oversight

The Omaha Housing Authority Does Not Have Adequate Controls Over Its Housing Quality Standards Process and Tenant Eligibility Verification Procedures

Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-01-12.

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

                                                              Issue Date
                                                                           January 12, 2006
                                                              Audit Report Number
                                                                            2006-KC-1003




TO:         Debra L. Lingwall, Director, Office of Public Housing – Omaha Office, 7APH

            //signed//
FROM:       Ronald J. Hosking, Regional Inspector General for Audit, 7AGA

SUBJECT: The Omaha Housing Authority does not have Adequate Controls over its
           Housing Quality Standards Process and Tenant Eligibility Verification
           Procedures


                                  HIGHLIGHTS

 What We Audited and Why

             We audited the Omaha Housing Authority's (Authority) Section 8 Housing
             Choice Voucher program (voucher program) to determine whether the
             Authority’s program complied with U.S. Department of Housing and Urban
             Development (HUD) requirements. We selected the Authority for review based
             on our risk assessment of the larger housing authorities in Region VII.

 What We Found


             The Authority properly calculated tenant rent and subsidy payments and
             maximized the number of vouchers they used. However, it provided assistance on
             units that did not meet Section 8 housing quality standards and did not always
             verify and document that family members were eligible.




                                            1
What We Recommend


           We recommend that the HUD Region VII Office of Public Housing require the
           Authority to improve controls over its housing inspection process and procedures
           for verifying tenant eligibility.

           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


           The Authority agreed with the findings. We provided the draft audit report to the
           Authority on December 12, 2005 and requested their comments by December 27,
           2005. The Authority provided their written response on December 23, 2005.

           The complete text of the auditee’s response is in appendix B of this report.




                                            2
                          TABLE OF CONTENTS

Background and Objectives                                                        4

Results of Audit
      Finding 1: The Authority's Housing Inspection Process Did Not Always Comply 5
      with HUD Requirements
      Finding 2: The Authority Did Not Consistently Follow Tenant Eligibility     11
      Verification Procedures

Scope and Methodology                                                            14

Internal Controls                                                                15

Appendixes
   A. Schedule of Ineligible Costs                                               17
   B. Auditee Comments and OIG’s Evaluation                                      18




                                          3
                     BACKGROUND AND OBJECTIVES


The Authority began operations in 1935. The Authority receives funding for its rental assistance
programs from HUD, tenant rents collected, and the City of Omaha. The rental assistance
programs include HUD’s public housing program and the Section 8 voucher program. The
Authority also receives funding for its other housing programs through federal, private, and
contractual agreements. Housing In Omaha, Incorporated operates the Authority’s other
programs. Housing In Omaha, Incorporated is one of the Authority’s nonprofit affiliates.

A five member Board of Commissioners governs the Authority. An executive director manages
the day-to-day operations. The Authority's administrative office is located at 540 South 27th
Street, Omaha, Nebraska. Its public housing/Section 8 voucher program office is located at
3003 Emmett Street, Omaha, Nebraska.

The Authority received the following HUD funds during our audit period: $21,331,999 in 2003;
$24,002,901 in 2004; and, $26,346,436 in 2005. HUD’s annual contributions contract with the
Authority authorizes 3,964 Section 8 vouchers.

The objective of our audit was to determine whether the Authority operated its Section 8 voucher
program in accordance with HUD requirements.




                                               4
                                RESULTS OF AUDIT

Finding 1: The Authority's Housing Quality Standards Process Did Not
Always Comply with HUD Requirements
The Authority's process for ensuring housing quality did not always comply with HUD
requirements. This occurred because the Authority did not emphasize the importance of the
inspection process. As a result, the Authority provided $29,151 in rental assistance for homes
that did not meet standards.


           Problems existed throughout the Authority’s housing inspection process. These
           problems included:
              • Inspections did not find violations.
              • Annual and initial inspections were not performed timely.
              • Rental payments were not stopped when units failed inspections.
              • Reinspections were not performed timely.


 Authority Did Not Always Find
 Violations


              The Authority's inspectors failed to find obvious housing quality deficiencies.
              We inspected 24 Section 8 assisted homes and found that twelve of the 24 homes
              failed to meet HUD’s minimum standards. We found 84 deficiencies in the 24
              homes. The deficiencies included 44 safety/health/tripping hazards and 40 other
              hazards. More importantly, 19 of the deficiencies in 24 homes existed when the
              Authority performed its most recent inspection.
              Title 24 of the Code of Federal Regulations, Part 982 allows HUD to pay rental
              subsidies so eligible families can afford decent, safe, and sanitary housing.
              HUD’s housing quality standards provides the minimum requirements for a
              Section 8 home. HUD requires that all Section 8 homes be decent, safe, and
              sanitary to be eligible for rental assistance.
              A significant violation occurs when units are in extremely poor condition caused
              by (1) deficiencies that existed for an extended period; (2) identified deficiencies
              not corrected once identified; and/or (3) deferred maintenance that consistently
              fails the unit. The following photographs illustrate some of the significant
              violations we found.




                                                5
The bottom half of the garage’s backside is missing (tenant t0006518).




Large rotting tree marked by the City of Omaha for removal (tenant t0003286).




The homes concrete steps are broken (tenant t0010629).




                                6
            The Authority should have identified these problems during its inspections. Had
            it found the problems, it could have made the owners correct them. Since it did
            not find the problems, it paid assistance on units that were in significantly worse
            condition than allowed by the standards. The Authority should repay the amounts
            spent on those units.

Inspections Not Timely



            The Authority’s staff did not perform timely annual and initial inspections. Of the
            24 homes we tested, eight inspections were past due. HUD requires initial and
            annual inspections of each Section 8 home within a reasonable time. Initial
            inspections must be done before the tenant moves in. Annual reinspections must
            be done within one year of the prior inspection. The following table identifies, by
            tenant, the type of inspection and the number of days past due.


                Tenants       Type inspection not conducted timely           Days past due
               t0007741                      Annual                               29
               t0003415                      Annual                               47
               t0010834                      Initial                              13
               t0006518                      Annual                                3
               t0003501                      Annual                               18
               t0005764                      Annual                                2
               t0004495                      Annual                               20
               T0003286                      Annual                               16


The Authority Did Not Stop
Rental Payments on a Failed
Home



            The Authority did not properly stop rental payments on one home in our sample.
            HUD lets owners fix problems found during inspections and requires that the
            Authority verify correction of the problems. If the owner fails to fix the problems
            within 30 days, the Authority must stop making assistance payments (abate). Unit
            leased for tenant number t0010455 failed its annual inspection. The Authority staff
            reinspected the unit 30 days later, but the unit still failed. The unit finally passed a
            second reinspection after 25 more days. The Authority should have stopped
            assistance payments after the first reinspection.




                                                7
Reinspections Not Always
Timely


            In seven of our sample cases, the Authority’s staff did not complete reinspections
            within the required timeframe. Promptly following an inspection, the Authority
            must notify the owner of problems that need correction, and then reinspect the unit
            within 30 days. The following table identifies the nine late reinspections and the
            number of days past due.


                           Tenant number                           Days past due
                              t0006160                                   2
                              t0006160                                   1
                              t0004495                                   1
                              t0004495                                   1
                              t0005747                                   2
                              t0006797                                   3
                              t0003286                                   1
                              t0004839                                   2
                              t0004203                                   2


Authority Did Not Adequately
Oversee the Inspection Process



            The Authority did not emphasize the importance of the inspection process. As a
            result, the Authority did not adequately train its staff or develop methods to ensure
            timely completion of the inspection process. Specifically, the Authority did not:

               Properly train its inspectors in HUD’s housing quality standards and local
               building/housing codes.
               Have an adequate process to ensure timely correction of identified deficiencies.
               Have an adequate process to ensure rental payments were stopped when
               deficiencies were not corrected.
               Have an adequate process to ensure timely completion of inspections.




                                               8
Excess Payments and Poor
Living Conditions


             The Authority paid $29,151 in assistance for four homes that did not meet
             housing quality standards. This amount is based on the amount of time (months)
             the unit did not meet standards multiplied by the average annual assistance
             payment. The following table shows the inappropriate payments.

                  Tenants        Housing assistance payment made for not meeting standards
                 t0006518                                $15,939
                 t0010629                                $10,958
                 t0003286                                 $1,992
                 t0010455                                  $262
                   Totals                                $29,151

             The Authority’s actions also resulted in tenants living in homes that were not
             decent, safe, and sanitary.


Conclusion


             The Authority did not identify and require correction of housing quality
             violations. Since the Authority did not emphasize the importance of the
             inspection process, it did not create adequate controls over the process. As a
             result, the Authority paid $29,151 in housing assistance for homes that did not
             meet standards and caused tenants to live in homes that were not decent, safe, and
             sanitary.

Recommendations

             We recommend that the HUD Region VII Office of Public Housing:

             1A. Require the Authority to emphasize the importance of the inspection
                 process by implementing sufficient controls to ensure it meets HUD
                 requirements. This should include:

                •     Providing training to inspectors on HUD's housing quality standards and
                      local building/housing codes.

                •     Developing a process to ensure timely performance of annual inspections
                      and reinspections.




                                              9
   •    Properly stopping payments on homes when the owner fails to correct
        problems.

1B. Require the Authority to repay $29,151 in assistance payments on homes
    that did not meet standards and for problems not detected by the Authority.
    Payments must come from other nonfederal sources.




                               10
Finding 2: The Authority Did Not Consistently Follow Tenant Eligibility
Verification Procedures
The Authority did not properly document the Social Security numbers and citizenship or
immigration status of family members of those applying for assisted housing. The Authority did
not ensure its staff consistently prorated assistance amounts based on the requirements specified
in its administrative plan and HUD regulations. The assistant director of the Section 8 program
and quality control review personnel did not perform adequate quality control reviews because
corrective changes to identify deficiencies were not completed. As a result, the Authority
overpaid $29,360 in assistance.



 Tenant Eligibility Procedures
 Not Followed


               The Authority did not properly determine or document the eligibility of all family
               members. HUD limits rental assistance to citizens and certain immigrants. If a
               family includes ineligible members, the Authority must prorate the assistance.

               Title 24 of the Code of Federal Regulations, Part 5, requires applicants to submit
               documents to show they are eligible, including Social Security numbers for all
               household members over five years of age. In addition, all family members must
               declare in writing whether they are a US citizen or a noncitizen with eligible
               immigration status. When applicants fail to submit these documents, the Authority
               must reduce the rental assistance for the ineligible family members.

               Of the 20 tenant files we tested, 16 files contained 72 cases of improperly
               documented eligibility. The Authority:

               •    Did not obtain copies of Social Security cards or acceptable documentation
                    on six family members.
               •    Received copies of Social Security cards for 18 family members after the 60-
                    day limit.
               •    Did not have the copies of declaration of citizenship status on eight family
                    members.
               •    Received copies of the declaration of citizenship status for nine family
                    members after the 30-day limit.

               The Authority's intake housing specialist requires and receives Social Security
               number and eligible citizenship or immigration status documentation. The intake-
               housing specialist must followup on missing documentation. The assistant director
               of the Section 8 housing choice voucher program and quality control personnel
               perform a quality control review on all files to ensure that all required documents
               exist.


                                                11
Quality Control Process Not
Monitored


            The assistant director of the Section 8 program and quality control review personnel
            did not perform adequate quality control reviews because corrective changes to
            identified deficiencies were not completed. Even though the Authority established a
            process of quality control, it failed to monitor the process and make corrective
            changes. For example, the Authority does not require that its staff track when they
            need to followup on missing or incomplete documentation or when they need to
            prorate rents for ineligible family members.

The Authority Overpaid
$29,360


            The Authority failed to prorate housing assistance payments to eight families. The
            Authority overpaid $29,360 in assistance during the time there were ineligible
            family members living in the units.

                 Tenants               Housing          OIG calculation of      Overpayment
                                      assistance         prorated housing            ---
                                      payment           assistance payment        housing
                                   rendered by the                               assistance
                                      authority                                   payment
                 t0006956      $           18,705      $            16,396     $       2,309
                 t0003411      $           22,548      $            18,038     $       4,510
                 t0006157      $            6,681      $             3,661     $       3,021
                 t0007581      $            7,242      $             3,621     $       3,621
                 t0007613      $           17,900      $             9,706     $       8,194
                 t0006275      $            6,325      $             4,648     $       1,677
                 t0005727      $           11,240      $             8,430     $       2,810
                 t0005473      $            9,653      $             6,435     $       3,218
                   Totals      $         100,294      $             70,935     $     29,360




                                             12
Conclusion


             The Authority did not properly document that family members were eligible.
             Without such documentation, the Authority is unable to show that the family
             should have received the entire amount of assistance. This occurred because the
             Authority failed to monitor its quality control process. As a result, the Authority
             overpaid $29,360.


Recommendations

             We recommend that the HUD Region VII Office of Public Housing:

             2A.    Require the Authority to ensure that it sufficiently monitors and oversees
                    the quality control process so it meets all HUD requirements. This would
                    include ensuring its staff obtains and properly files Social Security cards
                    and necessary citizenship or immigration status documents.

             2B.    Require the Authority to repay from non Federal sources $29,360 for
                    overpaid housing assistance




                                              13
                         SCOPE AND METHODOLOGY


To accomplish our audit objectives, we reviewed applicable Authority and HUD criteria. We
interviewed appropriate Authority and HUD staff and reviewed HUD’s files on the Authority. In
addition, we reviewed records maintained by the Authority and tested the control structure. We
also inspected a sample of units assisted under the Section 8 voucher program. We did not test
100 percent of the housing units or tenant files. We selected a small sample of each for detailed
testing.

Our initial unit inspection sample contained four homes, one home for each of four inspectors.
Our second sample contained 20 homes with three to four homes for each of five inspectors. Our
results apply to only the units inspected and are not intended to be a representation of all units.

Our file review sample contained 20 tenant files containing invalid Social Security numbers,
birthdates before January 1, 1998, and names matching a list from the Authority and the OIG.
Our results apply to only the tenant files reviewed and are not intended to be a representation of
all tenant files.

Our review period was January 1, 2003, through August 31, 2005. We conducted our audit work
from March through July 2005 at the Authority’s 3003 Emmett Street and 27th Street offices.

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




                                                14
                               INTERNAL CONTROLS

Internal control is an integral component of an organization’s management that provides
reasonable assurance of the achievement of the following objectives:

•     Effectiveness and efficiency of operations,
•     Reliability of financial reporting, and
•     Compliance with applicable laws and regulations.

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance.



    Relevant Internal Controls
                We determined the following internal controls were relevant to our audit
                objectives:

                    •   Controls over inspecting Section 8 housing choice voucher program units
                    •   Controls over enforcing corrective actions to cure housing quality standard
                        violations
                    •   Controls over ensuring the proper use of Section 8 housing choice
                        vouchers
                    •   Controls over determining tenant eligibility
                    •   Controls over calculating tenant rent and subsidy payments
                    •   Controls over the use of the Enterprise Income Verification System

                We assessed the relevant controls identified above.

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

    Significant Weaknesses
                Based on our review, we believe the following items are significant weaknesses:

                    •   The Authority did not emphasize the importance of the housing quality
                        standards inspection process. (see finding 1).




                                                 15
•   The assistant director of the Section 8 program and quality control review
    personnel did not perform adequate quality control reviews because
    corrective changes to identify deficiencies were not completed. (see
    finding 2).




                             16
                                    APPENDIXES

Appendix A

                  SCHEDULE OF INELIGIBLE COSTS

                            Recommendation         Ineligible 1/
                                number
                                   1B                $29,151
                                   2B                $29,360


1/   Ineligible costs are costs charged to a HUD financed or HUD insured program, activity
     that the auditor believes are not allowable by law; contract; or federal, state, or local
     polices, or regulations.




                                             17
Appendix B

             AUDITEE COMMENTS




                    18
AUDITEE COMMENTS




       19
AUDITEE COMMENTS




       20