oversight

The Lubbock Housing Authority's, Lubbock, Texas, Lack of Management Controls Resulted in Overhoused Tenants and Miscalculated Assistance Payments

Published by the Department of Housing and Urban Development, Office of Inspector General on 2006-11-28.

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

                                                                 Issue Date
                                                                          November 28, 2006
                                                                 Audit Report Number
                                                                              2007-FW-1003




TO:         Justin R. Ormsby
            Director, Office of Public Housing, 6APH


FROM:
            Frank E. Baca
            Regional Inspector General for Audit, Fort Worth Region, 6AGA

SUBJECT: The Lubbock Housing Authority’s, Lubbock, Texas, Lack of Management
         Controls Resulted in Overhoused Tenants and Miscalculated Assistance Payments

                                   HIGHLIGHTS

 What We Audited and Why

             We completed a limited review of the Lubbock Housing Authority’s (Authority’s)
             Section 8 housing assistance payments as part of our strategic plan. Our objective
             was to determine whether the Authority operated its Section 8 Housing Choice
             Voucher program in accordance with its annual contributions contract (contract)
             and the U.S. Department of Housing and Urban Development’s (HUD)
             requirements. We wanted to determine whether the Authority correctly calculated
             housing assistance payments and properly applied subsidy standards by ensuring
             tenants were not housed in units larger than its standards allowed.

 What We Found


             The Authority did not comply with its contract and HUD’s requirements. It
             overhoused tenants and miscalculated Section 8 housing assistance payments.
             Our review of the files of 20 potentially overhoused tenants showed that the
             Authority overhoused 13 tenants and made various calculation errors for 16
             tenants, 13 of which resulted in erroneous payments. Due to the errors, the
             Authority overpaid $15,096 in assistance and overcharged tenants $2,479. The
           Authority overhoused tenants and miscalculated assistance because its Section 8
           program lacked effective policies and controls, including inadequate written
           policies and procedures, no quality control system to ensure compliance with
           HUD’s requirements and the Section 8 Management Assessment Program
           (SEMAP), and adverse staffing issues.

What We Recommend


           We recommend that HUD require the Authority to ensure the errors in the tenant
           files are corrected and reimburse HUD $15,096 and the tenants $2,479 for the
           identified errors that affected the assistance payments. Further, we recommend
           HUD require the Authority’s management to implement procedures and controls
           over its administration of the Section 8 housing program to ensure it is in
           accordance with its contract and HUD’s requirements.

           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 a draft to the auditee on November 7, 2006, and requested a
           response by November 20, 2006. The Authority provided a written response on
           November 16, 2006. The Authority agreed with our finding and
           recommendations and is taking steps to correct the deficiencies. HUD's Fort
           Worth Office of Public Housing agreed with the report and stated it would
           provide management decisions by 120 days.

           The complete text of the auditee’s response, along with our evaluation of that
           response, can be found in appendix C of this report.




                                            2
                            TABLE OF CONTENTS

Background and Objectives                                                4

Results of Audit
      Finding: The Authority’s Lack of Management Controls Resulted in   5
      Overhoused Tenants and Miscalculated Assistance Payments

Scope and Methodology                                                    10

Internal Controls                                                        11

Appendixes
   A. Table of Tenant File Review Results                                13
   B. Schedule of Questioned Costs and Funds Be Put to Better Use        14
   C. Auditee Comments and OIG’s Evaluation                              15




                                            3
                      BACKGROUND AND OBJECTIVES

The City of Lubbock (City) is the ninth largest city in Texas and the largest city in West Texas. The
Lubbock Housing Authority (Authority) was established in 1939 to provide decent, safe, and
sanitary housing for families of low to moderate income. The Authority is governed by a seven-
member board of commissioners appointed by the mayor for two-year terms. It administers a
Section 8 Housing Choice Voucher program consisting of 852 vouchers. The Authority’s Section 8
staff is located and maintains administrative records and tenant files in its main office at 1708
Avenue G in Lubbock, Texas.

During January 2006, the U.S. Department of Housing and Urban Development (HUD) Fort Worth
Office of Public Housing identified the Authority as a candidate for an Office of Inspector General
(OIG) audit. HUD considered the Authority troubled and placed it under a memorandum of
agreement to improve its operations. HUD also questioned whether the Authority had the capacity
to operate its housing programs effectively. The previous executive director left the Authority in
November 2005. A deputy director served as the interim executive director from November 2005
until April 2006 when the City assigned one of its managers to be the executive director at the
Authority for up to two years.

We selected the Authority’s Section 8 Housing Choice Voucher program for review as part of
our strategic plan. Our objective was to determine whether the Authority operated its Section 8
Housing Choice Voucher program in accordance with its annual contribution contract and HUD
requirements. We wanted to determine whether the Authority correctly calculated housing
assistance payments and properly applied subsidy standards by ensuring tenants were not housed
in units larger than its standards allowed. Our work was limited in scope to the Authority’s
Section 8 housing assistance payments calculations and overhousing. Although our testing
found problems in calculating assistance and overhousing tenants, we decided not to perform
additional audit work because the current executive director acknowledged the Authority had no
controls and took steps to correct and revise the Authority’s Section 8 problems. The Authority
is reviewing all of the Housing Choice Voucher program tenant files and is recalculating
assistance payments and reviewing overhoused tenants. HUD is also working closely with the
Authority to improve its performance. Thus, we did not see the benefit in auditing the Authority
since its operations and practices have changed dramatically including a turnover of most of the
Section 8 staff. However, we are issuing this report to ensure the problems we identified are
corrected as part of the Authority’s overall operational changes.

This is the third of the three audit reports on the Authority’s Section 8 program.




                                                 4
                                         RESULTS OF AUDIT

Finding: The Authority’s Lack of Management Controls Resulted in
Overhoused Tenants and Miscalculated Assistance Payments
The Authority did not comply with its contract and HUD’s requirements. It miscalculated
Section 8 assistance and overhoused tenants because its Section 8 program had ineffective
management and controls, including (1) ineffective or nonexistent policies and procedures, (2)
no quality control system to ensure compliance with HUD’s requirements and the Section 8
Management Assessment Program (SEMAP), and (3) adverse staffing issues. Consequently, the
Authority overpaid or underpaid Section 8 housing assistance payments to 14 tenants, and could
overpay or underpay assistance to an additional 4 tenants in the future.


    The Authority Overpaid and
    Underpaid Section 8 Assistance


                   The Authority overpaid assistance for tenants to reside in units larger than the
                   Authority’s subsidy standards allow (overhousing), and it overpaid and underpaid
                   assistance due to calculation errors.

                   The Authority had 91 potentially overhoused tenants out of the 929 Section 8
                   tenants assisted during the 24-month review period. Our review of a random
                   sample of 20 potentially overhoused tenants showed the Authority overhoused 13
                   of them. During the 24-month period from January 2004 through December
                   2005, the Authority overpaid assistance totaling $14,009 to overhouse 9 of the 13
                   tenants. The Authority did not overpay for the remaining four tenants as they
                   either had larger vouchers than necessary while occupying appropriate size units,
                   or they occupied larger units that cost less than the allowable subsidy amount. A
                   further review of the same 20 tenant files showed that the Authority made utility
                   allowance and income calculation errors in 16 of them, 13 of which resulted in
                   overpayments and underpayments totaling $3,566 for the same period. 1

                   The Authority made the overhousing and miscalculation errors because its
                   administration of its Section 8 program lacked effective management and controls
                   over the payment calculation process, including

                        •    Inadequate written policies and procedures,
                        •    No quality control system, and
                        •    Negative staffing issues.


1
      See appendix A for detailed results of testing.


                                                        5
The Authority’s Written
Procedures Were Lacking or
Ineffective


           The Authority did not have written procedures or policies to ensure that its
           caseworkers performed essential tenant duties relating to the maintenance of tenant
           files, including

              •       Performing initial, annual, or interim certifications;
              •       Adjusting voucher sizes or subsidy standards based on changes in tenant
                      family composition;
              •       Verifying tenant necessity for larger vouchers based on medical
                      recommendations; and
              •       Properly documenting unit qualification or tenant identification.

           In addition, its policies did not require changes to subsidy standards until a tenant
           moved, which is contrary to HUD’s requirements. For example, for 4 of the 13
           tenants who were overhoused, the family size decreased, but the Authority did not
           reduce the size of the voucher. Further, the Authority’s administrative plan lacked
           instructions for repaying tenants when an error was made.

           The Authority’s Section 8 administrative plan was the Authority’s only written
           policy that addressed caseworkers’ duties and the maintenance of tenant files.
           However, the administrative plan lacked sufficient detail to instruct caseworkers on
           how to carry out the procedures. For example, the Authority overhoused three
           tenants who had a medical recommendation because it did not interview the tenant
           or inspect the unit to ensure that the larger unit was a necessity. Further, the
           Authority’s lack of written procedures caused the caseworkers to rely solely on
           senior staff members for direction in performing their duties and processing the
           tenant files. However, the Authority currently lacks senior caseworkers to provide
           guidance, and the caseworkers have no written operating procedures to guide them.

The Authority Had No Quality
Control System


           The Authority did not have a system to ensure that its Section 8 staff performed
           quality control file reviews as required by HUD’s regulations and its
           administrative plan. Further, the Authority’s administrative plan did not state that
           quality control file reviews were to be used for monitoring staff performance and
           providing feedback but instead listed them as a means of detecting program abuse
           and fraud. The administrative plan also contained requirements to perform
           quality control reviews of leasing. However, former Authority management
           overrode or ignored these controls. Consequently, the Authority did not


                                              6
            adequately perform or document quality control file reviews and cannot support
            its Section 8 Management Assessment Program (SEMAP) self-certification and
            score.

            The former Section 8 administrator either did not perform the quality control
            reviews or performed them inadequately. She stated she performed quality
            control reviews; however, she could not show that the reviews were performed,
            and other Authority staff stated the reviews were not done. If the Section 8
            administrator performed the quality control reviews, they served no useful
            purpose as she did not document the results of the file reviews or discuss the
            results with the caseworkers. As a result, the caseworkers did not receive
            feedback as to whether they performed their file reviews properly and in
            compliance with HUD’s and the Authority’s requirements.

            In addition, the Authority cannot support its September 2005 Section 8 SEMAP
            self-certification that it had performed the required annual sample of quality
            control file reviews. Previous Authority management was apparently unaware
            that support for the quality control reviews did not exist because the former
            Section 8 administrator stated that management had never requested to see the
            reports on quality control.


Staffing Issues Had a
Negative Impact


            The Authority’s ineffective management also led to high staff turnover and a lack
            of direction and training. The Authority has experienced significant turnover in
            management in the last 10 months. The previous executive director left in
            November 2005; the director of finance, who oversaw the Section 8 department,
            left in May 2006; and the Section 8 administrator resigned at the end of July 2006.
            In addition, during the last few years, the Authority’s Section 8 department has
            seen both a decrease in size and a loss of experienced staff. Within the last 12
            months, 13 people have worked in the Section 8 department, but as of August
            2006, the department only had a staff of four.

            Section 8 and senior Authority staff indicated that the caseworkers had received
            very little Section 8 training. The former Section 8 administrator stated that the
            employees were not well trained and that there were no records showing what, if
            any, training they had received.




                                             7
The Authority Has Taken
Steps to Address the Problems


             The current executive director admitted that the Authority had no controls and has
             changed the operations of the Section 8 program. The Authority is working with
             HUD and another housing authority to improve its operations. It is currently
             reviewing all of the Housing Choice Voucher program tenant files. On
             September 18, 2006, the Authority commenced a Section 8 participant folder
             review to ensure that each folder contains HUD-required documents, correct
             income/rent computations, and the correct size voucher for the family’s size based
             on the Authority’s subsidy standards. HUD staff indicated that the Authority is
             improving and has been on-site to provide assistance.

Conclusion



             Because the Authority did not have effective management to establish procedures
             and controls to effectively operate and monitor its Section 8 program, it overpaid
             assistance to tenants who were overhoused and both overcharged and
             undercharged tenants due to calculation errors. The Authority’s new management
             has taken steps to correct the problems. However, HUD needs to ensure that the
             Authority’s management establishes and implements policies, procedures, and
             controls that are consistently followed to prevent overhousing and incorrect
             assistance payments. Further, Authority management needs to monitor the
             controls over the tenant file quality control process to ensure that they are not
             overridden or ignored and ensure that future certifications concerning quality
             control inspections are supported by adequate documentation.

Recommendations



             We recommend that the director of HUD’s Fort Worth Office of Public Housing
             require the Authority to

             1A. Reimburse HUD $15,096 for ineligible expenses identified as assistance
                 overpayments during the review ($14,009 for overhoused tenants + $1,087
                 for overpayments from income/deduction and utility allowance errors =
                 $15,096).

             1B. Reimburse the tenants $2,479 that it underpaid for housing assistance
                 identified during the review.




                                              8
1C. Complete its 100 percent tenant file review and repay any other instances of
    overhousing or miscalculation of assistance. Further, it should assign the
    appropriate size voucher to those tenants its review identifies as overhoused.
    The Authority also needs to develop procedures for reimbursing tenants
    when the Authority makes an error and include those procedures in its
    administrative plan.

1D. Implement procedures and controls, including quality control reviews, to
    ensure that its caseworkers properly calculate assistance payments and
    house tenants in appropriate size units.




                                 9
                           SCOPE AND METHODOLOGY

We conducted our review at the Authority, the Fort Worth Office of Public Housing, and our office
in Houston, Texas. During the review, we performed the following steps:

    •   Reviewed background information and the criteria that control the Authority and its
        operations.
    •   Reviewed various reports, databases, and documents to determine existing conditions at
        the Authority. The data included the independent public accountant report for fiscal year
        2004, information contained in HUD’s Public and Indian Housing Information Center
        system, and monitoring reports maintained by the Fort Worth Office of Public Housing.
    •   Obtained current data from HUD’s PIH Information Center (PIC) that contained housing
        assistance and related data for all tenants during the audit period. Validated the data for
        reliability in accordance with professional standards. 2 Selected a nonstatistical, random
        sample of 20 tenants from a population of 91 potentially overhoused tenants. The 91
        potentially overhoused tenants came from a larger universe of 929 vouchers that the
        Authority had from January 1, 2004, through March 9, 2006.
    •   Reviewed the sample of potentially overhoused tenants to determine whether the
        Authority housed them in units larger than their family composition allowed and
        recalculated rents for the tenants based on documentation contained in their tenant files.
    •   Conducted interviews with Authority staff, the independent public accountant, Office of
        Public Housing staff tasked with oversight of the Authority’s operations, and the sample
        tenants to determine whether units were of the appropriate size when housing quality
        standards inspections were performed.

We performed our on-site work during March, April, and August 2006 at the Authority’s offices
located at 1708 Avenue G in Lubbock, Texas. Our review period was from January 1, 2004,
through December 31, 2005. We expanded the scope of our review as necessary. We performed
our review in accordance with generally accepted government auditing standards.




2
    Government Accountability Office, “Assessing the Reliability of Computer-Processed Data,” GAO-03-273G,
    October 2002.


                                                    10
                              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:

              •   Effectiveness and efficiency of program operations – Policies and procedures
                  that management has implemented to reasonably ensure that a program meets its
                  objectives.

              •   Compliance with laws and regulations – Policies and procedures that
                  management has implemented to reasonably ensure that resources are used
                  consistent with laws and regulations.

           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 items are significant weaknesses:

              •       The Authority lacked effective management and controls over its housing
                      assistance payments to ensure that they complied with HUD’s
                      requirements.




                                                11
•   The Authority lacked an effective quality control system that complied with
    HUD’s Section 8 Management Assessment Program (SEMAP)
    requirements.




                             12
                                           APPENDIXES

Appendix A
      TABLE OF TENANT FILE REVIEW RESULTS
                Overhoused (1)                     Housing assistance payment miscalculations (2)
                                                   Housing
                                                   assistance      Housing       Housing
                                                   payment         assistance    assistance
     Sample (3) Overhoused? Overpaid               error?          overpaid      underpaid
       1           Yes             0                 Yes                      32
       2                                             Yes                       0
       3           Yes         2,178                 Yes                                   1,676
       4                                             Yes                       0
       5           Yes           882                 Yes                                     288
       6                                             Yes                                     368
       7
       8           Yes           455
       9           Yes           522                 Yes                                                 20
      10           Yes         3,356                 Yes                           443
      11                                             Yes                             0
      12           Yes             0                 Yes                             5                   99
      13           Yes         2,676                 Yes                            96
      14           Yes         3,116                 Yes                           156
      15                                             Yes                           194
      16           Yes           194                 Yes                                                 28
      17           Yes             0                 Yes                            96
      18           Yes           630                 Yes                            65
      19
      20           Yes            0*
     Totals        13        $14,009                 16                        $1,087               $2,479

Results
1.    Thirteen of the tenants were or could be overhoused. The Authority overpaid $14,009 to overhouse
      nine of them. The Authority did not overpay for the remaining four tenants as the tenants either had
      a voucher for more bedrooms than needed but they occupied an appropriate size unit, or they
      occupied a larger unit but the cost of the larger unit was less than the maximum subsidy allowed for
      the appropriate size unit.
2.    Sixteen of the tenants’ files had housing assistance payment calculation errors including utility
      allowance, income, and/or deduction errors. The Authority overpaid $1,087 and underpaid $2,479
      for thirteen of the tenants totaling $3,566. The calculation errors in the remaining three tenant files
      did not result in payment errors. The overpayments are an ineligible use of HUD funds. The
      underpayments are funds to be put to better use.
3.    Eighteen of the twenty tenants had overhousing or payment calculation errors. Fourteen of the
      tenants had erroneous payments based on those errors.




                                                      13
Appendix B

                 SCHEDULE OF QUESTIONED COSTS
                 AND FUNDS BE PUT TO BETTER USE



                   Recommendation                           Funds be put to
                       number              Ineligible 1/    better use 2/

                          1A                     $15,096
                          1B                                          $2,479
                         Totals                  $15,096              $2,479




1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that auditor believes are not allowable by law; contract; or federal, state, or local policies
     or regulations.

2/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an Office of Inspector General (OIG) recommendation is
     implemented. This includes reductions in outlays, deobligation of funds, withdrawal of
     interest subsidy costs not incurred by implementing recommended improvements,
     avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
     which are specifically identified. In this instance, if the Authority implements our
     recommendation, it will ensure that tenants are reimbursed for personal funds they should
     not have expended as the Authority underpaid the amount of assistance they were entitled
     to receive under the Section 8 Housing Choice Voucher program.




                                              14
Appendix C

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                         15
                           OIG Evaluation of Auditee Comments

Comment 1
The Authority agreed with our finding and recommendations and is taking steps to correct the
deficiencies.




                                              16