071                             66                          252                           120                 438                   0
  5147                            123                          492                           451               1,066                   0
  5345                               0                       1,116                         1,056               2,172                   0
  5449                            729                        1,334                             0               2,063                   0
  5623                             36                           96                          N/A                  132                   0
  5642                               0                         284                           890               1,174                   0
  5710                             46                          159                             0                 205                   0
  5747                               0                       1,407                         2,765               4,172                   0
  5818                               0                       (106)                         (583)                   0               (689)
  5873                             (2)                            0                            0                   0                 (2)
  6001                           (93)                         (81)                            32                   0               (142)
  6056                          (111)                         (37)                             0                   0               (148)
  6186                               0                            0                        (186)                   0               (186)
  6340                               0                         464                             0                 464                   0
  6343                            133                        1,197                          N/A                1,330                   0
  6383                             36                          186                           132                 354                   0
  6593                               0                       (104)                         1,214               1,110                   0
  6624                               0                         710                           554               1,264                   0
  6762                               0                            0                          562                 562                   0
  6830                             27                          252                           203                 482                   0
  6934                               0                          97                            58                 155                   0
  7044                               0                        (45)                           393                 348                   0
  7134                             (3)                        (67)                          N/A                    0                (70)
  7143                               0                         136                         (166)                   0                (30)
  7155                            198                          918                           957               2,073                   0
  7285                          1,086                        3,798                         1,626               6,510                   0
  7372                               8                          24                             4                  36                   0
  7402                               0                        (85)                         (171)                   0               (256)
  7456                            365                          553                           820               1,738                   0
  7623                            319                           61                            28                 408                   0
  7741                           (30)                        (100)                         (110)                   0               (240)
  7978                            348                          552                           483               1,383                   0
  8144                            254                          243                         (152)                 345                   0
  8457                            143                          564                           222                 929                   0
  8461                            708                          236                          N/A                  944                   0
  8598                            182                        (133)                             0                  49                   0
  8617                            189                          764                           256               1,209                   0
  8673                             36                           24                           513                 573                   0
  8681                               0                       (528)                           114                   0               (414)
  5019                             36                          462                           364                 862                   0
  5136                          2,106                        7,166                             0               9,272                   0
  6644                               0                            0                         (45)                   0                (45)
  Totals                       $6,980                     $25,542                       $13,962              $49,034            ($2,550)




                                                                      28