oversight

Dallas County Housing Agency, Dallas, Texas, Overhoused Tenants

Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-05-09.

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

                                                                        Issue Date
                                                                                     May 9, 2006
                                                                        Audit Report Number
                                                                                     2006-FW-1009




TO:             Justin Ormsby
                Director, Office of Public Housing, 6APH

FROM:

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

SUBJECT: Dallas County Housing Agency, Dallas, Texas, Overhoused Tenants


                                             HIGHLIGHTS

    What We Audited and Why

                  As part of the U.S. Department of Housing and Urban Development (HUD),
                  Office of Inspector General’s (OIG) annual audit plan, we audited the Dallas
                  County Housing Agency’s (Agency) Section 8 program to determine whether the
                  Agency overhoused tenants, computed housing assistance payments correctly, and
                  complied with housing quality standards.


    What We Found
                  The Agency operated its Section 8 program in compliance with HUD
                  requirements. It computed housing assistance payments correctly and had
                  effective controls in place to ensure that it met housing quality standards.
                  However, the Agency overhoused 34 tenants1 by granting unjustified subsidy size
                  exceptions. Since October 2003, the Agency has unnecessarily paid $63,311 in
                  housing assistance payments for 23 of these tenants. It may overpay housing
                  subsidies for additional tenants if it does not correct voucher assignments. The

1
     This represented less than 1 percent of the Agency’s tenant population.
           Agency could avoid future losses of up to $298,013 by improving its controls
           over voucher assignments.

What We Recommend


           We recommend that you require the Agency to (1) repay ineligible housing
           assistance overpayments of $63,311 and (2) improve its procedures to ensure it
           assigns the correct subsidy size for all tenants to avoid future losses of up to
           $298,013.

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

Auditee’s Response


           We provided the Agency a draft report on April 11, 2006, and held an exit
           conference on April 17, 2006. Subsequent to the exit conference, we provided
           additional information to the Agency. We held a telephone conference on April
           25, 2006 with the Agency to discuss the individual tenants and came to an
           agreement on most of the issues. On April 28, 2006, the Agency provided its
           written response. While the Agency generally agreed with the findings and had
           taken actions to correct the problems, it disagreed with our conclusion on eight
           instances involving reasonable accommodations. The complete text of the
           Agency'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 Agency Overhoused Tenants   5

Scope and Methodology                            10

Internal Controls                                11

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




                                          3
                      BACKGROUND AND OBJECTIVES

The Dallas County Housing Agency (Agency) is part of the Dallas County Department of Health
and Human Services. The Dallas County Health Department was organized in 1919. It went
through various reorganizations, finally merging with Dallas County Human Services in 1996 to
create the Dallas County Department of Health and Human Services.

The Dallas County Commissioners Court governs the Department of Health and Human
Services. Dallas County has four commissioners and a county judge who serve on the court.
The county is divided into four districts, and the voters of each district elect a commissioner to
serve a four-year term. All voters of the county elect the county judge to a four-year term.

The Agency is managed by an assistant director of housing. Its mission is to provide low- and
moderate-income citizens of Dallas County an opportunity to access decent, safe, and sanitary
housing at an affordable cost.

The Agency operates the U.S. Department of Housing and Urban Development’s (HUD)
Section 8 Housing Choice Voucher program. In fiscal year 2005, it received $23.8 million to
administer more than 3,600 Section 8 housing choice vouchers. The Agency maintains its
records at 2377 North Stemmons Freeway, Suite 700, Dallas, Texas.

The Agency uses its Section 8 funding to provide housing subsidies in the private market.
Participants may choose any housing that meets program requirements. The Agency pays a
housing subsidy directly to the landlord on behalf of the participating family; the family pays the
difference between the actual rent and the subsidy amount. The Agency determines eligibility
based on income and family size in accordance with its administrative plan. It verifies family
income and composition annually and ensures the unit meets minimum housing quality
standards.

Our audit objective was to determine whether the Agency overhoused tenants, computed housing
assistance payments correctly, and complied with housing quality standards.




                                                 4
                                        RESULTS OF AUDIT

Finding: The Agency Overhoused Tenants
The Agency overhoused 34 tenants2 by granting unjustified subsidy size exceptions. Since
October 2003, the Agency has unnecessarily paid $63,311 in housing assistance payments for 23
of these tenants. It has the potential to overpay housing subsidies for additional tenants if it does
not correct its voucher assignments. The Agency could avoid estimated future losses of up to
$298,013 by improving its controls over voucher assignments.



    The Agency Established
    Subsidy Sizes

                   HUD requires housing authorities to adopt a written administrative plan that
                   establishes local policies for administration of its Section 8 program. Housing
                   authorities must also establish subsidy size standards that provide for the smallest
                   number of bedrooms needed to house a family without overcrowding.3 The
                   Agency’s administrative plan provided that generally two people were expected to
                   share each bedroom. However, it routinely granted exceptions to this standard.
                   During the audit period, only 33 percent of the Agency’s tenants were assigned
                   vouchers that met its two-people-per-bedroom standard. As noted in its
                   administrative plan, other than as a reasonable accommodation for someone with
                   a disability, the largest unit size that a family could be offered would provide no
                   more than one bedroom per family member, taking into account family size and
                   composition.


    $63,311 in Housing Assistance
    Overpayments


                   During the audit period, the Agency made $63,311 in ineligible housing assistance
                   payments on behalf of 23 overhoused tenants. The overpayments occurred in the
                   following instances:




2
      This represented less than 1 percent of the Agency’s tenant population.
3
      24 CFR [Code of Federal Regulations] 982.402(b)(1).


                                                           5
                                                                          Number of          Total
                                   Overhousing situation
                                                                           instances     overpayment
                   Unjustified reasonable accommodation exceptions             8              $25,894
                   Overhoused during audit period, but Agency later            5              $14,865
                   corrected voucher
                   Error caught by quality control but not corrected           1                $2,672
                   Vouchers not corrected when required                        8               $18,264
                   Payment on behalf of a deceased tenant                      1                $1,616
                   Totals:                                                     23              $63,311


    Unjustified Reasonable
    Accommodation Exceptions
    Were Granted

                  The Agency granted unjustified exceptions to its subsidy size standard for
                  reasonable accommodations. This included 13 exceptions based on doctors’
                  letters provided by tenants. However, many of the ailments indicated in the
                  letters did not justify an exception to the Agency’s subsidy size standard.

                  Seven of the doctors’ letters indicated the tenants might occasionally need
                  someone to spend the night with them. The Agency granted exceptions for these
                  tenants. However, in all but one instance, the caregivers were not documented in
                  the tenant files or on the tenant leases as required.4 In the case in which a
                  caregiver was listed on the lease and in the file, the tenant later certified that the
                  caregiver no longer resided in the unit and that he lived alone. However, the
                  Agency allowed the single tenant to remain in a two-bedroom unit. In another
                  instance, the Agency’s quality control staff noted the tenant did not have a
                  caregiver on the lease and requested that the Agency correct the voucher.
                  However, the Agency did not do so. The case notes in another file indicated the
                  person that came over occasionally was a boyfriend. An extra bedroom should
                  not be allowed for caregivers who are not on a tenant’s lease or to accommodate
                  occasional overnight stays. Further, the Agency was required to screen and
                  approve anyone who would reside in the units. By not verifying the existence of a
                  caregiver and approving them, the Agency risked allowing prohibited individuals
                  to live in the units without its knowledge.

                  The Agency granted exceptions for four tenants because the doctors’ letters
                  indicated an extra bedroom was needed for specific medical equipment. The
                  Agency did not require its inspectors to verify the presence of medical equipment
                  during annual inspections. While we did not question the need for an extra
                  bedroom for these tenants, the Agency should ensure during its annual inspections
                  that the tenant is using the additional bedroom for its intended purposes.


4
     24 CFR [Code of Federal Regulations] 982.308(f)(1)(ii).


                                                        6
                 Although the Agency documented the doctors’ letters, it apparently did not
                 determine whether the letters justified granting exceptions to its subsidy size
                 standard. A quality control official acknowledged the problem associated with
                 accepting doctors’ letters. However, he explained that dealing with reasonable
                 accommodation requests was a delicate matter.

                 While HUD regulations required5 the Agency to approve a caregiver if needed as
                 a reasonable accommodation, generally there was no indication in the file that a
                 caregiver resided with or otherwise made the program accessible to the tenants.
                 In all but one instance, the Agency did not require the tenant to provide the
                 caregiver’s name. Further, the Agency did not verify whether an additional
                 bedroom was used for medical equipment when it granted exceptions for that
                 purpose. These unjustified exceptions resulted in the Agency overpaying $25,894
                 in ineligible housing subsidies for eight tenants. The Agency should ensure
                 additional bedrooms are used for their intended purposes. If not, the Agency
                 should reassess the exception and adjust the voucher as appropriate.


    The Agency Corrected Some
    Vouchers


                 The Agency has quality control staff that reviews tenant files and it requires
                 supervisory approval when granting exceptions to its subsidy size standard. In
                 eight instances during the audit period, the Agency identified tenants that were
                 overhoused and made the corrections effective for the next reexamination date.
                 Although the Agency corrected these vouchers, it paid $14,865 in overpayments
                 during the audit period for five tenants. In six of the eight instances, the error was
                 a longstanding issue that should have been corrected much earlier.

                 In one instance, the quality control staff identified an overhoused error shortly
                 after it occurred, but did not require a change until the next reexamination date,
                 which meant the Agency overpaid the housing subsidy for an entire year instead
                 of immediately making the correction. The delay in correcting this error resulted
                 in the Agency overpaying $2,672 in housing subsidies for this tenant.




5
     24 CFR [Code of Federal Regulations] 8.28(a)(5).


                                                        7
    The Agency Continues to
    Overhouse Tenants


                  Based on its minimum standard of one-person-per-bedroom, the Agency
                  overhoused as many as 81 tenants during the audit period. In addition to the
                  overpayments related to reasonable accommodation exceptions, we calculated
                  further overpayments of $18,264 due to the Agency not correcting housing
                  vouchers when it was required to do so.

                  Of the 81 tenants, 33 are no longer in the program. However, the Agency
                  overpaid housing subsidies for six of these tenants during the audit period. In one
                  case, the Agency continued to make subsidy payments for four months after a
                  tenant died. The Agency did not discontinue payment upon the tenant’s death or
                  recapture the $1,616 overpayment from the tenant’s landlord.

                  For seven tenants, overhousing did not result in housing subsidy overpayments.
                  This was because the gross rents were less than the correct payment standard.
                  Even though the overhousing did not result in overpayments in these instances,
                  the Agency should correct the vouchers to avoid possible future overpayments.

                  If the Agency does not correct voucher assignments for all overhoused tenants, it
                  could potentially overpay subsidies in the following situations:

                       ƒ   The tenant currently has a voucher that is too large for the family, but the
                           gross rent is below the correct payment standard. If the rent increases, it
                           could result in excess subsidy payments since the tenant’s larger voucher
                           allows for a greater payment standard.
                       ƒ   The tenant currently has a voucher that is too large due to a change in
                           family composition. If the Agency does not change the voucher
                           assignment at an interim or annual recertification, it could pay an
                           excessive subsidy.
                       ƒ   The tenant currently has a voucher that is too large, but is in the correct
                           unit size. If the tenant decided to move to a larger unit since they have a
                           larger voucher, this could increase the subsidy payment to an excessive
                           amount.

                  Further, if the Agency corrects the voucher assignments for its overhoused
                  tenants, it could avoid additional overpayments of as much as $298,013 over the
                  next 3.7 years.6 This estimate is based on the difference between the actual rent
                  (including utility allowance) the Agency paid on behalf of the overhoused tenants
                  and the average rent paid for a correct subsidy size unit.



6
     Current monthly overhousing costs of $6,712 X 3.7 years (average length of time a tenant stays in a unit in a
     large metropolitan area). See Scope and Methodology section for further explanation.


                                                          8
   Conclusion


          The Agency generally applied its subsidy size standards in accordance with its
          administrative plan. However, it overhoused 34 tenants and has the potential to
          overpay housing subsidies for additional tenants. As a result, it paid $63,311 in
          ineligible housing subsidy costs. If it does not correct the voucher assignments for
          its overhoused tenants, it could overpay an estimated $298,013 in housing assistance
          over the next 3.7 years. The Agency could avoid these future losses by improving
          its controls over assigning vouchers.

Recommendations



          We recommend that HUD require the Agency to

          1A. Repay ineligible housing assistance overpayments of $63,311.

          1B. Improve its procedures to ensure all tenant vouchers reflect the appropriate
              subsidy size for the family composition in accordance with its
              administrative plan to avoid future losses of up to $298,013.




                                           9
                           SCOPE AND METHODOLOGY

The audit covered the period from October 2003 through December 2005. To accomplish our
objectives, we analyzed HUD data and data provided by the Agency. We reviewed the Agency’s
policies and procedures, tenant files, and audited financial statements. We also reviewed federal
regulations and the Agency’s administrative and agency plans. We obtained an understanding of
the Agency’s internal controls and inspected units for compliance with housing quality
standards. We performed fieldwork at the Agency’s administrative offices in Dallas, Texas,
from December 2005 to February 2006.

In the initial phase of our audit, we used data from HUD’s Pubic Housing Information Center to
identify potentially overhoused tenants. We validated the data in accordance with professional
standards.7 The data contained 3,788 tenant records for the Agency during our audit period. We
used computer software to compare the Agency’s subsidy size standards with the family count
and number of bedrooms on the voucher. From the 3,788 tenant records, we identified 81
tenants who appeared to be overhoused based on the Agency’s one-person-per-bedroom subsidy
size standard. We began the audit with the anticipation of reviewing all 81 files.

During the audit, we adjusted the scope of the review by applying a computer formula to identify
which of the 81 tenants appeared to have associated overpayments. We identified 31 tenants
who appeared to have associated overpayments. During the audit, we reviewed a total of 45
tenant files to determine whether there was an acceptable justification for issuing vouchers larger
than the Agency’s administrative plan allowed, and if not, we calculated the amount of subsidy
overpayments.

To determine the effect of tenants who continued to be overhoused, we applied a computer
formula to the 81 possibly overhoused tenants. We determined that 48 possibly overhoused
tenants remained in the program. We removed from the calculations 4 tenants that we
determined were not overhoused during the audit period. We continued our calculations based
on 44 tenants since those no longer in the program and those with correct voucher assignments
had no effect on possible future overpayments. We calculated the difference between the actual
amount paid on behalf of each overhoused tenant and the average rent paid for a correct subsidy
size unit. We also calculated the difference between the actual utility allowance the Agency paid
for overhoused tenants and the average utility allowance it would have paid had the Agency
assigned each tenant the correct voucher. Based on these calculations, the Agency has the
potential to overpay as much as $6,712 in monthly housing subsidies. This estimate could result
in future cost savings of as much as $298,013 over 3.7 years, which is the estimated average
length of time a tenant stays in a unit in a large metropolitan area.

We conducted the audit in accordance with generally accepted government auditing standards.



7
    Assessing the Reliability of Computer-Processed Data, GAO-03-273G, October 2002.


                                                    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, 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 objective:

                  ƒ   Calculation of housing assistance payments,
                  ƒ   Assignment of voucher size, and
                  ƒ   Compliance with housing quality standards.

              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 do not believe a significant weakness exists in the area
              of assigning voucher sizes. However, we do believe the issue identified was a
              reportable condition. The Agency could resolve this condition by improving the
              controls it already has in place.




                                               11
                                    APPENDIXES

Appendix A

                 SCHEDULE OF QUESTIONED COSTS




                                                           Funds to be
                    Recommendation                         put to better
                        number           Ineligible 1/        use 2/

                           1A                 $63,311
                           1B                                    $298,013

                          Totals              $63,311            $298,013




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.




                                              12
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 2




                         13
Comment 3




Comment 2



Comment 4



Comment 5



Comment 6




            14
Comment 7




            15
                                 OIG Evaluation of Auditee Comments


       Comment 1        The doctor statements requested accommodations for occasional overnight
                        stays or for ailments that did not justify the exception. As discussed in the
                        finding, HUD regulations required the Agency to approve a caregiver if
                        needed. However, the Agency did not screen and approve caregivers or verify
                        that the additional room was used as intended.

       Comment 2        The Agency's records did not reflect a recapture of the overpaid funds. The
                        Agency's response did not provide evidence that it recaptured these funds.
                        The Agency should either provide evidence the funds were recaptured or
                        repay them.

       Comment 3        HUD's public housing information center system8 showed only two people for
                        this three-bedroom voucher. The Agency's files showed that the tenant
                        requested a third person be added to the voucher. However, the Agency
                        required the tenant to provide additional information on the person. A month
                        later the Agency's quality control staff determined that the tenant was only
                        entitled to a two-bedroom voucher. The Agency needs to provide evidence
                        that it collected the required information and correct its report to HUD or
                        repay the funds

       Comment 4        We reviewed the information the Agency provided and modified the report as
                        necessary.

       Comment 5        We disagree. At the tenant's annual recertification, the Agency should have
                        decreased the voucher from three-bedrooms to one-bedroom to accurately
                        reflect the tenant's decrease in family size.

       Comment 6        We thank the Agency for its positive response and commitment to correcting
                        the problems.

       Comment 7        We commend the Agency for identifying and correcting the errors. However,
                        the Agency made ineligible overpayments prior to correcting the error, which
                        is included in the finding.




8
    As of April 26, 2006.


                                                    16