oversight

The St. Joseph Housing Authority, St. Joseph, Missouri, Overhoused 16 Tenants under the Section 8 Housing Voucher Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-03-30.

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

                                                                Issue Date
                                                                             March 30, 2006
                                                                Audit Report Number
                                                                             2006-KC-1008




TO:         Andrew L. Boeddeker, Director, Office of Public Housing, 7APH

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

SUBJECT: The St. Joseph Housing Authority, St. Joseph, Missouri, Overhoused 16 Tenants
           under the Section 8 Housing Choice Voucher Program


                                   HIGHLIGHTS

 What We Audited and Why

             We reviewed the Section 8 Housing Choice Voucher program (voucher program)
             of the St. Joseph Housing Authority, St. Joseph, Missouri (Authority). Our audit
             objective was to determine whether the Authority paid excess subsidies for
             oversize units. We audited the Authority after a computer analysis identified
             tenants who appeared to have larger vouchers than the household composition
             supported.

 What We Found
             The Authority overhoused 16 tenants when it subsidized an additional bedroom
             for medical purposes without proper justification. This resulted in overpayments
             of $20,108 from 2002 through January 2006. By correcting its weak controls, the
             Authority can avoid future overpayments totaling $54,036.

 What We Recommend
             We recommend that the director, Office of Public Housing, ensure that the
             Authority immediately corrects overhoused tenants’ vouchers and repays the
             overpayments. We also recommend that the director verify that the Authority
           implements procedures to ensure that each tenant receives the proper voucher size
           to avoid additional overpayments.

           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 our findings. We provided the report to the Authority
           on March 2, 2006, and requested a response by March 17, 2006. The Authority
           provided written comments on March 14, 2006.

           The complete text of the auditee’s 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 Did Not Follow HUD Regulations When Authorizing an    5
                Additional Bedroom for Medical Purposes

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                                                            10




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                      BACKGROUND AND OBJECTIVES

The St. Joseph, Missouri, Housing Authority (Authority) was established by city ordinance on
February 23, 1965. The mayor of St. Joseph appoints a five-member board of commissioners,
which oversees its operations. The Authority currently assists 834 voucher program tenants.
HUD authorized $2,870,686 in Section 8 Housing Choice Voucher program (voucher program)
funds to the Authority for the fiscal year ending September 30, 2005. Its stated mission is to
ensure safe, decent, and affordable housing which contributes to safe communities and
encourages individuals to become self-sufficient.

The Authority operates the U.S. Department of Housing and Urban Development’s (HUD)
voucher program. The voucher program is used to provide decent, safe, sanitary, and affordable
housing for low-income families who are holding a voucher issued by the program. The benefits
of the program are improving outcomes for children, helping families leave welfare and remain
off welfare, and helping families succeed in the workplace.

The Authority uses the voucher program to help qualifying applicants obtain safe, decent
dwellings in a neighborhood of their choice with a portion of the rent paid by the Authority.
Through the voucher program, participants are responsible for locating their own housing.
Rental units must meet minimum standards of health and safety as determined by the Authority.
The Authority must inspect the dwelling and determine that the rent requested is reasonable. It
also determines a payment standard, which is the amount generally needed to rent a moderately
priced dwelling unit in the local housing market. The Authority determines the voucher size, and
the payment standard is used to calculate the amount of housing assistance (subsidy) a
participant will receive. The Authority calculates the subsidy and pays it directly to the landlord
on behalf of the participant. The participant pays the difference between the actual rent charged
by the landlord and the amount subsidized by the program.

The objective of this review was to determine whether the Authority paid excess subsidies for
oversize units.




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                                RESULTS OF AUDIT

Finding: The Authority Did Not Follow HUD Regulations When
          Authorizing an Additional Bedroom for Medical Purposes
The Authority overhoused 16 tenants when it did not comply with HUD regulations for authorizing
an additional bedroom for medical purposes. Its policies and procedures did not include the
applicable HUD requirements, and Authority staff was unaware of the requirements. As a result,
the Authority overpaid $20,108 in rent subsidies for tenants. By correcting the deficiencies, the
Authority can avoid $54,036 in future overpayments.


 Additional Bedrooms
 Granted Inappropriately


               The Authority did not comply with HUD regulations when granting an additional
               bedroom for medical purposes for 16 of the 32 tenants reviewed. HUD’s Housing
               Choice Voucher Guidebook explains that housing authorities should generally
               assign vouchers for units with the least number of bedrooms needed to house a
               family without overcrowding. The Authority establishes its unit size rules and
               can grant exceptions for live-in aides or other medical needs when justified.

               The Authority inappropriately granted an additional bedroom for a live-in aide for
               15 tenants. HUD requires housing authorities to conduct background
               investigations of live-in aides. However, none of the 15 tenants identified an aide,
               indicating that the Authority did not conduct required background investigations.
               In six cases, the tenant’s physician noted that the tenant needed only occasional
               assistance or did not identify the level of assistance needed. The Authority should
               not grant an additional bedroom for conditions that warrant only occasional
               assistance or when the level of assistance needed is not certain.

               In addition, Section 504 of the Rehabilitation Act of 1973 indicates there should
               be a nexus to grant a medical-related exception to unit size rules. In seven cases,
               the Authority granted an additional bedroom when the requesting physician did
               not identify a medical condition justifying the larger voucher. In another case, it
               continued to subsidize a two-bedroom unit when the tenant qualfied for only one-
               bedroom rent assistance. The tenant’s physician requested that the tenant be
               allowed to keep her two-bedroom unit, asserting that the stress of moving to a
               smaller unit would be detrimental to the tenant’s mental health. Without a
               defined and reasonable nexus for the larger voucher, the Authority should not
               subsidize an additional bedroom.




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              The overhousing occurred because the Authority’s policies and procedures did not
              include the applicable HUD requirements and Authority staff was not aware of
              the HUD requirements.

 Conclusion

              Because the Authority did not comply with HUD requirements when authorizing an
              additional bedroom for live-in aides or continued to pay rent for a larger unit when
              no longer justified, it overpaid $20,108 in rent subsidies. By correcting the
              deficiencies, the Authority can avoid $54,036 in future overpayments and use these
              funds to help additional families.

              As a result of our findings, the Authority immediately revised its policies and
              procedures to reflect HUD requirements. We reviewed the revisions and verified
              that they meet HUD requirements.

 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 $20,108 from its reserve account, and

              1C. Implements policies and procedures to ensure that each tenant receives the
                  proper voucher size to put $54,036 to better use.


On March 29, 2006, the director, Office of Public Housing, agreed with the finding and
recommendations. The director had also confirmed that the Authority took appropriate actions to
correct overhoused tenants’ vouchers, repaid HUD $20,108 from its reserve account, and
implemented policies and procedures to ensure tenants receive proper voucher sizes in the future.
Therefore, no additional action is required.




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                        SCOPE AND METHODOLOGY

Our review covered the period from October 1, 2002, through January 31, 2006. To accomplish our
objectives, we conducted interviews of the Authority’s staff and staff of the local HUD Office of
Public Housing. We also reviewed the Authority’s policies and procedures, hard copy and
computer tenant files, and audited financial statements. We reviewed federal regulations and
analyzed data from HUD’s Public Housing Information Center database. Additionally, we
discussed our review results with Authority management.

To determine the extent and effect of overhousing, we applied a computer formula to the Public
Housing Information Center database to identify potentially overhoused tenants. Our computer
analysis identified 32 tenants in the voucher program as of January 1, 2005, who appeared to
have larger vouchers than the household composition supported. We reviewed the 32 tenant files
to determine whether the Authority assigned the tenant the proper size voucher, including
reviewing documents the Authority relied on in approving an extra bedroom for medical
purposes. If the larger voucher was not properly justified, we calculated the overhousing cost.
To determine the amount of potential future overpayments, we calculated the most recent
month’s overpayment and multiplied by 36 months, the average number of months a tenant stays
in a unit.

To achieve our audit objective, we relied in part on computer-processed data contained in the
Public Housing Information Center database. We assessed the data’s reliability and found it
adequate. We also conducted sufficient tests of the data. Based on these assessments and tests,
we concluded that the data are sufficiently reliable to meet our objective. In reaching our
conclusions, we corroborated the HUD data with evidence obtained from the hard copy tenant
files.

We performed audit work from November 2005 through January 2006 at the Authority’s office
located at 502 South 10th Street, St. Joseph, Missouri. We conducted our audit 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 determining the appropriate 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 Weakness


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

              •       The Authority did not have adequate policies and procedures to ensure that it
                      issued appropriate size vouchers (see finding).




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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/
                        1A                     $ 20,108
                        1B                                          $ 54,036


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




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