oversight

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)

                                                                 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




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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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