Issue Date June 20, 2006 Audit Report Number 2006-LA-1012 TO: Cecilia Ross, Director, Los Angeles Office of Public Housing, 9DPH FROM: Joan S. Hobbs, Regional Inspector General for Audit, Region IX, 9DGA SUBJECT: The Housing Authority of the City of Los Angeles, Los Angeles, California, Did Not Adequately Determine and Support Section 8 Tenant Eligibility HIGHLIGHTS What We Audited and Why We reviewed the Housing Authority of the City of Los Angeles’ (Authority) Section 8 tenant eligibility determinations for its Section 8 Housing Choice Voucher program. The Authority’s current executive director requested we review various aspects of its Section 8 program due to his concerns regarding the prior management’s administration of the program. The objective of the audit was to determine whether the Authority established the eligibility of its Section 8 tenants in accordance with U.S. Department of Housing and Urban Development (HUD) rules and regulations. What We Found The Authority did not establish and document its Section 8 tenants’ eligibility to receive housing choice vouchers in 76 of 133 cases reviewed. We attributed these conditions to the Authority’s disregard of HUD requirements. What We Recommend We recommend that the director of HUD’s Office of Public and Indian Housing require the Authority to (1) support or reimburse HUD more than $1 million in unsupported Section 8 housing assistance payments; (2) implement the necessary controls and/or revisions to its administrative plan to ensure that it establishes its Section 8 tenants’ eligibility for housing choice vouchers in accordance with pertinent requirements; and (3) conduct training on the new controls and procedures with its staff. 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 Authority the draft report on May 22, 2006, and held an exit conference with auditee officials on May 25, 2006. The Authority generally agreed with our report; however, the Authority disagreed that it should be required to repay the $1 million in unsupported costs. The complete text of the auditee’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 1: The Authority Did Not Establish the Eligibility of Its Section 8 5 Tenants in Accordance with HUD Requirements Scope and Methodology 11 Internal Controls 12 Appendixes A. Schedule of Questioned Costs and Funds to Be Put to Better Use 13 B. Auditee Comments and OIG’s Evaluation 14 C. Schedule of Deficiencies Found in 76 of 133 Tenant Files 28 D. Schedule of Unsupported Housing Assistance Payments 33 E. Criteria 35 F. Statistical Sampling Methodology 37 3 BACKGROUND AND OBJECTIVES The Housing Authority of the City of Los Angeles (Authority) was organized as a public housing authority in 1938 to provide low-cost housing to individuals meeting established criteria. The Authority is a state-chartered public agency that provides the largest stock of affordable housing in the Los Angeles area. The Authority gets the majority of its funding from the U.S. Department of Housing and Urban Development (HUD). However, it has built numerous key partnerships with city and state agencies, nonprofit foundations, and community-based organizations, as well as private developers. As of January 2005, the Authority had issued 45,237 housing choice vouchers and was over leased by about 3 percent. From May 2003 through May 2005, it paid more than $668 million in housing assistance payments to landlords participating in the program. In addition, it received more than $73 million in administrative fees for administering the Section 8 program for the years 2003-2004. The Authority administers its Housing Choice Voucher program under HUD’s Section 8 program. The housing choice vouchers allow very low-income families to obtain affordable, decent, and safe housing. In a letter, dated March 27, 2005, the Authority’s current executive director requested that we perform an audit of this area because of concerns over the prior management’s administration of the program. The objective of the audit was to determine whether the Authority established the eligibility of its Section 8 tenants in accordance with HUD rules and regulations and, consequently, supported housing assistance payments. 4 RESULTS OF AUDIT Finding 1: The Authority Did Not Establish the Eligibility of Its Section 8 Tenants in Accordance with HUD Requirements The Authority did not establish the eligibility of its Section 8 tenants for housing choice vouchers in accordance with HUD requirements. This was due to the Authority disregarding HUD rules and regulations and not having sufficient controls in place to ensure that required documentation was maintained. As a result, the Authority paid more than $1 million in unsupported and ineligible housing assistance payments. Tenant Eligibility Not Supported in 76 of 133 Files Reviewed Our review disclosed that 76 of 133 tenant files reviewed did not support that tenants were eligible for assistance under the Section 8 Housing Choice Voucher program. In addition, one file showed the tenant was ineligible for Section 8 assistance due to criminal activity. Appendix C shows the deficiencies by client number. Appendix D shows the unsupported housing assistance payments related to these deficiencies. Our review disclosed the following issues related to tenant eligibility. The Authority did not determine whether household members had been evicted from other federally assisted housing for drug-related criminal activity. This occurred in 59 of the files. In addition, there was no documentation in the files for the following: • Yearly eligibility recertifications in eight files, • Social Security number verification for household members in six files, • Income and/or asset verification in five files, and Lastly, the Authority could not produce four of the files for our review. Details of the deficiencies found are discussed separately below. 5 Eviction Checks There has been a requirement in effect since June 2001 that housing authorities prohibit admission for three years to the Section 8 Housing Choice Voucher program if any household member has been evicted from federally assisted housing for drug-related criminal activity. The Authority disregarded this requirement and has not established or implemented a policy or procedure for making this determination. Authority management stated the only check made regarding evictions was to determine whether the applicant had ever been evicted from Authority housing. Of the 133 tenants whose files we reviewed, 59 were subject to this requirement. Therefore, the Authority cannot support whether the household members related to the 59 tenant files were eligible for admission to the program. For example, client 270677 was admitted to the Section 8 Housing Choice Voucher program in June 2004, and no eviction check was performed. Therefore, $8,290 in corresponding housing assistance payments was unsupported. Yearly Recertifications Housing authorities are required to recertify a tenant’s eligibility every year. The recertification involves but is not limited to verifying all household members’ income and assets. However, we determined the Authority could not support the recertification for eight of the tenants. This occurred because the recertification supporting documentation was missing. The Authority acknowledged it was unable to produce the required recertifications. To illustrate, the tenant file for client 172193 did not contain documentation for the yearly recertifications for 2003 and 2004. Because we could not review the documentation for the recertification, we determined the unsupported housing assistance payments for this tenant amounted to $18,291. Verifications and Required Authorizations Social Security number – Although housing authorities are required to verify all household member Social Security numbers, there was no evidence the verification was done in six files. As an example, for client 016102, the tenant file did not contain evidence that the Social Security number for the head of household had been verified. Since the authority did not verify the Social Security number, there is no evidence the tenant was eligible for assistance. Therefore, the entire $10,169 paid in housing assistance payments during our audit period is unsupported. Income and/or assets – There was no evidence that required income and/or asset verifications were performed in five files. For example, there was no evidence in the tenant file for client 213841 that the income verifications for 2003 and 2004 6 and the asset verification for 2004 were performed. Therefore, $15,772 in housing assistance payments is unsupported. Missing Files We were unable to review four files. The Authority acknowledged it was unable to locate the tenant files for the following tenants: Client 061956 Client 209817 Client 142868 Client 145091 Since we were unable to review these files, we cannot confirm these four tenants’ eligibility for the program; therefore, the housing assistance payments totaling $27,594 made on the tenants’ behalf are unsupported for our audit period. Collectively, there was more than $1 million in unsupported housing assistance payments made on behalf of the potentially ineligible tenants. Additional Issues That Need Corrective Action We also identified three issues relating to the manner in which tenant eligibility was determined that require corrective action. While these are required components of establishing tenant eligibility, we did not include these deficiencies in our calculation of monetary benefits. Criminal background checks The Authority did not perform criminal background checks as required. According to an Authority employee, this was due to the monetary cost and the time involved in running the background checks. At the time the requirement was implemented, the Authority was increasing the number of vouchers it issued. The Authority employee stated that “…leasing-up was more important than following the regulations.” We did require the Authority to perform the checks, and there were no tenants who should have been denied admission based on a conviction. This is described as a mandatory prohibition. However, the Code of Federal Regulations also discusses establishing a policy or procedure to deny admission called “permissive prohibition.” A housing authority can prohibit admission if a household member is currently or has been engaged in various criminal activities which may threaten the health, safety, or right to peaceful enjoyment of the premises by residents, property management staff, the owner, etc. We believe, due to the limited number of vouchers available, the Authority should establish a 7 policy and procedure to best ensure vouchers are issued to applicants determined eligible to receive housing. Of the 133 tenants reviewed, one was ineligible for admission to the Section 8 Housing Choice Voucher program. According to the file for client 265383, the Authority was aware the applicant had been arrested for a drug-related crime. The applicant was unable to attend the first scheduled interview appointment on February 20, 2003, because she was incarcerated. The file contained a written statement from the applicant’s husband regarding her incarceration and a copy of the police report. According to the Authority’s administrative plan, chapter 13, section 3.1.2, the applicant should have been determined ineligible due to engaging in the use of illegal drugs during the previous year. The Authority did not follow its procedure and issued the applicant a voucher on August 25, 2003. We were unable to project this as an ineligible cost; therefore, due to other deficiencies identified, we left this in the unsupported category. Information in the Public and Indian Housing Information Center System HUD requires complete, accurate, and timely submission of HUD Form 50058 because it relies on the data. In addition, the instructions for completing the form state the information data shown on the form is used for effective program monitoring. Information submitted to HUD electronically through data entries in the Authority’s Section 8 computer module was inaccurate for 10 tenants whose files were reviewed. The inaccurate information generally involved incorrect household member Social Security numbers. The Authority performs random tenant file quality control reviews; however, the reviewers were not always successful in identifying the errors. The quality control review form required the reviewer to check whether data entered into the system were accurate. For example, an Authority quality control reviewer reviewed the file for client 218691 on May 28, 2004. The reviewer marked on the review checklist that she had determined information in the Authority Section 8 computer module to be verified as correct. However, there was an incorrect Social Security number for one of the household members. This erroneous information was electronically transmitted to the Public and Indian Housing Information Center System. HUD Form 9886, Authorization for Release of Information/Privacy Act Notice There was no evidence that HUD Form 9886, Authorization for Release of Information/Privacy Act Notice, was signed as required in five files. As a condition of admission to or continued assistance, the authority is required to have prospective applicable household members execute the HUD Form 9886. While the above three items require corrective action, we did not question any housing assistance payments in conjunction with these deficiencies alone. 8 Conclusion Collectively, we attribute the deficiencies to the Authority’s disregard of HUD rules and regulations. In addition, the Authority did not maintain adequate controls to ensure that required documentation and files were maintained as required. As a result, the Authority paid more than $1 million in unsupported Section 8 housing assistance payments on behalf of potentially ineligible tenants. Further, as detailed in appendix F, we used an unrestricted variable sampling plan that allowed statistical projections of the amount of the Section 8 housing assistance payments paid to Housing Choice Voucher program participants whose eligibility was not properly supported by required documentation. Based on the statistical sample we performed, we then projected the results to the universe. We project the Authority cannot assure HUD that at least $277.8 million paid in housing assistance payments was paid to eligible tenants. Accordingly, we have made recommendations to ensure that adequate controls and procedures are implemented in the future to ensure that the Authority makes Section 8 housing assistance payments only for eligible tenants. Recommendations We recommend that the director, Los Angeles Office of Public and Indian Housing, require the Authority to 1A. Support or reimburse HUD $1,021,222 in unsupported Section 8 housing assistance payments. 1B. Establish and document Section 8 tenant eligibility, income, and assets for housing choice vouchers and maintain complete documentation of the eligibility determination. 1C. Immediately establish a policy and implement procedures to determine whether household members have been evicted from federally-assisted housing for drug related criminal activity. In addition, the authority should determine whether current household members subject to the requirement have been evicted for the same reason. 1D. Ensure that adequate controls are in place so that all household information is complete and accurately input and electronically transferred to HUD. 9 1E. Conduct training with the Section 8 personnel on the new controls and procedures. 10 SCOPE AND METHODOLOGY To accomplish our objective, we • Reviewed 133 tenant files; • Interviewed eligibility interviewers, eligibility advisors, and Section 8 management personnel; • Reviewed HUD regulations for the Housing Choice Voucher program; and • Reviewed the Authority’s administrative plan. We interviewed appropriate Authority and HUD Office of Public and Indian Housing management staff. We performed on-site work at the Authority’s administrative office at 2600 Wilshire Boulevard, Los Angeles, California, from September 2005 through April 2006. The audit covered the period of May 1, 2003, through May 31, 2005. We performed our review in accordance with generally accepted government auditing standards. We determined the number of files to review based on a statistical sample. See appendix F for further information regarding how we performed our statistical methodology. 11 INTERNAL CONTROLS Internal controls are 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: • Administration of the Section 8 program as it relates to tenant eligibility determination in compliance with HUD regulations, • Maintaining complete and valid records, and • Safeguarding Section 8 program resources. 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 item is a significant weakness: • The Authority did not establish and implement adequate controls and procedures to ensure that it established and documented both the eligibility of its tenants for Section 8 housing choice voucher assistance and the amount of assistance for which they were eligible (finding 1). 12 APPENDIXES Appendix A SCHEDULE OF QUESTIONED COSTS AND FUNDS TO BE PUT TO BETTER USE Recommendation number Unsupported 1/ 1A $1,021,222 1/ The unsupported costs relate to housing assistance payments made for 76 tenants in which the Authority did not adequately support that the tenants were eligible for assistance. Therefore, we could not determine the eligibility of the housing assistance payments at the time of audit. More specifically, the Authority did not determine whether the tenants had been evicted from other federally assisted housing for drug- related activity. In addition, required documentation was missing, including: yearly eligiblity recertifications; social security number verification for household members; income and/or asset verification; and entire tenant files. A schedule of the deficiencies found for each of the tenants is shown in appendix C. In addition, appendix D contains a schedule of the unsupported housing assistance payments for each of the 76 tenants. 13 Appendix B AUDITEE COMMENTS AND OIG’S EVALUATION Ref to OIG Evaluation Auditee Comments Comment 1 14 Comment 2 15 Comment 3 16 17 18 Comment 1 Comment 4 19 20 21 22 23 24 25 OIG Evaluation of Auditee Comments Comment 1 We acknowledge that there is no national database; however, there is information in HUD’s Public and Indian Housing Information Center system and we confirmed that it is accessible to the Authority. The local HUD office informed us that the Authority can access the system to query the applicants’ Social Security numbers to determine if the applicants have participated in federally assisted housing in the past, anywhere in the country. We believe that this should be used to supplement and validate the self-certification. In our opinion, self- certification is insufficient on its own. The Authority is required to comply with the Code of Federal Regulations, which requires housing authorities to prohibit admission to the program if any household member has been evicted from federally assisted housing for drug-related criminal activity. The requirement has been in effect since 2001 and the Authority should have implemented procedures to comply with the requirement. If it, and other public housing authorities, are experiencing difficulties in complying with the requirement, they should address those issues with the local HUD office. Comment 2 We disagree. Without the required documents there is no assurance to the Authority or to HUD that the tenant was indeed eligible to receive Section 8 housing assistance payments during the time period between that point and the subsequent annual review. Therefore, we questioned the related housing assistance payments as unsupported amounts. If the Authority cannot produce the missing records, then we believe the Authority should repay HUD for the corresponding amounts. In our opinion, the deficiencies were not technical administrative errors. The deficiencies cited in the report were requirements that should have been met to assure both HUD and the Authority that housing assistance payments were being made only to those tenants that were eligible for assistance. Comment 3 We disagree. HUD’s Housing Choice Voucher Guidebook requires the public housing authority to establish local policies for denial of assistance. The Authority’s policies restated the requirement to prohibit admission of applicant; however, there were no details provided as to how the Authority would make a determination as to whether an applicant should be prohibited admission or not. Therefore, as disclosed during our review, no proactive measures were taken to ensure compliance with the requirement. We believe that self-certification by an applicant applying for housing assistance is insufficient and merely self-serving for the applicant and any other household members. We believe there is no benefit for the applicant to truthfully answer this question because it would mean denial from assistance. 26 The Authority did not provide us with any detailed information on the services provided by an outside vendor to generate unlawful detainer checks for all the tenants subject to the audit. Therefore, we did not make any additional changes to report. Prior to issuing the report, we contacted the Authority to ask for more information; however, we did not receive a response. Comment 4 The Authority is required to conduct a reexamination of family income and composition at least annually. In addition, the Authority is required to maintain complete and accurate records and conduct verifications of Social Security numbers and assets. If the Authority cannot produce documentation showing compliance with these requirements, the eligibility determination is unsupported. A reexamination in a subsequent year does not meet the requirement for annual reexaminations and verifications. Further, without the annual reexamination documentation there is no assurance to the Authority or HUD that the tenant was eligible during that year. 27 Appendix C SCHEDULE OF DEFICIENCIES FOUND IN 76 of 133 FILES Client # 1 2 3 4 5 6 7 8 9 1 218691 X X X X 2 257714 X X X 3 247303 X X 4 243497 X X X 5 230824 X X 6 233747 X X 7 240890 X X X 8 232029 X X 9 072951 X 10 265383 X X X 11 087346 X 12 040302 13 039607 14 230935 X X 15 248919 X X 16 013644 X 17 130829 18 081216 X X 19 256191 X X 20 091323 21 267652 X X 22 173171 23 209306 24 234080 X X 25 012027 26 270677 X 27 093215 28 254492 X X 29 016102 X X 30 236187 X X Legend 1 - Criminal background check not conducted. 2 - Check for eviction from federal housing not conducted. 3 - Income/asset verification not conducted. 4 - Form HUD-50058 was submitted to HUD with incomplete and/or inaccurate information. 5 - HUD Form 9886, Release of Information/Privacy Act Notice, not signed. 6 - Social Security number not verified with required documentation. 7 - The Authority could not locate the file. 8 - The Authority could not locate missing documents. 9 - The tenant was not eligible to participate in the program 28 Client # 1 2 3 4 5 6 7 8 9 31 200397 32 261387 X X 33 024424 34 025842 35 256025 X X X 36 190353 37 259875 X X 38 210424 39 234240 X X 40 230381 X X 41 200647 42 246737 X X 43 241094 X X 44 243459 X X 45 246247 X X 46 036866 47 258465 X X 48 113264 X 49 220965 50 080128 51 208387 52 120050 53 235609 54 016884 X 55 021602 56 262022 X X 57 149124 X X 58 087421 59 234923 X X 60 063270 X 61 054534 62 061956 X 63 119919 64 209394 X X 65 013340 Legend 1 - Criminal background check not conducted. 2 - Check for eviction from federal housing not conducted. 3 - Income/asset verification not conducted. 4 - Form HUD-50058 was submitted to HUD with incomplete and/or inaccurate information. 5 - HUD Form 9886, Release of Information/Privacy Act Notice, not signed. 6 - Social Security number not verified with required documentation. 7 - The Authority could not locate the file. 8 - The Authority could not locate missing documents. 9 - The tenant was not eligible to participate in the program 29 Client # 1 2 3 4 5 6 7 8 9 66 144559 X 67 200055 68 039374 69 012852 70 244120 X X 71 131457 X 72 192384 X 73 224677 X X 74 263842 X X X 75 209817 X 76 250605 X X 77 139259 78 264476 X X 79 172193 X 80 029685 81 152879 82 261974 X X 83 039876 84 038970 85 093764 X X 86 218062 X X 87 041828 X 88 074863 X X 89 211838 90 257130 X X X 91 027854 92 213841 X X 93 229396 X X X 94 082370 95 244841 X X 96 245254 X X 97 251160 X X 98 222416 X X 99 030960 X 100 114094 Legend 1 - Criminal background check not conducted. 2 - Check for eviction from federal housing not conducted. 3 - Income/asset verification not conducted. 4 - Form HUD-50058 was submitted to HUD with incomplete and/or inaccurate information. 5 - HUD Form 9886, Release of Information/Privacy Act Notice, not signed. 6 - Social Security number not verified with required documentation. 7 - The Authority could not locate the file. 8 - The Authority could not locate missing documents. 9 - The tenant was not eligible to participate in the program 30 Client # 1 2 3 4 5 6 7 8 9 101 171036 102 227155 X X 103 253207 X X 104 088757 105 090967 106 019107 107 155424 X 108 147554 109 247518 X X 110 025958 X 111 233873 X X 112 142868 X 113 083991 114 203708 X X X 115 257032 X X X 116 145091 X 117 257099 X X 118 193044 119 257356 X X 120 012917 Legend 1 - Criminal background check not conducted. 2 - Check for eviction from federal housing not conducted. 3 - Income/asset verification not conducted. 4 - Form HUD-50058 was submitted to HUD with incomplete and/or inaccurate information. 5 - HUD Form 9886, Release of Information/Privacy Act Notice, not signed. 6 - Social Security number not verified with required documentation. 7 - The Authority could not locate the file. 8 - The Authority could not locate missing documents. 9 - The tenant was not eligible to participate in the program 31 Client # 1 2 3 4 5 6 7 8 9 121 243796 X X 122 144384 123 113159 124 154609 125 253706 X X 126 100563 127 040524 X 128 028820 129 169772 X 130 190495 X 131 036693 X 132 246905 X X X 133 232782 X X 133 files looked at and applicable to review No. of hits 58 59 5 10 5 6 4 8 1 % hits 43.61% 44.36% 3.76% 7.52% 3.76% 4.51% 3.01% 6.02% 0.75% Legend 1 - Criminal background check not conducted. 2 - Check for eviction from federal housing not conducted. 3 - Income/asset verification not conducted. 4 - Form HUD-50058 was submitted to HUD with incomplete and/or inaccurate information. 5 - HUD Form 9886, Release of Information/Privacy Act Notice, not signed. 6 - Social Security number not verified with required documentation. 7 - The Authority could not locate the file. 8 - The Authority could not locate missing documents. 9 - The tenant was not eligible to participate in the program 32 Appendix D SCHEDULE OF UNSUPPORTED HOUSING ASSISTANCE PAYMENTS Total Unsupported Client housing housing number assistance assistance payments payments 1 218691 $ 12,648 $ 12,648 2 257714 $ 16,485 $ 16,485 3 247303 $ 21,037 $ 21,037 4 243497 $ 5,712 $ 5,712 5 230824 $ 29,040 $ 29,040 6 233747 $ 6,334 $ 6,334 7 240890 $ 11,599 $ 11,599 8 232029 $ 8,508 $ 8,508 9 265383 $ 7,392 $ 7,392 10 230935 $ 19,319 $ 19,319 11 248919 $ 14,153 $ 14,153 12 232782 $ 20,220 $ 20,220 13 081216 $ 17,731 $ 17,731 14 256191 $ 9,967 $ 9,967 15 267652 $ 10,572 $ 10,572 16 234080 $ 11,828 $ 11,828 17 270677 $ 8,290 $ 8,290 18 254492 $ 14,595 $ 14,595 19 016102 $ 10,169 $ 10,169 20 236187 $ 14,686 $ 14,686 21 261387 $ 11,924 $ 11,924 22 256025 $ 6,120 $ 6,120 23 259875 $ 7,836 $ 7,836 24 234240 $ 12,952 $ 12,952 25 230381 $ 19,236 $ 19,236 26 246737 $ 17,651 $ 17,651 27 241094 $ 10,411 $ 10,411 28 243459 $ 16,296 $ 16,296 29 246247 $ 26,868 $ 26,868 30 258465 $ 12,414 $ 12,414 31 016884 $ 25,760 $ 13,039 32 262022 $ 16,320 $ 16,320 33 149124 $ 15,528 $ 15,528 34 234923 $ 6,359 $ 6,359 35 063270 $ 1,920 $ 1,920 36 061956 $ 13,237 $ 13,237 33 Total Unsupported Client housing housing number assistance assistance payments payments 37 209394 $ 378 $ 378 38 144559 $ 15,741 $ 6,311 39 244120 $ 5,726 $ 5,726 40 131457 $ 21,841 $ 21,841 41 224677 $ 11,601 $ 11,601 42 263842 $ 16,034 $ 16,034 43 209817 $ 7,781 $ 7,781 44 250605 $ 12,480 $ 12,480 45 264476 $ 9,641 $ 9,641 46 172193 $ 20,103 $ 18,291 47 261974 $ 12,562 $ 12,562 48 093764 $ 18,047 $ 18,047 49 218062 $ 17,597 $ 17,597 50 041828 $ 21,052 $ 21,052 51 074863 $ 31,247 $ 31,247 52 257130 $ 15,090 $ 15,090 53 213841 $ 16,460 $ 15,772 54 229396 $ 24,026 $ 24,026 55 244841 $ 10,524 $ 10,524 56 245254 $ 22,844 $ 22,844 57 251160 $ 6,531 $ 6,531 58 222416 $ 22,217 $ 22,217 59 227155 $ 5,325 $ 5,325 60 253207 $ 6,512 $ 6,512 61 155424 $ 12,849 $ 5,580 62 247518 $ 21,050 $ 21,050 63 025958 $ 18,190 $ 8,736 64 233873 $ 8,811 $ 8,811 65 142868 $ 3,312 $ 3,312 66 203708 $ 15,017 $ 15,017 67 257032 $ 29,978 $ 29,978 68 145091 $ 3,264 $ 3,264 69 257099 $ 15,142 $ 15,142 70 257356 $ 13,631 $ 13,631 71 243796 $ 13,367 $ 13,367 72 253706 $ 14,101 $ 14,101 73 040524 $ 29,734 $ 9,448 74 169772 $ 19,679 $ 19,679 75 036693 $ 11,278 $ 9,648 76 246905 $ 12,632 $ 12,632 Total $1,084,512 $ 1,021,222 34 Appendix E CRITERIA _______________________________________________ The following sections of the Code of Federal Regulations apply to tenant eligibility determinations: • 24 CFR [Code of Federal Regulations] 5.218(a)-(c) requires the housing authority to deny eligibility of an applicant if the applicant does not meet the applicable Social Security number disclosure and verification requirements in 24 CFR [Code of Federal Regulations] 5.216. • 24 CFR [Code of Federal Regulations] 5.855 allows housing authorities to prohibit admission of individuals who have engaged in criminal activity if the housing authority determines any household member is currently engaging in or has engaged in during a reasonable time before the admission decision 1) drug- related criminal activity; 2) violent criminal activity; 3) other criminal activity that would threaten the health, safety, or right to peaceful enjoyment of the premises by other residents; or 4) other criminal activity that would threaten the health or safety of the housing authority or owner or any employee, contractor, subcontractor, or agent of the housing authority or owner who is involved in the housing operations. Further, 24 CFR [Code of Federal Regulations] 5.855 allows the housing authority to establish a reasonable period before the admission decision, during which an applicant must not have engaged in any of these activities. • 24 CFR [Code of Federal Regulations] 5.903 states that the housing authority may use the criminal conviction records it obtains from a law enforcement agency to screen applicants for admission to covered housing programs; however, to obtain access to records, the housing authority must require every applicant family to submit a consent form signed by each adult household member. Upon signing the consent form, the adult household member authorizes the housing authority to receive the criminal conviction records from a law enforcement agency. • 24 CFR [Code of Federal Regulations] 960.259 states the housing authority shall require the family head and other family members to execute a consent form authorizing any depository or private source of income or any federal, state, or local agency to release any necessary information to the housing authority or HUD. Further, 24 CFR [Code of Federal Regulations] 960.259 requires the housing authority to obtain and document third-party verification, related to the family’s annual income and assets. 35 • 24 CFR [Code of Federal Regulations] 982.158 requires the housing authority to maintain complete and accurate accounts and other records for the program, in accordance with HUD requirements, in a timely manner that permits a speedy and effective audit. • 24 CFR [Code of Federal Regulations] 982.516 requires the housing authority to conduct a reexamination of family income and composition at least annually. Family income must include income of all family members, including family members not related by blood or marriage. The housing authority must establish procedures that are appropriate and necessary to assure that income data provided are complete and accurate. • 24 CFR [Code of Federal Regulations] 982.552 states the housing authority must deny admission to the program if any member of the family fails to sign and submit consent forms for obtaining information in accordance with part 5, subparts B and F of title 24. In addition, the family must submit required evidence of citizenship or eligible immigration status. • 24 CFR [Code of Federal Regulations] 982.553 requires the housing authority to prohibit admission to the program of an applicant, for three years from the date of eviction, if a household member has been evicted from federally assisted housing for drug-related criminal activity. Further, the housing authority must establish standards that prohibit admission if the housing authority determines that any household member is currently engaging in illegal use of a drug or any household member has ever been convicted of drug-related criminal activity for manufacture or production of methamphetamine on the premises of federally assisted housing. In addition, 24 CFR [Code of Federal Regulations] 982.553 requires the housing authority to establish standards that prohibit admission to the program if any member of the household is subject to a lifetime registration requirement under a state sex offender registration program. The housing authority must perform criminal history background checks necessary to determine whether any household member is subject to the registration requirement in the state where the housing is located and in other states where the household members are known to have resided. 36 Appendix F STATISTICAL SAMPLING METHODOLOGY Purpose of the Sampling The objective of the audit was to determine whether the Housing Authority of the City of Los Angeles performed Section 8 tenant eligibility in accordance with HUD rules and regulations. In support of this objective, we employed an unrestricted variable sampling plan that allowed statistical projections of the amount of the Section 8 housing assistance payments paid to housing choice voucher program participants whose eligibility was not properly supported by required documentation. Definition of the Audit Population and Tests Performed Using data obtained from the Authority’s automated system used to manage its Section 8 operations, we identified 46,781 participants who were paid $668,183,451 in regular Section 8 housing assistance payments during the period May 1, 2003 through May 31, 2005. Excluded from this universe were adjustment payments and participants who elected to use their voucher outside of the housing authority’s geographic area. For each transaction sampled, we obtained the tenant case file for review. Based on the information included in the case files, we assessed whether the supporting documentation required by HUD and authority guidance for program eligibility was included and showed the participant: • met certain income limits • had their income and assets verified • had signed HUD form 9886 (consent form) • proved their age and citizenship status • provided valid social security documentation • had an authority run criminal background check • was not previously evicted from a federally funded housing assistance program For those participants for whom the tenant case file did not show the participant met the specified program eligibility requirements, we considered the participant and their associated relevant cumulative housing assistance payments paid during the period of review to have failed the requirement for adequate supporting documentation. Sample Design Using unrestricted variable sampling methodology, we determined that a sample size of 133 participants was sufficient using a 90 percent confidence level and a desired sampling precision of 6.3 percent. Accordingly, we randomly selected 133 tenant case files for detail review from the universe. 37 Statistical Projections of the Sample Data Based on the results of the detailed tests performed on the sampled items, we are 95 percent confident that the minimum value of the universe of the Section 8 housing assistance payments paid to the 46,781 voucher program participants whose program eligibility was properly supported was at least $390,428,704. This means that the Housing Authority of the City of Los Angeles paid housing assistance payments totaling at least $277,754,747 for participants whose program eligibility was not adequately documented and properly supported. The point estimate of the population of Section 8 housing assistance payments was $331,779,645, plus or minus $58,649,059. In other words, we are 90 percent confident that the total value of the population of Section 8 housing assistance payments that were sufficiently documented and adequately supported lies between $273,130,587 and $390,428,704. The actual precision (sampling error) was 18 percent. Statistical projection details were: Information on the Universe and Sample Size Total Value of Section 8 Housing Assistance Payments $668,183,451 Total Number of Section 8 Participants In the Universe 46,781 Mean for Housing Assistance Payments In the Universe $14,283 Standard Deviation for Housing Assistance Payments In the Universe $6,260 Total Number of Section 8 Participants In the Sample 133 Mean for Housing Assistance Payments In the Sample $7,092 Standard Deviation for Housing Assistance Payments In the Sample $8,829 Results for the Sample Evaluation Confidence Level 90% Precision For Estimated Value of Supported Housing Assistance Payments $58,649,059 18% Estimated Value of Supported Housing Assistance Payments (Point Estimate) $331,779,645 Estimated Lower Limit of Supported Housing Assistance Payments $273,130,587 Estimated Upper Limit of Supported Housing Assistance Payments $390,428,704 Determination of Estimated Value of Unsupported Housing Assistance Payments Total Value of Housing Assistance Payments In the Universe $668,183,451 Less Estimated Value of Supported Housing Assistance Payments For Reporting (Upper Limit) $390,428,704 Equals Estimated Value of Unsupported Housing Assistance Payments For Reporting $277,754,747 38
The Housing Authority of the City of Los Angeles, Los Angeles, California, Did Not Adequately Determine and Support Section 8 Tenant Eligibility
Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-06-21.
Below is a raw (and likely hideous) rendition of the original report. (PDF)