oversight

Brazos Valley Council of Governments, Bryan, Texas, Issued Vouchers Larger Than Its Policy Allowed

Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-05-08.

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

                                                                  Issue Date
                                                                               May 8, 2006
                                                                  Audit Report Number
                                                                               2006-FW-1008




TO:         Dan Rodriguez
            Program Center Coordinator, Office of Public Housing, 6EPH



FROM:       Frank E. Baca
            Regional Inspector General for Audit, Fort Worth Region, 6AGA

SUBJECT: Brazos Valley Council of Governments, Bryan, Texas, Issued Vouchers Larger
         Than Its Policy Allowed.


                                   HIGHLIGHTS

 What We Audited and Why

             We reviewed Brazos Valley Council of Governments’ (Council’s) Section 8
             Housing Choice Voucher program to determine whether the Council properly
             applied the subsidy size standards in its administrative plan. We selected the
             Council for review based on a risk assessment and because reducing erroneous
             payments in rental programs is part of our strategic audit plan.

 What We Found


             Of the 20 tenant files reviewed, the Council assigned a larger voucher size than its
             subsidy size standards required to 11 tenants. However, it improperly paid $552
             in assistance for only two of the overhoused tenants. The Council’s assignment of
             an improper voucher size for another nine tenants did not result in a material
             financial impact.
What We Recommend


           We recommend that you require the Council to (1) repay the ineligible housing
           assistance overpayment of $552, (2) develop and implement procedures to ensure
           it assigns the correct subsidy size for all tenants, and (3) correct the voucher size of
           the nine tenants identified and other incorrectly assigned vouchers to avoid future
           overpayments and ensure the tenants are housed in accordance with the Council’s
           subsidy size standards.

           For each recommendation without a management decision, please respond and
           provide status reports in accordance with U.S. Department of Housing and Urban
           Development (HUD) Handbook 2000.06, REV-3. Please furnish us copies of any
           correspondence or directives issued because of the audit.

Auditee’s Response


           We discussed our review results with the Council during the audit. We provided
           a copy of the draft report to Council officials on April 18, 2006, for their
           comments and discussed the report with the officials at the exit conference on
           April 24, 2006. The Council provided written comments on April 28, 2006. The
           Council’s executive director agreed with our report finding and indicated
           corrective action was being taken. The complete text of the auditee’s response,
           along with our evaluation of that response, can be found in appendix B of this
           report.




                                              2
                            TABLE OF CONTENTS

Background and Objectives                                                   4

Results of Audit
      Finding: The Council Issued Vouchers Larger Than Its Policy Allowed   5

Scope and Methodology                                                       7

Internal Controls                                                           8

Appendixes
   A. Schedule of Questioned Costs and Funds to Be Put to Better Use        9
   B. Auditee Comments and OIG’s Evaluation                                 10




                                             3
                     BACKGROUND AND OBJECTIVES

The Brazos Valley Council of Governments (Council), established in 1966, is one of 24
voluntary associations of local governments formed under Texas law. These associations deal
with the problems and planning needs that cross the boundaries of individual local governments
or that require regional attention. The Council serves the seven-county Brazos Valley region,
consisting of Brazos, Burleson, Grimes, Leon, Madison, Robertson, and Washington counties as
well as 25 incorporated cities and several unincorporated communities.

A 32-member board of directors (board), representing the seven counties, governs the Council.
Board members serve three-year terms. The board hires an executive director to manage the
Council’s day-to-day operations. The Council maintains its office and records at 3991 East 29th
Street, Bryan, Texas.

The Council provides housing, health, workforce, and senior services programs throughout the
Brazos Valley. In addition, it administers the regional 9-1-1 plan, community and economic
development programs, criminal justice planning and grants, solid waste planning and grants, and a
county indigent health care program. The Council has 1,901 contracted Section 8 units under its
Housing Choice Voucher program. During fiscal years 2003 to 2005, the U.S. Department of
Housing and Urban Development (HUD) awarded the Council more than $31 million to operate the
Section 8 program.

We selected the Council for review based on a risk assessment and because reducing erroneous
payments in rental programs is part of our strategic audit plan. The objective of this review was
to determine whether the Council properly applied the subsidy size standards in its
administrative plan.




                                                4
                                      RESULTS OF AUDIT

Finding: The Council Issued Vouchers Larger Than Its Policy Allowed
Of the 20 tenant files reviewed, the Council assigned a larger voucher than its subsidy size
standards required to 11 tenants. However, the Council only overpaid $552 over the three-year
audit period for two of the overhoused tenants. The Council’s assignment of an improper
voucher size for another nine tenants did not result in a dollar impact because the Council used
the correct payment standards when calculating those tenants’ rent. Correcting the voucher size
for these nine tenants will avoid future overpayments and ensure the tenants are housed in
accordance with the Council’s subsidy size standards. These errors occurred because the
Council did not change the voucher size to adjust for a change in a family’s composition or the
change of subsidy size standards.


                 HUD regulations require the Council’s board to adopt and follow a written
                 administrative plan that establishes local policies for administration of its Section 8
                 program.1 In its plan, the Council must establish subsidy size standards that
                 determine the number of bedrooms needed for families of different sizes.2

    The Council Overpaid
    Assistance for Two Tenants


                 The Council overpaid $552 in housing assistance for one current tenant and one
                 terminated tenant. In one case, the case manager issued the correct voucher size
                 according to the Council’s revised subsidy size standards. However, the case
                 manager did not apply the correct voucher size or payment standard when
                 calculating the tenant’s rent. Consequently, the Council overpaid $30 in housing
                 assistance for the tenant. In the other case, the case manager used the correct
                 payment standard of a one-bedroom size for a family of one but did not change
                 the voucher size from two to one. Further, the case manager did not use the
                 correct payment standards at the annual reexaminations because the tenant file
                 still showed the voucher size of two. Consequently, the Council overpaid $522 in
                 housing assistance for the tenant.




1
     24 CFR [Code of Federal Regulations] 982.153.
2
     24 CFR [Code of Federal Regulations] 982.54(a) and (c).



                                                       5
    Nine Tenants had the Wrong
    Size Voucher

                          The Council did not assign the correct voucher size for another nine tenants,
                          but the error did not result in an overpayment of assistance. In these cases,
                          the Council used the correct payment standards for the family composition
                          and the actual unit size but did not change the voucher size to be consistent
                          with its subsidy size standards. Since the Council used the correct payment
                          standards,3 it did not overpay housing assistance for these tenants, but it may
                          not use the correct payment standards at the next annual reexaminations due
                          to the incorrect voucher sizes in the tenant files. As a result, it could overpay
                          an estimated $7,008 in housing assistance for these tenants during the next
                          annual reexamination period.

                          The Council assigned tenants the wrong size vouchers and overpaid
                          assistance because its case managers’ review checklist did not include an
                          item to check the voucher size. In addition, according to the Council’s
                          quality control unit leader, the case managers did not pay attention to the
                          voucher size and did not change it as needed. To avoid future overpayments
                          of housing assistance, the Council needs to correct the tenants’ voucher size
                          to be consistent with its subsidy size standards.

    Recommendations

                 We recommend that HUD require the Council to

                 1A. Repay ineligible housing assistance overpayments of $552.

                 1B. Develop and implement procedures to ensure it assigns tenants a housing
                     voucher in accordance with the subsidy size standards in its administrative
                     plan.

                 1C. Correct the voucher size of the nine tenants identified and revise other
                     incorrectly assigned vouchers to ensure the tenant is housed in accordance
                     with the Council’s subsidy size standards. Correcting the voucher size of the
                     nine tenants will ensure the Council avoids potential overpayments of $7,008
                     in housing assistance for these tenants during the next annual reexamination
                     period.




3
     Payment standard is the maximum monthly assistance payment for a family assisted in the Housing Choice
     Voucher program. The payment standard is higher when the voucher size is larger.



                                                       6
                        SCOPE AND METHODOLOGY

We conducted the review at the Council’s office in Bryan, Texas, and the local HUD office in
Houston, Texas. Our review period was from January 1, 2003, through December 31, 2005.
During the review, we performed the following steps:

   •   Reviewed background information and the criteria that control the Council’s Section 8
       program.

   •   Obtained computer data files from the Public and Indian Housing Information Center
       (PIC) system that contained Section 8 housing assistance payments and related
       information for all tenants during the review period. There were 3,016 tenants in the
       universe.

   •   Analyzed the data to identify the number of tenants whose vouchers were too large based
       on family composition and the Council’s subsidy size standards. From the universe of
       3,016 tenants, we identified 126 tenants whose vouchers were too large.

   •   Used EZ-Quant, a statistical sampling program, to generate 20 random numbers from the
       listing of 126 tenants identified previously for testing.

   •   Obtained and reviewed 20 tenant files to determine whether the Council properly applied
       the subsidy size standards in its administrative plan. If not, we determined whether the
       Council overpaid for tenants who were housed in a larger unit than the Council’s policy
       allowed.

   •   Estimated the amount the Council could overpay in housing assistance for nine tenants
       assigned a larger voucher size than required by the Council’s subsidy size standards. The
       estimate covered the tenants’ next annual reexamination period and was calculated by
       determining the difference between the payment standard that was based on the voucher
       size and the actual payment standard used.

   •   Conducted interviews with Council and HUD staff.

We performed the review at the Council in January and February 2006. We conducted our
review in accordance with generally accepted government auditing standards.



              .




                                                7
                             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:

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

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

              We assessed the relevant controls identified above.

              A significant weakness exists if management controls do not provide reasonable
              assurance that the process for planning, organizing, directing, and controlling
              program operations will meet the organization’s objectives.


 Significant Weakness


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

                  •   The Council did not have a system to ensure that the voucher size was
                      correct (see finding 1).




                                                8
                                         APPENDIXES

Appendix A

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

             Recommendation           Ineligible 1/           Funds to be
                 number                                    put to better use 2/
                     1A                   $552
                     1C                                           $7,008




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/   “Funds to be put to better use” are quantifiable savings that are anticipated to occur if an
     Office of Inspector General (OIG) recommendation is implemented, resulting in reduced
     expenditures at a later time for the activities in question. This includes costs not incurred,
     deobligation of funds, withdrawal of interest, reductions in outlays, avoidance of
     unnecessary expenditures, loans and guarantees not made, and other savings.




                                               9
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                         10
                         OIG Evaluation of Auditee Comments

Comment 1   The auditee fully agreed with the finding and all recommendations. The auditee
            indicated it is taking steps to correct all misclassified cases and had revised its
            policies and procedures. We appreciate the auditee’s proactive stance and prompt
            response which should correct the issues identified.




                                            11