Issue Date
March 3, 2006
Audit Report Number
2006-KC-1006
TO: Andrew Boeddeker, Director, Office of Public Housing, 7APH
//signed//
FROM: Ronald J. Hosking, Regional Inspector General for Audit, 7AGA
SUBJECT: The Housing Authority of Kansas City, Missouri, Unnecessarily Paid Housing
Choice Voucher Program Funds for Overhoused Tenants
HIGHLIGHTS
What We Audited and Why
We reviewed the Housing Authority of Kansas City, Missouri’s (Authority)
Housing Choice Voucher program (voucher program) to determine whether the
Authority paid excess subsidies for overhoused tenants. We selected the
Authority for review based on a computer analysis of U.S Department of Housing
and Urban Development (HUD) data, which identified tenants whose voucher
size exceeded the number of persons in the household.
What We Found
The Authority overhoused 50 tenants. Since 2002, the Authority has
unnecessarily paid $30,946 in voucher program funds for these tenants. The
Authority could avoid future losses of $73,692 by enhancing its controls, thereby
allowing it to provide vouchers to additional tenants.
What We Recommend
We recommend that HUD require the Authority to immediately correct
overhoused tenants’ vouchers, repay the unnecessary costs incurred, and develop
and implement procedures that improve controls over assigning voucher sizes.
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 disagreed with the recommendation to repay the unnecessary costs
incurred. It also disagreed with one voucher error. We provided the report to the
Authority on February 2, 2006, and requested a response by February 17, 2006.
The Authority provided written comments on February 17, 2006.
The complete text of the auditee’s response, along with our evaluation of that
response, can be found in appendix B of this report.
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TABLE OF CONTENTS
Background and Objectives 4
Results of Audit
Finding: The Authority Paid Unnecessary Subsidies by Overhousing Tenants 5
Scope and Methodology 8
Internal Controls 9
Appendixes
A. Schedule of Questioned Costs and Funds to Be Put to Better Use 10
B. Auditee Comments and OIG’s Evaluation 11
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BACKGROUND AND OBJECTIVES
The Housing Authority of Kansas City, Missouri (Authority), was established by city ordinance
on July 14, 1941. The mayor of Kansas City, Missouri, appoints six of a seven-member board of
commissioners that oversees the Authority, and Authority residents elect the seventh member.
Its stated mission is to develop, rehabilitate, and manage decent, safe, and sanitary quality
affordable housing in a manner that promotes equal opportunity, fair housing, and the
deconcentration of race and poverty.
The Authority operates the U.S. Department of Housing and Urban Development’s (HUD)
Section 8 Housing Choice Voucher program (voucher program). The voucher program is the
federal government’s major program for helping very low-income families, the elderly, and the
disabled to afford decent, safe, and sanitary housing in the private market. The Authority
received between $42.7 million and $47.6 million per year for its voucher program from 2002
through 2005. This allowed the Authority to lease approximately 7,500 Section 8 vouchers per
month depending on available funding.
Participants in the voucher program are allowed to select any housing that meets the
requirements of the program. The Authority establishes a payment standard that is the amount
generally needed to rent a moderately priced housing unit in the local market. It determines the
voucher size allowed for the participant and uses the payment standard amount to calculate the
housing assistance (subsidy) a family will receive.
Our objective was to determine whether the Authority paid excess subsidies for overhoused
tenants.
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RESULTS OF AUDIT
Finding: The Authority Paid Unnecessary Subsidies by Overhousing
Tenants
The Authority overhoused 50 tenants from 2002 through 2005. This occurred because the
Authority’s procedures were ineffective, it had not adequately trained personnel administering
the voucher program, and it experienced high staff turnover. Overhousing tenants resulted in
unnecessary subsidies of $30,946 and exposes the Authority to future losses of $73,692.
50 Overhoused Tenants
The Authority overhoused 50 tenants by issuing vouchers for larger units than
family composition supported. The Authority’s administrative plan states
families are to be given appropriate-size units based on the Authority’s unit size
rules, federal regulations, and fair housing guidelines. HUD’s Housing Choice
Voucher Guidebook explains that housing authorities should generally assign
vouchers for units with the smallest number of bedrooms needed to house a
family without overcrowding. The Authority establishes its unit size rules based
on the household composition, and can grant exceptions when justified.
The Authority erred when issuing 47 housing vouchers that exceeded the
maximum number of bedrooms allowed by its unit size rules. The errors occurred
when Authority staff incorrectly identified the number of bedrooms in the
subsidized unit, assigned the wrong voucher size, or used the wrong payment
standard in calculating the rent subsidy.
The Authority also made three reasonable accommodation errors by inappropriately
allowing an additional bedroom. Reasonable accommodations are allowed if a
medical professional properly documents that the tenant requires an additional
bedroom for a live-in caregiver or medical equipment. The Authority erred when it
did not adequately evaluate the medical professionals’ requests for an extra
bedroom, or it did not ensure the tenant was using the extra space as intended.
When a tenant needs a live-in caregiver, HUD requires the tenant to identify the
caregiver in the tenant’s records. In one case reviewed, the Authority granted an
extra bedroom for a live-in caregiver without requiring the tenant to identify the
caregiver. In another case, the Authority accepted an inadequate doctor’s
recommendation for an extra bedroom. The disabled tenant provided a doctor’s
letter stating the tenant needed an extra bathroom with handicap status. However,
the doctor’s staff altered the letter by replacing bathroom with bedroom. The
Authority accepted the letter and issued a voucher with an additional bedroom,
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without confirming with the doctor that his request was intended for an extra
bedroom.
In the third instance, the Authority granted an extra bedroom for exercise equipment.
However, our site visit revealed that the tenant had no exercise equipment in the
extra bedroom but was, instead, using it as a home office. The Authority
appropriately issued the larger voucher when the medical need began, but did not
verify that the extra space was being used for the approved use when the tenant
recertified for another year of assistance. The following pictures show the extra
bedroom granted for exercise equipment.
Ineffective Controls
The Authority has ineffective quality controls. It performs limited, periodic
reviews of tenant files in which it verifies the presence of certain documents and
accuracy of monetary calculations in a small sample of files. When conducting
the reviews, the Authority does not evaluate data integrity or reasonableness of
waivers for larger vouchers.
In addition, the Authority’s voucher processing policies and procedures are
inadequate to prevent overhousing. Its procedures allow staff to grant waivers for
extra bedrooms without supervisory approval and without adequately evaluating
the reasonableness of the requested accommodation. Further, the Authority does
not have procedures for verifying that the additional space is used for the reasons
granted or intended.
Authority management told us there is a high turnover of staff administering the
voucher program and it does not have a formal training process for these
employees. Team leaders provide on-the-job training while still performing their
assigned job duties, which contributed to inadequately trained staff.
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Conclusion
Overhousing 50 tenants caused the Authority to overpay subsidies of $30,946
from 2002 through 2005. If the Authority strengthens its weak controls, it could
avoid additional overpayments of $73,692. This estimate is based on the current
monthly overhousing cost of $2,047 times 36 months (the average number of
months a tenant stays in a unit).
Number Excess Future
Error type of tenants subsidies savings Total
Processing 47 $25,072 $54,792 $ 79,864
Reasonable
accommodation 3 $ 5,874 $18,900 $ 24,774
Totals 50 $30,946 $73,692 $104,638
Recommendations
We recommend that the director, Office of Public Housing ensure that the
Authority
1A. Immediately corrects overhoused tenants’ vouchers.
1B. Repays the voucher program fund from its reserve account the $30,946 in
excess housing assistance payments.
1C. Develops and implements procedures to ensure that each tenant receives the
proper size voucher to avoid future losses of $73,692.
1D. Develops and implements procedures to ensure staff administering the
voucher program receive sufficient training on HUD’s voucher program.
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SCOPE AND METHODOLOGY
Our review generally covered the period from October 1, 2002, through November 9, 2005. To
achieve our audit objective, we interviewed HUD and Authority staff. We reviewed HUD rules,
regulations, and monitoring reports; and the Authority’s policies, procedures, and Section 8
administrative plan. We also analyzed HUD data and inspected housing units, and discussed our
audit results with Authority management.
To determine the extent and effect of overhousing, we applied a computer formula to HUD’s
Public Housing Information Center data to identify potentially overhoused tenants. We
identified 58 tenants with annual recertifications performed from November 1, 2004, through
November 9, 2005. This allowed us to review tenants that were still in the voucher program as
of November 9, 2005. We reviewed the 58 tenant files to determine whether there was
acceptable justification for issuing vouchers larger than the household composition supported,
and if not, we calculated the overhousing cost. For each overhoused tenant, we calculated the
overpayments from the first occurrence of the error through November 9, 2005. However, we
did not calculate the effect of the error before October 1, 2002.
We relied in part on computer-processed data from HUD’s Public Housing Information Center
database. We assessed the data’s reliability and found it adequate to identify the universe of
potentially overhoused tenants, and to select tenant files for review. However, based on our
comparison of the system data to the hard-copy tenant files (source data), we concluded the data
are not sufficiently reliable to support our audit conclusions. In reaching our conclusions, we
used the HUD data only as corroborating evidence for the information obtained from the tenant
files.
We performed on-site work from November 2005 through January 2006 at the Authority’s office
located at 301 East Armour Boulevard, Kansas City, Missouri. We performed our review in
accordance with generally accepted government auditing standards.
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INTERNAL CONTROLS
Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following objectives are being achieved:
• Effectiveness and efficiency of operations,
• Reliability of financial reporting, and
• Compliance with applicable laws and regulations.
Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance.
Relevant Internal Controls
We determined the following internal controls were relevant to our audit objectives:
• Controls over assignment of voucher size.
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 do not believe a significant weakness exists in the area of
assigning voucher sizes.
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APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
AND FUNDS TO BE PUT TO BETTER USE
Recommendation Ineligible 1/ Funds to be put
number to better use 2/
1B $30,946
1C $73,692
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.
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Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1
Comment 2
Comment 2
11
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OIG Evaluation of Auditee Comments
Comment 1 We disagree that $30,946 in overpayments is immaterial and should not be repaid.
The Authority erroneously issued larger vouchers than necessary and overpaid
housing assistance payments. If the Authority had not made the overpayments,
these funds would have been available to assist additional families. Requiring the
Authority to repay the voucher program from its reserve account allows more
funding to house needy families.
Comment 2 We continue to believe that the Authority should have confirmed the intent of the
requesting doctor. We are not questioning the level of medical professional
altering the request, but that the Authority allowed an extra bedroom based on an
altered request. The doctor clearly stated the tenant should receive a bathroom
with handicap status. An additional bathroom does not increase the housing
assistance payment, but an additional bedroom requires additional funding.
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The Housing Authority of Kansas City, Missouri, Unnecessarily Paid Housing Choice Voucher Program Funds for Overhoused Tenants
Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-03-03.
Below is a raw (and likely hideous) rendition of the original report. (PDF)