oversight

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)

                                                                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