oversight

The Municipality of Caguas, Puerto Rico, Needs to Improve Controls over Its Section 8 Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-05-30.

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

                                                                  Issue Date
                                                                          May 30, 2008
                                                                  Audit Report Number
                                                                          2008-AT-1007




TO:         Olga I. Saez, Director, Public and Indian Housing, San Juan Field Office, 4NPH



FROM:       James D. McKay, Regional Inspector General for Audit, 4AGA

SUBJECT: The Municipality of Caguas, Puerto Rico, Needs to Improve Controls over Its
         Section 8 Program

                                    HIGHLIGHTS
 What We Audited and Why


             As part of the U.S. Department of Housing and Urban Development (HUD),
             Office of the Inspector General’s (OIG) strategic plan, we audited the
             Municipality of Caguas’ (authority) Section 8 Housing Choice Voucher program.
             We selected the authority for review based on a risk assessment. Our audit
             objectives were to determine whether Section 8 units met housing quality
             standards in accordance with HUD requirements and whether the authority
             properly determined housing assistance subsidies.

 What We Found


             Of the 10 units inspected, eight (80 percent) did not meet minimum housing
             quality standards, and three of those were in material noncompliance. The
             authority also failed to ensure that quality control inspections were performed in
             accordance with HUD requirements. As a result, the authority made housing
             assistance payments for units that did not meet standards.

             The authority miscalculated Section 8 assistance, overhoused tenants, made
             duplicate payments, and did not abate rents. As a result, it made overpayments
           and underpayments totaling $14,074 and did not support $1,957 in assistance
           payments. We estimate that over the next year, the authority will disburse more
           than $6,800 in subsidy overpayments if it does not implement adequate controls.


What We Recommend


           We recommend that the Director of the Office of Public Housing require the
           authority to inspect the eight units that did not meet minimum housing quality
           standards to verify that the landlords took appropriate corrective actions to make
           the units decent, safe, and sanitary. If appropriate actions were not taken, the
           authority should abate the rents or terminate the housing assistance contracts. The
           Director should also require the authority to ensure that errors in tenant files are
           corrected and reimburse its program $13,086 and the tenants or landlords $988 for
           the identified errors that affected the assistance payments. We also recommend
           that the Director require the authority to submit supporting documentation that
           would justify the issuance of a voucher larger than the administrative plan
           allowed or reimburse its program $1,957 from nonfederal funds for the five
           unsupported vouchers. Additionally, we recommend that the Director require the
           authority to establish and implement controls to prevent $6,804 in overpayments
           because of incorrect payment standards.

           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 discussed the findings with the authority and HUD officials during the audit.
           We provided a copy of the draft report to authority officials on April 7, 2008, for
           their comments and discussed the report with the officials at the exit conference
           on April 14, 2008. The authority provided its written comments to our draft
           report on April 24, 2008. In its response, the authority generally agreed with the
           findings, except for recommendation 2C. The authority partially addressed
           recommendation 2A but did not address recommendations 2B, 2D, and 2F.

           The complete text of the authority’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: Controls over Housing Quality Standards Were Inadequate     5
        Finding 2: Controls over Housing Assistance Payments Were Inadequate   10

Scope and Methodology                                                          14

Internal Controls                                                              16

Appendixes
   A. Schedule of Questioned Costs and Funds to Be Put to Better Use           17
   B. Auditee Comments and OIG’s Evaluation                                    18
   C. Criteria                                                                 29
   D. Schedule of Units in Material Noncompliance with Housing Quality
      Standards                                                                30
   E. Schedule of Housing Assistance Errors                                    31




                                             3
                      BACKGROUND AND OBJECTIVES

The Municipality of Caguas (authority) was founded in 1894, and its governing system consists
of an executive and legislative body: a mayor and 16 members of the municipal legislature
elected for four-year terms. The municipal government provides a full range of services,
including public health and safety, urban and economic development, education, and others.

The authority administers approximately 1,200 housing choice vouchers in Caguas, Puerto Rico.
It uses its Section 8 voucher funds to provide rental assistance to eligible families. From July 1,
2006, through June 30, 2007, the U.S. Department of Housing and Urban Development (HUD)
authorized and disbursed $5.94 million to the authority in Section 8 program voucher funds. The
authority’s housing department was assigned the responsibility of administering the Section 8
program. The authority’s records for the Section 8 program are maintained at the Angel Luis
Rivera Municipal Government Center, Caguas, Puerto Rico.

The objectives of our audit were to determine whether the authority’s Section 8 units met
housing quality standards in accordance with HUD requirements and whether the authority
properly determined housing assistance subsidies.




                                                4
                                RESULTS OF AUDIT

Finding 1: Controls over Housing Quality Standards Were Inadequate
The authority did not adequately enforce HUD’s housing quality standards. Of the 10 units
inspected, eight (80 percent) did not meet minimum housing quality standards, and three were in
material noncompliance. It also failed to ensure that quality control inspections were performed
in accordance with HUD requirements. This noncompliance occurred because the authority’s
management did not implement adequate internal controls over its inspection process and did not
have adequate procedures for conducting quality control inspections. As a result, the authority
made housing assistance payments for units that did not meet standards.




 Health and Safety Hazards
 Were Predominant


              From the authority’s 222 program units that passed inspection between August
              and October 2007, we selected 10 units for inspection. The 10 units were
              inspected to determine whether the authority ensured that its program units met
              housing quality standards. Of the 10 units, eight (80 percent) had 34 housing
              quality standards violations. The following table lists the most frequently
              occurring violations for the eight units.
                                                       Number of      Number     Percentage
                         Type of deficiency            deficiencies   of units    of units
               Illumination and electrical                  19           7           70
               Structure and materials                       4           2           20
               Water supply                                  5           4           40
               Food preparation and refuse disposal          2           2           20
               Smoke detector                               3            3           30

              Additionally, three of the eight failed units were in material noncompliance with
              housing quality standards. Appendix D provides details on the three units.

              The most predominant deficiencies were electrical hazards, including exposed
              wiring, improper wiring of water heaters, and unshielded electrical wires. We
              also found other health and safety hazards, including stairs needing handrails,
              porch area with tripping hazards, and unsafe bathrooms. The following pictures
              show some of these deficiencies.




                                               5
Electrical outlet improperly wired and unshielded electrical
wires. This deficiency was not reported by the authority
during its September 7, 2007, inspection.




Primary breaker box with no internal cover and with
exposed electrical contacts, creating an electrical shock
hazard. The deficiency was not reported by the authority
during its September 24, 2007, inspection.




                             6
Improper wiring of water heater with exposed wire
connections, creating an electrical shock hazard. In
addition, the pressure relief valve discharge pipe was too
short. This deficiency was not reported by the authority
during its August 23, 2007, inspection.




No guardrail on left side of entrance stairs. The tenant
informed us that this condition had existed since move-in in
October 2007. This deficiency was not reported by the
authority during its September 13, 2007, inspection.




                             7
             We found 25 deficiencies that existed at the time of the authority’s most recent
             inspection, but the inspectors did not identify or did not report them. Improper
             water heater and electrical installations were some of the deficiencies not reported
             by inspectors. Authority inspectors attributed some of the deficient inspections to
             oversight or their unfamiliarity with HUD requirements. As a result, authority
             inspectors improperly passed units that did not meet the required standards.

             We provided our inspection results to the authority’s Section 8 program
             supervisor, who agreed to notify tenants and owners and ensure that violations
             were corrected.


Quality Control Review Sample
Was Inadequate


             The authority’s quality control inspection sample was also inadequate. While
             HUD requires the authority to complete quality control reviews of a sample of the
             routine (i.e., initial and periodic) inspections that represent a cross-section of
             neighborhoods and inspectors’ work, this procedure was not followed during the
             May and June 2007 reinspections. The authority limited its sample to only those
             units that failed the initial inspection and passed the reinspection between January
             and April 2007. It excluded from the review any unit that passed the authority’s
             initial inspection. As a result, the quality control review sample did not represent
             a cross-section of the inspections conducted in the units under contract as required
             by HUD. In addition, the authority did not document any feedback provided to
             inspectors on recurring inspection deficiencies noted that needed to be addressed.

             This noncompliance occurred because the authority did not establish adequate
             policies and procedural guidelines for conducting the required quality control
             inspections. The authority’s Section 8 administrative plan only made a general
             reference to the universe from which the sampled units should be obtained and
             stated that the size of the sample had to comply with HUD requirements. The
             plan lacked sufficient detail to instruct staff on how to carry out the quality
             control inspections and select the sample of the units to be reinspected.


Conclusion



             Because the authority did not implement adequate internal controls, it made
             housing assistance payments for units that did not meet housing quality standards.
             The authority did not maintain adequate controls to ensure that inspections met
             HUD requirements. Management must emphasize the importance of housing
             quality standards and implement policies and procedures which ensure that it


                                              8
          complies with HUD requirements and gives tenants the opportunity to live in
          decent, safe, and sanitary conditions.


Recommendations



          We recommend that the Director of the Office of Public Housing

          1A.     Require the authority to inspect the eight units that did not meet minimum
                  housing quality standards to verify that the owners took appropriate
                  corrective actions to make the units decent, safe, and sanitary. If
                  appropriate actions were not taken, the authority should abate the rents or
                  terminate the housing assistance contracts.

          1B.     Require the authority to implement internal controls which ensure that
                  inspections meet HUD requirements, to prevent Section 8 funds from
                  being spent on units that are in material noncompliance with standards.

          1C.     Require the authority to develop and implement an internal control plan
                  and procedural guidelines to ensure that quality control inspections are
                  performed in accordance with HUD requirements and that it documents
                  the feedback provided to inspectors to correct recurring inspection
                  deficiencies noted.




                                           9
Finding 2: Controls over Housing Assistance Payments Were
           Inadequate
The authority did not comply with HUD requirements. It miscalculated Section 8 assistance,
overhoused tenants, made duplicate payments, and did not abate rents. This noncompliance
occurred because the authority did not have effective controls in place to ensure that its staff
assigned the correct voucher size and determined the correct assistance payment. As a result, it
made overpayments and underpayments totaling $14,074 and did not support $1,957 in subsidy
payments. We estimate that over the next year, the authority will disburse more than $6,800 in
subsidy overpayments if it does not implement adequate controls.



    The Authority Overpaid and
    Underpaid Section 8 Assistance

                 The authority overpaid and underpaid assistance due to calculation errors; it
                 overpaid assistance for tenants who resided in units larger than the authority’s
                 subsidy standards allowed (overhousing) and made other erroneous payments.

                 Calculation errors - We reviewed a sample of 15 vouchers to determine whether
                 the authority correctly determined the housing assistance of Section 8 tenants.
                 The authority did not properly calculate housing assistance payments for 14 of
                 them, 11 of which resulted in overpayments and underpayments totaling $8,341. 1
                 These 14 vouchers contained the following errors:

                                                                  Number of          Percentage of
                               Type of error                       vouchers             sample
                   Payment standard selection                         8                   53
                   Utility allowance calculation                      8                   53
                   Adjusted gross income calculation                  3                   20
                   Payment administration                             4                   27

                 Appendix E of this report details the errors and associated improper payments for
                 the 11 vouchers that resulted in overpayments and underpayments.

                 The authority’s housing assistance payment register showed 379 vouchers with
                 certifications that were effective on or after October 1, 2007. The authority’s staff
                 used the incorrect payment standard on at least 230 of these vouchers when
                 determining the housing assistance of tenants. On October 1, 2007, the authority
                 established new payment standards for its Section 8 program, but its staff
                 incorrectly applied a higher payment standard when it keyed in the data in the
                 authority’s certification system. The authority’s housing counselor used the

1
 The authority did not overpay or underpay for the remaining three vouchers, as the gross rents were less than the
applicable payment standard.
                                                        10
                  incorrect payment standards, because she was not aware that a lower payment
                  standard had been established.

                  We recalculated the housing assistance for these tenants to determine the possible
                  effect on the Section 8 program if the authority had used the correct payment
                  standard. With the incorrect payment standard, the authority made overpayments
                  in 48 of the 230 vouchers. 2 We estimate that the authority will overpay more than
                  $6,800 in subsidies over the next 12 months, if it does not use the correct payment
                  standard.

                  During the audit, the authority initiated corrective measures to change the
                  incorrect payment standards used and recuperate any overpayments.

                  Overhoused tenants - Of the Authority’s 1,205 Section 8 active tenants, 71 were
                  potentially overhoused. We reviewed a sample of 15 vouchers of tenants who
                  appeared to be overhoused to determine whether there was acceptable justification
                  for issuing a voucher larger than the authority’s administrative plan allowed. For
                  six vouchers, the authority assigned the correct voucher size, but it overhoused
                  four tenants in our sample. The authority overhoused tenants because it did not
                  assign the correct voucher size during admission or reduce the voucher’s size at
                  its annual reexamination for tenants who had experienced a change in family
                  composition. The authority overpaid assistance totaling $1,713 to the four
                  overhoused tenants.

                  For the remaining five vouchers in our sample, the authority did not provide
                  acceptable justification for issuing a voucher larger than the authority’s
                  administrative plan allowed. Although the authority claimed that a larger voucher
                  was approved because of medical reasons, the tenants’ files did not contain
                  sufficient information to support the authority’s determination. Therefore, there
                  are potentially overhoused tenants, and housing assistance payments totaling
                  $1,957 are considered unsupported. 3

                  Duplicate payments - Review of the subsidy payments made during our audit
                  period showed that the authority paid $2,651 in duplicate housing assistance
                  associated with six vouchers. This condition occurred because the authority did
                  not suspend or cancel the subsidy payment associated with portability-in vouchers
                  of tenants who transferred to the authority’s jurisdiction and who were given new
                  vouchers. As a result, the tenants were assigned two vouchers, and the authority
                  made subsidy payments for both vouchers. Authority officials were not aware
                  that duplicate payments were made.

                  Unabated rents - The authority failed to abate $1,369 in housing assistance
                  payments for a unit not meeting housing quality standards. Although the
2
  The authority did not overpay for the remaining 182 vouchers, as the gross rents were less than the correct payment
standard.
3
  We questioned the difference between the subsidy paid for the larger unit and the subsidy that would have been
paid based on the household size.
                                                         11
             authority initially abated the rents, it resumed the housing assistance payments
             when the unit was brought up to standards and improperly paid all rents
             previously abated. The authority attributed the improper payment to an oversight.

Conclusion



             The authority overpaid $13,086 and underpaid $988 in housing assistance,
             because it did not have effective controls in place to ensure that its staff assigned
             the correct voucher size and determined the correct assistance payment. Although
             the monetary impact of the housing assistance errors is not significant, the number
             of vouchers with errors, more than 200, warrants special attention from HUD and
             the authority. Management must emphasize the importance of the certification
             process and implement policies and procedures to ensure that it complies with
             HUD requirements and prevent future housing assistance errors. We estimate that
             by making the necessary improvements, the authority will prevent disbursements
             of more than $6,800 in subsidy overpayments.

Recommendations



             We recommend that the Director of the Office of Public Housing

             2A.    Require the authority to reimburse its program $13,086 ($7,353 in
                    assistance errors, $1,713 in overhoused tenants, $2,651 in duplicate
                    payments, and $1,369 for not abating rents) from nonfederal funds for the
                    overpayment of housing assistance.

             2B.    Require the authority to reimburse the applicable households or landlords
                    $988 from its program funds for the underpayment of housing assistance.

             2C.    Require the authority to submit supporting documentation that would
                    justify the issuance of a voucher larger than the authority’s administrative
                    plan allowed or reimburse its program $1,957 from nonfederal funds for
                    the five unsupported vouchers.

             2D.    Require the authority to review the remaining 56 potentially overhoused
                    tenants, determine the appropriateness of the housing assistance disbursed,
                    and repay the Section 8 Housing Choice Voucher program from
                    nonfederal funds any amounts determined ineligible.

             2E.    Require the authority to implement adequate procedures and controls to
                    ensure that its calculations regarding tenants’ housing assistance payments
                    and voucher size are correct as required by HUD and prevent more than
                    $6,800 in subsidy overpayments.
                                              12
2F.   Increase monitoring of the authority’s performance in the administration
      of its Section 8 Housing Choice Voucher program. If the authority fails to
      improve and fulfill its administrative responsibilities, consider imposing
      sanctions in accordance with 24 CFR [Code of Federal Regulations]
      982.152(d).




                              13
                             SCOPE AND METHODOLOGY

To accomplish our objectives, we did the following:

    •   Reviewed applicable laws, regulations, and other HUD program requirements.

    •   Reviewed the authority’s Section 8 policies, procedures, and administrative plan.

    •   Interviewed HUD and authority management and staff.

    •   Reviewed the authority’s latest independent public accountant report and HUD program
        monitoring reviews.

    •   Obtained a download of the authority’s Section 8 units for the Housing Choice Voucher
        program as of November 5, 2007. 4

We selected a random sample of the authority’s program units to inspect from the 222 units that
passed its inspections conducted from August through October 2007. We used the U.S. Army
Audit Agency’s Statistical Sampling software to select 52 of the 222 units. We only reviewed 10
of the 52 selected units, therefore the results apply only to the units inspected and cannot be
projected to the universe or population.

Our sampling results indicated that three of the eight failed units were in material noncompliance
with housing quality standards. We based our assessment on prior authority inspection reports,
tenants’ comments, and our observation and judgment of the condition of the unit during the
inspection. We judged units to be in material noncompliance with housing quality standards,
because the units had preexisting conditions that threatened the living conditions of the tenants.

To perform our housing assistance review, we relied upon computer-processed data provided by
the authority. Specifically, we relied upon a spreadsheet that contained data on housing
subsidies paid to landlords and tenants during our 15-month audit period for 1,298 households.
We analyzed the data and concluded that the data were sufficiently reliable for our purposes of
sample selection and projection.

We randomly selected 32 of the 1,298 household files for detailed review. We only reviewed 15
of the 32 randomly selected household files and did not use these files for projecting our sample
results. Therefore, the results apply only to items selected and cannot be projected to the
universe or population.

To determine whether the authority properly calculated the housing assistance payments made
during our audit period for the sample households, we analyzed information entered into the
authority’s certification system as well as supporting documentation such as household
4
  To achieve our audit objectives, we relied in part on computer-processed data contained in the authority’s
database. Although we did not perform a detailed assessment of the reliability of the data, we did perform a
minimal level of testing and found the data to be adequate for our purposes.
                                                        14
composition, fair market rent data, income verifications, and rental unit records. We then
calculated the correct housing assistance payment amounts covering each month of our audit
period, and in some cases, we expanded our audit period as needed to accomplish our objectives.
Our analyses indicated that in 6 of the 15 vouchers reviewed, the authority underpaid monthly
housing subsidies totaling $988. These funds could be put to better use if the authority correctly
determines the rental subsidy.

Authority records identified 379 tenants from the 1,205 active vouchers with certifications that
were effective on or after October 1, 2007. We applied a computer formula to the authority’s
data and identified 230 vouchers in which the authority’s staff did not apply the new payment
standard that went into effect on October 1, 2007. We also recalculated the housing assistance
for the 230 tenants to determine the possible effect on the Section 8 program had the authority’s
staff used the correct payment standard. To recalculate the housing assistance, we used the
payment standard that applied to tenants based on the number of people in their households. We
accepted and did not verify the authority’s calculation for income and deductions for the
overhoused tenants.

Our analyses indicated that in 48 of the 230 vouchers, the authority overpaid monthly housing
subsidies totaling $567. Projecting the results, we estimate that the authority will overpay
$6,804 ($567 x 12) in subsidies over the next 12 months. This estimate is presented solely to
demonstrate the annual amount of Section 8 funds that could be put to better use if the authority
uses the correct payment standard.

We also identified 71 potentially overhoused tenants from the 1,205 active vouchers the
authority had as of November 5, 2007. We defined an overhoused tenant voucher as any
voucher that did not have the minimum number of household members required by the
authority’s payment standards for voucher size. We reviewed the files of 15 potentially
overhoused tenants to determine whether there was acceptable justification for assigning
vouchers larger than the authority’s administrative plan allowed, and when there was no
justification, we calculated the overpayments. 5 We used nonstatistical sampling, therefore the
results apply only to items selected and cannot be projected to the universe or population.

We conducted our fieldwork from November 2007 through March 2008 at the authority’s offices
in Caguas, Puerto Rico. Our audit period was from July 1, 2006, through September 30, 2007,
but we expanded our audit period as needed to accomplish our objectives.

We conducted the audit in accordance with generally accepted government auditing standards.




5
    Our selection was based on the tenants with an admission date between December 1, 2003, and August 7, 2007.

                                                         15
                             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 that the following internal controls were relevant to our audit
              objectives:

              •   Compliance with laws and regulations - Policies and procedures that
                  management has implemented to reasonably ensure that resource use is
                  consistent with laws and regulations.

              •   Safeguarding of resources - Policies and procedures that management has
                  implemented to reasonably ensure that resources are safeguarded against
                  waste, loss, and misuse.

              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 did not have internal controls in place to ensure that Section 8
                  units met housing quality standards (see finding 1).

              •   The authority did not have adequate internal controls to detect overhoused
                  tenants and miscalculated Section 8 assistance (see finding 2).


                                               16
                                   APPENDIXES

Appendix A

              SCHEDULE OF QUESTIONED COSTS
             AND FUNDS TO BE PUT TO BETTER USE


     Recommendation                                                 Funds to be put to
         number            Ineligible 1/      Unsupported 2/          better use 3/

           2A                    $13,086
           2B                                                                      $988
           2C                                            $1,957
           2E                   _______                _______                    6,804

          Total                  $13,086                $1,957                   $7,792



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

2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of audit. Unsupported costs
     require a decision by HUD program officials. This decision, in addition to obtaining
     supporting documentation, might involve a legal interpretation or clarification of
     departmental policies and procedures.

3/   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 these instances, if the authority implements
     recommendations 2B and 2E, it will cease to make rental underpayments and
     overpayments to landlords and, instead, will expend those funds in accordance with
     HUD’s requirements. Once the authority successfully improves its controls, this will be a
     recurring benefit. Our estimates reflect only the initial year of this benefit.




                                            17
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         18
Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 2




                         19
Ref to OIG Evaluation   Auditee Comments




                         20
Ref to OIG Evaluation                      Auditee Comments




Name of tenants were deleted by OIG to preserve their privacy.




                                              21
Ref to OIG Evaluation                      Auditee Comments




Comment 3



Comment 4




Name of tenants were deleted by OIG to preserve their privacy.




                                              22
Ref to OIG Evaluation                      Auditee Comments




Comment 5




Name of tenants were deleted by OIG to preserve their privacy.




                                              23
Ref to OIG Evaluation                      Auditee Comments




Comment 6




Name of tenants and owners were deleted by OIG to preserve their privacy.




                                             24
Ref to OIG Evaluation                      Auditee Comments




Name of tenants and owners were deleted by OIG to preserve their privacy.




                                             25
Ref to OIG Evaluation   Auditee Comments




                         26
                           OIG Evaluation of Auditee Comments

The authority generally agreed with our recommendations, except for recommendation 2C. The
authority partially addressed recommendation 2A ($1,713 in overhoused tenants and $2,651 in
duplicate payments), but did not address 2B, 2D and 2F.

Comment 1     The measures taken by the authority should help to improve procedures and
              controls over its unit inspections. The authority must also ensure that it has
              adequate written procedures that clearly describe steps to be followed during
              inspections and that these are performed in accordance with HUD’s requirements.

Comment 2     Our audit showed that 8 of the 10 units inspected had 34 housing quality
              standards violations. We found 25 deficiencies that existed at the time of the
              authority’s most recent inspection, but the inspectors did not identify or did not
              report them. As a result, housing inspectors improperly passed units and the
              authority paid housing assistance for dwellings that did not meet the required
              standards.

Comment 3     File number 1058 - The authority stated that the family was not overhoused and
              that it used the fair market rent of a 1 bedroom unit. According to the supporting
              documentation the authority provided us during the audit and our interview with
              the housing counselor, the family was overhoused and the assistance was
              determined based on a 2 bedroom unit. The authority did not provide additional
              support that could demonstrate that the family was not overhoused.

Comment 4     File number 529 - The authority stated that the family was not overhoused
              because of a medical condition of a family member. According to the supporting
              documentation the authority provided us during the audit and our interview with
              the housing counselor, the family was overhoused. The authority overhoused the
              tenant because it did not reduce the voucher’s size at its annual reexamination
              although it had experienced a reduction in the family composition. The authority
              did not provide additional support that could demonstrate that the family was not
              overhoused or the medical conditions warranting the additional bedroom.

Comment 5     Our report does not state or imply that the medical condition of Section 8
              participants should be questioned by the authority. The report clearly states that
              the authority claimed that a larger voucher was approved because of medical
              reasons, but the tenants’ files did not contain sufficient information to support the
              authority’s determination. In the files reviewed, the recommendation letter from
              health professionals only gave general information on the participant’s medical
              condition (asthma, hypertension, diabetes, etc.), but did not provide additional
              information that could explain why the additional room was needed.

              The administrative plan allows the authority to issue a larger size voucher than the
              subsidy standards permit subject to a verified medical or health reason. It also
              states that the family can request a larger voucher, but the request must explain
              the need or justification. It is the authority’s responsibility that all Section 8
                                               27
            participants comply with HUD requirements and standards, and that all requests
            are properly supported and verified.

Comment 6   The authority stated that it recovered all duplicate payments and that evidence
            was provided to OIG. However, the authority provided documentation on some
            of the cases, and it did not clearly show that the authority reimbursed its Section 8
            program. In addition, the amount that the authority claims it reimbursed to its
            program ($2,272) did not agree with the $2,651 in duplicate payments that we
            identified during our audit.




                                             28
Appendix C
                                         CRITERIA


Federal Regulations at 24 [Code of Federal Regulations] 982.54(c)

The authority must administer the program in accordance with the authority’s administrative
plan.

Federal Regulations at 24 [Code of Federal Regulations] 982.401(a)(3)

All program housing must meet housing quality standards performance requirements, both at
commencement of assisted occupancy and throughout the assisted tenancy.

Federal Regulations at 24 [Code of Federal Regulations] 982.505(c)(5)

If the family unit size increases or decreases during the housing assistance payments contract
term, the new family unit size must be used to determine the payment standard amount for the
family beginning at the family’s first regular reexamination following the change in family unit
size.

Federal Regulations at 24 [Code of Federal Regulations] 985.3(e)

The sample for quality control inspections is to be drawn to represent a cross-section of
neighborhoods and the work of a cross-section of inspectors.




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Appendix D

    SCHEDULE OF UNITS IN MATERIAL NONCOMPLIANCE
         WITH HOUSING QUALITY STANDARDS


                                         Types of violations**
                                             Food
                                          preparation
                                          and refuse      Illumination and              Structure and
  File number        Water supply          disposal           electrical                  materials
       611                0                    0                  2                           3
      1163                1                    0                  4                           0
       102                2                    1                  2                           0
**The table does not indicate all violations found in the unit. We only included the most frequently occurring
  or serious violations.




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Appendix E

            SCHEDULE OF HOUSING ASSISTANCE ERRORS


                                   Type of error
             Payment       Utility   Adjusted gross
 File No.    standard    allowance       income         Payment
             selection   calculation   calculation    administration   Overpayments Underpayments
   140          X           X                               X                 $60           $425

   225          X                                                           3,148

   405          X                                           X                  21             21

   416                      X                                                                 96

   48           X                                                           1,660

   491                      X                               X                                236

  1089          X           X              X                                1,840

  1302                      X                                                                 90

  1451                                     X                                  600

  1462          X           X                                                                120

  1346          X                          X                X                  24

 Totals         7           6              3                4              $7,353           $988




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