oversight

The Chicago Housing Authority, Chicago, Illinois, Needs to Improve Its Controls Over Housing Assistance and Utility Allowance Payments

Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-09-30.

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

                                                                 Issue Date
                                                                          September 30, 2008
                                                                 Audit Report Number
                                                                          2008-CH-1017




TO:         Steven E. Meiss, Director of Public Housing Hub, 5APH


FROM:       Heath Wolfe, Regional Inspector General for Audit, 5AGA

SUBJECT: The Chicago Housing Authority, Chicago, Illinois, Needs to Improve Its
           Controls Over Housing Assistance and Utility Allowance Payments

                                    HIGHLIGHTS

 What We Audited and Why

             We audited the Chicago Housing Authority’s (Authority) Section 8 Housing
             Choice Voucher program (program) under its Moving to Work Demonstration
             program. The audit was part of the activities in our fiscal year 2007 annual audit
             plan. We selected the Authority based upon our analysis of risk factors relating to
             the housing agencies in Region V’s jurisdiction. Our objective was to determine
             whether the Authority administered its program in accordance with the U.S.
             Department of Housing and Urban Development’s (HUD) requirements. This is
             the first of multiple audit reports that may be issued regarding the Authority’s
             program.

 What We Found

             The Authority’s program administration regarding housing assistance payment
             calculations, documentation to support households’ eligibility and calculations for
             housing assistance, and the recovery of overpayments of housing assistance and
             utility allowances for deceased individuals was inadequate. The Authority
             incorrectly calculated households’ payments resulting in more than $60,000 in
             overpayments and nearly $5,800 in underpayments for the period January 1, 2006,
             through August 31, 2007.
           The Authority also did not ensure that its households’ files contained the required
           documentation to support its housing assistance and utility allowances. Of the 71
           files statistically selected for review, 42 did not contain documentation required
           by HUD and the Authority’s program administrative plan to support nearly
           $157,000 in housing assistance and utility allowance payments.

           Further, the Authority did not effectively recover more than $36,000 in housing
           assistance and utility allowance overpayments for deceased individuals.

           We informed the Authority’s chief executive officer and the Director of HUD’s
           Chicago Office of Public Housing of minor deficiencies through a memorandum,
           dated August 25, 2008.

What We Recommend

           We recommend that the Director of HUD’s Chicago Office of Public Housing
           require the Authority to reimburse its program from nonfederal funds for the
           improper use of more than $113,000 in program funds, provide documentation or
           reimburse its program nearly $164,000 from nonfederal funds for the unsupported
           payments cited in this audit report, and implement adequate procedures and
           controls to address the findings cited in this audit report.

           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 issued because of the audit.

Auditee’s Response

           We provided our review results and supporting schedules to the Director of
           HUD’s Chicago Office of Public Housing and the Authority’s chief executive
           officer during the audit. We also provided our discussion draft audit report to the
           Authority’s chief executive officer, its board chairman, and HUD’s staff during
           the audit. We held an exit conference with the Authority’s chief executive officer
           on July 23, 2008.

           We asked the chief executive officer to provide comments on our discussion draft
           audit report by August 15, 2008. The chief executive officer provided written
           comments, dated August 15, 2008. The Authority disagreed with our findings
           and recommendations. The complete text of the written comments, along with
           our evaluation of that response, can be found in appendix B of this report except
           for 27 pages of documentation that was not necessary for understanding the
           Authority’s comments. A complete copy of the Authority’s comments plus the
           documentation was provided to the Director of HUD’s Chicago Office of Public
           Housing.




                                            2
                            TABLE OF CONTENTS

Background and Objective                                                            4

Results of Audit
      Finding 1: Controls over Housing Assistance and Utility Allowance Payments
                 Were Inadequate                                                    5

      Finding 2: Controls over Recovery of Housing Assistance and Utility
                 Allowance Payments for Deceased Individuals Need Improvement      10

Scope and Methodology                                                              13

Internal Controls                                                                  14

Appendixes
   A. Schedule of Questioned Costs and Funds to Be Put to Better Use               16
   B. Auditee Comments and OIG’s Evaluation                                        17
   C. Federal Regulations and the Authority’s Requirements                         47




                                             3
                      BACKGROUND AND OBJECTIVE

The Chicago Housing Authority (Authority) was established in April 1934 under the laws of the
State of Illinois to provide decent, safe, and sanitary housing. The Authority is governed by a
10-member board of commissioners (board) appointed by the mayor of the City of Chicago,
Illinois to five-year staggered terms. The board’s responsibilities include overseeing the
Authority’s operations, as well as the review and approval of its policies. The City’s mayor also
appoints the Authority’s chief executive officer. The chief executive officer is responsible for
coordinating established policy and carrying out the Authority’s day-to-day operations.

In May 1995, the U.S. Department of Housing and Urban Development (HUD) assumed control
of the Authority due to years of management problems and deteriorated living conditions at the
Authority’s developments. HUD selected Quadel Consulting Corporation (contractor) to
administer, manage, and operate the Authority’s Section 8 Housing Choice Voucher program
(program) in October 1995. The contractor created a subsidiary, CHAC, Inc., which formally
took over the Authority’s program administration in December 1995. The Authority paid the
contractor more than 90 percent of its administrative fee to operate the program. Although the
contractor administers the program, the Authority is ultimately responsible to HUD for program
operations and for any errors.

In 1996, Congress authorized the Moving to Work Demonstration (Moving to Work) program as a
program under HUD. The Authority was accepted into the Moving to Work program on February
6, 2000, when HUD’s Assistant Secretary for Public and Indian Housing signed the Authority’s
Moving to Work agreement (agreement). Moving to Work allows certain housing authorities to
design and test ways to promote self-sufficiency among assisted families, achieve programmatic
efficiency, reduce costs, and increase housing choices for low-income households. Congress
exempted the Moving to Work participants from much of the United States Housing Act of 1937
and associated regulations. The agreement requires the Authority to abide by the statutory
requirements in Section 8 of the United States Housing Act of 1937 and the annual contributions
contract to the extent necessary for the Authority to implement its Moving to Work demonstration
initiatives. As of June 2008, HUD proposed amendments to the Authority’s agreement; however, it
had not executed the new agreement.

As of May 31, 2008, the Authority had 48,557 units under contract with annual housing
assistance payments totaling more than $463 million in program funds.

Our objective was to determine whether the Authority administered its program in accordance
with HUD’s requirements to include determining whether the Authority (1) accurately calculated
housing assistance and utility allowance payments, (2) maintained required documentation to
support household eligibility, and (3) recovered the overpayment of housing assistance provided
for deceased individuals. This is the first of multiple audit reports that may be issued regarding
the Authority’s program.




                                                4
                                RESULTS OF AUDIT

Finding 1: Controls over Housing Assistance and Utility Allowance
                      Payments Were Inadequate
The Authority did not comply with HUD’s requirements and its program administrative plan
regarding housing assistance and utility allowance payments. Its contractor failed to maintain
required documentation to support payments to program landlords and households and
consistently compute payments accurately. This condition occurred because the Authority and
its contractor lacked adequate procedures and controls to ensure that their calculations were
accurate and that HUD’s requirements and the Authority’s program administrative plan were
appropriately followed. As a result, the Authority was unable to support nearly $157,000 in
housing assistance and utility allowance payments and overpaid more than $60,000 and
underpaid nearly $5,800 in housing assistance and utility allowances.


 The Authority’s Contractor
 Lacked Documentation to
 Support Nearly $157,000 in
 Housing Assistance and
 Utility Allowance Payments

              We statistically selected 71 household files from a universe of 34,895 households
              receiving housing assistance payments as of September 24, 2007, using data
              mining software. The 71 files were reviewed to determine whether the Authority
              and/or its contractor had documentation for and correctly calculated households’
              housing assistance and utility allowance payments for the period January 2006
              through August 2007. Our review was limited to the information maintained by
              the contractor in the Authority’s household files.

              The contractor lacked documentation to support housing assistance and utility
              allowance payments totaling $156,449 for the period January 2006 through July
              2007. The documentation was required by HUD’s regulations and/or the
              Authority’s program administrative plan. Of the 71 household files reviewed, 42
              (59 percent) had missing or incomplete documents as follows:

                  •   21 were missing HUD Form 52517, Request for Tenancy Approval;
                  •   Seven were missing HUD Form 9886, Authorization for the Release of
                      Information and Privacy Act Notice;
                  •   Seven were missing third-party income verifications of reported household
                      income;
                  •   Seven were missing a disclosure of information on lead-based paint;
                  •   Six were missing birth certificates;
                  •   Five were missing declaration of U.S. citizenship certifications;


                                               5
               •   Five were missing proof of Social Security numbers;
               •   Five were missing evidence of criminal history background checks;
               •   Four were missing housing assistance payments contracts;
               •   Four were missing the lease and/or addendum agreements;
               •   Two were missing supporting documentation for the utility allowance
                   calculation;
               •   One was missing supporting documentation for the dependent allowance
                   and income calculation; and
               •   One was missing the biennial certification.

           The contractor obtained new or original documentation for 17 of the 42 household
           files after we notified it of the missing or incomplete documents during the audit.
           As a result, the questioned cost cited in recommendation 1A only reflects the
           missing documentation for the remaining 25 household files (42 minus 17).

The Authority’s Contractor
Miscalculated Housing Assistance
and Utility Allowance Payments

           The contractor’s miscalculations and its failure to comply with program
           requirements resulted in housing assistance and utility allowance overpayments of
           $60,679 and underpayments of $5,718. Of the 71 household files reviewed, 60
           (85 percent) contained errors in one or more of their income certifications. The
           60 files contained the following errors:

               •   41 did not have adjusted housing assistance payments when the contractor
                   became aware of the increase in household income,
               •   38 had incorrect utility allowance standards,
               •   33 had incorrect payment standards,
               •   22 had incorrect income calculation errors,
               •   Three had incorrect child care expense allowances,
               •   Three had incorrect payments involving portability,
               •   Three had incorrect minimum rent standards,
               •   Three had incorrect dependent or disability allowances, and
               •   Two had an incorrect medical expense calculation.

The Authority’s Procedures
and Controls over Its
Contractor Had Weaknesses

           The Authority did not ensure that its contractor provided an acceptable level of
           service because it did not effectively monitor the contractor. The Authority’s
           contract requires the contractor to implement a quality control system in which an
           error rate of no more than 10 percent is acceptable in the calculation of household
           contribution. The contractor performed a quality control review on 8 of the 71

                                            6
files reviewed; however, it did not identify three files (38 percent) that had errors
in housing assistance and utility allowance payments. In addition, of the 71 files
statistically sampled, 60 contained errors in one or more of the income
certifications, resulting in an 85 percent error rate. According to the Authority’s
acting housing choice voucher director, the contractor was solely responsible for
implementing quality controls and overseeing housing assistance and utility
allowance payments. As of March 2008, the Authority had not conducted any
reviews of its contractor regarding the maintaining of documentation to support
household eligibility or the calculation of housing assistance payments. The
Authority’s quality assurance analyst said that because of our audit and a review
by Ernest and Young, the Authority planned to initiate reviews of its contractor
regarding the maintaining of documentation to support household eligibility and
the calculation of housing assistance payments.

In addition, the Authority was aware of previous errors the contractor had made in
its housing assistance and utility payments functions. During HUD’s rental
integrity review in August 2002, HUD stated that due to serious operational
problems in program administration of household eligibility, 51 (28 percent) of
the 184 files reviewed had one or more errors. During its integrity monitoring re-
review in May 2004, HUD stated that there were approximately 62 instances in
which copies of a household member’s Social Security card, birth certificate, or
proof of citizenship were missing, and in several instances the Social Security
numbers and birth certificate dates were incorrectly entered on the HUD Form
50058 in the files reviewed. There were also 11 files that lacked third-party
verification of income or zero income, and the dependent status as a household
member.

The contractor made a number of errors in managing the Authority’s program. It
did not maintain the required program documentation and made incorrect housing
assistance and utility allowance payments to program landlords and households
because it lacked adequate procedures and controls to ensure that it appropriately
followed HUD’s regulations and the Authority’s program administrative plan.
The contractor’s executive director stated that the missing eligibility
documentation was due to its scanning process of the program household files.
According to the executive director, the Authority’s computer system contained
sufficient checks to ensure that households would not be approved and vouchers
would not be issued for households that had not provided the appropriate
documentation and the fact that these households received housing assistance
evidenced the existence of the documents despite the contractor’s inability to
produce them. The contractor’s quality control supervisor said that errors in the
utility allowance calculations could have been caused by shortcuts taken by staff
when processing the HUD Form 50058.

Further, the contractor did not adequately use HUD’s Enterprise Income
Verification system (system) or other similar third-party income verification. For
38 of the 71 households reviewed, when the contractor ran a system report and it
indicated an increase in the household’s reported income, the contractor did not
conduct an interim certification. The Authority’s program administrative plan

                                  7
             requires an interim certification be conducted when there is an increase or
             decrease in household income that is expected to last at least 30 days. The
             contractor’s director of compliance and training said that it was not the
             contractor’s intention to conduct an interim certification every time there was an
             increase in household income and that the administrative plan needed to be
             clarified. The Authority’s former housing choice voucher program director
             agreed with the contractor and said that the administrative plan needed to be
             clarified. However, as of May 29, 2008, the Authority’s administrative plan had
             not been updated or clarified. Moreover, the contractor did not consistently
             communicate to households the program requirements regarding how and when to
             report increases and/or decreases in annual income. For example, the application
             for the program required households to report any changes in income; however,
             the family obligations form only required households to report income if they had
             previously reported zero annual income.

             The Authority’s program administrative plan did not address how households
             would be reimbursed when an underpayment of housing assistance payment
             occurred.

Conclusion

             As a result of the weaknesses in the Authority and its contractor’s procedures and
             controls, the Authority disbursed $156,449 in housing assistance and utility
             allowance payments without required supporting documentation and overpaid
             $60,679 and underpaid $5,718 in housing assistance and utility allowances.

             In accordance with 24 CFR [Code of Federal Regulations] 982.152(d), HUD may
             reduce or offset any administrative fee to public housing authorities, in the
             amount determined by HUD, if the authorities fail to perform their administrative
             responsibilities correctly or adequately under the program. The Authority
             received $7,345 in program administrative fees related to the unsupported
             payments for the 25 households and $36,369 ($29,217 related to the households
             receiving overpayments plus $7,152 related to the household receiving
             underpayments) in program administrative fees for the 60 households with
             incorrect housing assistance and utility allowance payments.

Recommendations

             We recommend that the Director of HUD’s Chicago Office of Public Housing
             require the Authority to

             1A.    Provide support or reimburse its program $163,794 ($156,449 in housing
                    assistance and utility allowance payments and $7,345 in associated
                    administrative fees) from nonfederal funds for the unsupported payments
                    and associated administrative fees cited in this finding.


                                              8
1B.   Reimburse its program $89,896 ($60,679 in housing assistance and utility
      allowance payments and $29,217 in associated administrative fees) from
      nonfederal funds for the overpayment of housing assistance and utility
      allowances cited in this finding.

1C.   Reimburse the appropriate households $5,718 for the underpayment of
      housing assistance and utility allowances cited in this finding.

1D.   Reimburse its program $7,152 in associated administrative fees from
      nonfederal funds for the underpayment of housing assistance and utility
      allowances cited in this finding.

1E.   Implement adequate procedures and controls to ensure that all required
      documentation is complete, accurate, and maintained in its household files
      to support the eligibility and calculation of housing assistance and utility
      allowance payments.

1F.   Implement adequate procedures and controls to ensure that its contractor
      properly calculates housing assistance and utility allowance payments.

1G.   Revise its program administrative plan to address how households will be
      reimbursed when an underpayment of housing assistance and/or utility
      allowance occurs.

1H.   Revise the appropriate document(s) to clarify when it will conduct an
      interim certification when there is an increase or decrease in household
      income.




                                9
Finding 2: Controls over Recovery of Housing Assistance and Utility
   Allowance Payments for Deceased Individuals Need Improvement
The Authority’s contractor did not comply with HUD’s regulations and its program
administrative plan regarding the collection of housing assistance and utility allowance payments
for deceased individuals. The contractor did not consistently pursue repayment agreements with
households’ landlords. This condition occurred because the Authority and its contractor lacked
adequate procedures and controls to ensure that the Authority’s program administrative plan was
appropriately followed. As a result, the Authority overpaid more than $36,000 in housing
assistance and utility allowance payments and underpaid nearly $1,500 in housing assistance and
utility allowances.



    The Authority Did Not Recover
    Housing Assistance and Utility
    Allowance Payments for Two
    Households

                 A review of 110,972 active household members’ Social Security numbers as of
                 September 24, 2007, revealed that 796 were associated with deceased individuals.
                 We statistically selected 32 household members by using data mining software to
                 determine whether the Authority inappropriately provided housing assistance and
                 utility payments and failed to recover any overpayments for the period October
                 2006 through May 2008.

                 Of the 32 household members’ Social Security numbers reviewed, 27 were
                 associated with deceased individuals, 12 of which resulted in net overpayments of
                 $34,586 (10 overpayments of $36,009 minus two underpayments of $1,4231). For
                 the households where the contractor was aware of the deceased individuals, the
                 contractor recovered overpayments of $21,614, as of May 27, 2008, for nine of
                 the deceased individuals where overpayments were made. In addition, as of June
                 2008, the contractor initiated action to recover the payment for the one deceased
                 individual and sent letters to advise the two households of the underpayments that
                 were made. However, the contractor informed household 9701934 that $860 in
                 housing assistance payments was underpaid, when actually $1,265 was underpaid.
                 However, balances remain from one household where the contractor did not begin
                 collections within 30 days and only attempted to collect 6 of the 11 months
                 outstanding. As a result, the outstanding net overpayment of housing assistance
                 and utility payments were $12,972 (two overpayments of $14,395 minus two
                 underpayments of $1,423) for four individuals.



1
  Although the contractor was informed by the heads of household that a member passed away, it failed to conduct
interim certifications to remove the deceased members’ income and/or the dependent allowance from the calculation
of housing assistance payments. As a result, the contractor underpaid housing assistance payments of $1,265 for
household 9701934 and $158 for household 0950870.

                                                       10
             The contractor was aware of 18 of the 27 deceased individuals; however, it was
             not aware of the remaining nine deceased individuals until we informed it. We
             did not include the outstanding balances for the nine individuals in our previously
             mentioned totals. The contractor’s procedures manual states that once the
             contractor becomes aware of an overpayment, an overpayment letter is mailed to
             the owner. The owner then has 30 days to repay the outstanding balance. If the
             owner owing money is currently receiving housing assistance payments, the
             Authority’s account tracking system will automatically deduct the overpayments
             amount from the owner’s current housing assistance payments.

The Authority and Its
Contractor Lacked Adequate
Procedures and Controls


             The outstanding net overpayments of $12,972 in housing assistance and utility
             allowances to program landlords for deceased individuals occurred because the
             Authority and its contractor lacked adequate procedures and controls to ensure
             that they appropriately followed the Authority’s program administrative plan.

             In three instances, the contractor did not respond when notified of deceased
             individuals. Twice the contractor was informed by the heads of household that a
             household member passed away and it failed to conduct interim certifications to
             remove the deceased members’ incomes and/or the dependent allowances from
             the calculation of housing assistance payments. This resulted in the households
             paying $1,423 more than they should have.

             The Authority’s program administrative plan states that if an owner owes money
             for overpayments of housing assistance, the contractor will provide the owner the
             opportunity to repay immediately or enter into a repayment agreement. However,
             the contractor did not attempt to enter into a repayment agreement or seek
             immediate repayment with an owner who received more than $12,000 in overpaid
             housing assistance. Since the owner was not receiving housing assistance
             payments as of May 2008, the contractor could not pursue reimbursement through
             the Authority’s account tracking system. The contractor’s former finance
             manager said that the contractor would seek reimbursement when the owner
             reenters the Authority’s program. However, there is no assurance that the owner
             will reenter the program. Therefore, the contractor should have sought immediate
             repayment or a repayment agreement. On June 16, 2008, the contractor sent a
             demand letter to the owner requesting repayment in full in 30 days.

Conclusion


             HUD lacked assurance that the Authority used its program funds efficiently and
             effectively when it failed to collect $14,395 and underpaid $1,423 in housing
             assistance and utility allowances.


                                             11
          In accordance with 24 CFR 982.152(d), HUD may reduce or offset any
          administrative fee to public housing authorities, in the amount determined by
          HUD, if the authorities fail to perform their administrative responsibilities
          correctly or adequately under the program. The Authority received $1,746 in
          program administrative fees related to the excess amounts not collected on the
          two deceased individuals that the contractor underpaid assistance and the one
          deceased individual where the contractor did not attempt to make any collections
          cited in this finding.

Recommendations

          We recommend that the Director of HUD’s Chicago Office of Public Housing
          require the Authority to

          2A. Ensure that it collects the $14,395 in overpaid housing assistance and utility
              allowances for the two households cited in this finding or reimburse its
              program the applicable amount from nonfederal funds.

          2B. Reimburse the appropriate households $1,423 for the underpayment of
              housing assistance and utility allowances cited in this finding.

          2C. Reimburse its program $1,746 from nonfederal funds for the inappropriate
              administrative fees related to the three households cited in this finding.

          2D. Implement adequate procedures and controls to ensure funds paid related to
              deceased tenants are collected according to its administrative plan and
              interim certifications are performed when household members are reported
              as deceased.




                                           12
                        SCOPE AND METHODOLOGY

To accomplish our objective, we reviewed

       •      Applicable laws, regulations, the Authority’s 2006 program administrative plan,
              HUD’s program requirements at 24 CFR Parts 5 and 982, and HUD’s Housing
              Choice Voucher Guidebook 7420.10.

       •      The Authority’s accounting records; annual audited financial statements for 2004,
              2005, and 2006; bank statements; household files; policies and procedures; board
              meeting minutes for January 2006 through July 2007; organizational chart; and
              program annual contributions contract with HUD.

       •      HUD’s files for the Authority.

We also interviewed the Authority’s employees, and the contractor’s and HUD staff.

Finding 1

Using data mining software, we statistically selected 71 of the Authority’s program households
from the 34,895 households on the Authority’s program as of September 24, 2007. The 71
households were selected to determine whether the Authority correctly calculated households’
housing assistance payments. Our sampling criteria used a 90 percent confidence level with a 50
percent estimated error rate.

Finding 2

Using data mining software, we statistically selected 32 of the Authority’s program individuals
from the 796 individuals on the Authority’s program as of September 24, 2007. The 32
individuals were selected to determine if the Authority inappropriately provided housing
assistance for deceased individuals and failed to capture the overpayments. Our sampling
criteria used a 90 percent confidence level with a 50 percent estimated error rate.

We performed our on-site audit work between October 2007 and March 2008 at the contractor’s
offices located at 60 East Van Buren Street, 8th Floor, Chicago, Illinois. The audit covered the
period January 1, 2006, through August 31, 2007, but was expanded as determined necessary.

We performed our audit in accordance with generally accepted government auditing standards.




                                               13
                             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,
   •   Validity and reliability of data,
   •   Compliance with applicable laws and regulations, and
   •   Safeguarding resources.

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 objective:

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

              •       Validity and reliability of data – Policies and procedures that management
                      has implemented to reasonably ensure that valid and reliable data are
                      obtained, maintained, and fairly disclosed in reports.

              •       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 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 internal controls do not provide reasonable
              assurance that the process for planning, organizing, directing, and controlling
              program operations will meet the organization’s objectives.


 Significant Weakness

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

                                               14
           •   The Authority lacked adequate procedures and controls to ensure compliance
               with HUD’s regulations and/or its program administrative plan regarding the
               program eligibility determination, calculation of housing assistance payments,
               and recovery of overpaid housing assistance for deceased individuals (see
               findings 1 and 2).

Separate Communication of
Minor Deficiencies

           We informed the Authority’s chief executive officer and the Director of HUD’s
           Chicago Office of Public Housing of minor deficiencies through a memorandum,
           dated August 25, 2008.




                                           15
                                   APPENDIXES

Appendix A

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


           Recommendation                                        Funds to be put
               number            Ineligible 1/ Unsupported 2/     to better use 3/
                 1A                                 $163,794
                 1B                  $89,896
                 1C                                                       $5,718
                 1D                    7,152
                 2A                   14,395
                 2B                                                        1,423
                 2C                    1,746
                Totals              $113,189          $163,794            $7,141


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.




                                            16
Appendix B

        AUDITEE COMMENTS AND OIG’s EVALUATION

Ref to OIG Evaluation   Auditee Comments




                         17
Ref to OIG Evaluation   Auditee Comments




Comment 1




                         18
Ref to OIG Evaluation   Auditee Comments




Comment 2




Comment 3




                         19
Ref to OIG Evaluation   Auditee Comments




Comment 4




Comment 5




Comment 6




                         20
Ref to OIG Evaluation   Auditee Comments




Comment 7




Comment 4




                         21
Ref to OIG Evaluation   Auditee Comments




Comment 8




Comment 9




                         22
Ref to OIG Evaluation   Auditee Comments




Comment 10




Comment 11




                         23
Ref to OIG Evaluation   Auditee Comments




Comment 12




Comment 12




                         24
Ref to OIG Evaluation   Auditee Comments




Comment 13




Comment 14




                         25
Ref to OIG Evaluation   Auditee Comments




Comment 15




                         26
Ref to OIG Evaluation   Auditee Comments




Comment 4




                         27
Ref to OIG Evaluation   Auditee Comments




Comment 4




                         28
Ref to OIG Evaluation   Auditee Comments




Comment 1




                         29
Ref to OIG Evaluation   Auditee Comments




Comment 16




Comment 17




Comment 18




                         30
Ref to OIG Evaluation   Auditee Comments




Comment 19




Comment 20




                         31
Ref to OIG Evaluation   Auditee Comments




Comment 21




Comment 22




Comment 23




                         32
Ref to OIG Evaluation   Auditee Comments




Comment 24




Comment 6




                         33
Ref to OIG Evaluation   Auditee Comments




Comment 24



Comment 25




Comment 22




Comment 6

Comment 3

Comment 3




                         34
Ref to OIG Evaluation   Auditee Comments




Comment 26




Comment 27




                         35
Ref to OIG Evaluation   Auditee Comments




Comment 28




Comment 29




                         36
Ref to OIG Evaluation   Auditee Comments




Comment 30




Comment 31




                         37
Ref to OIG Evaluation   Auditee Comments




Comment 30




Comment 30




                         38
Ref to OIG Evaluation   Auditee Comments




Comment 32




Comment 6




Comment 10




                         39
                        OIG’s Evaluation of Auditee Comments

Comment 1   We agree that the Authority’s contract with its contractor requires the contractor
            to implement a quality control plan and provide periodic reports to the Authority;
            however, this does not address that the Authority had not conducted any reviews
            of its contractor regarding the maintenance of documentation to support
            household eligibility or the calculation of housing assistance payments as of
            March 2008.

            We disagree that the Authority provided documentation that supports an
            independent review. The documentation provided shows the Authority observed
            the quality control activities performed by the contractor as stated in the
            contractor’s quality control plan. The quality control plan states that the
            contractor is responsible for consistently measuring and monitoring the results of
            its quality control efforts and the Authority reserves the right to observe quality
            control activities performed by the contractor.

Comment 2   We disagree with the Authority that one cannot draw adequate conclusions
            regarding the rates of errors in the Authority’s program files based on our
            sampling rate. The Authority’s statistician’s report agreed with our error rate
            computation methodology. The statistician’s report noted that the percent of files
            with errors was computed by dividing the number of files with errors by the total
            number of files and multiplying the result by 100. In practice, only a sample of
            files is examined and the percent of sampled files with errors is computed. An
            inference regarding the actual percent of files with errors is made based upon this
            sample percent. Our error rate was based on this methodology. In addition, the
            statistician’s report also stated that based on the number of files sampled and the
            percent of the sampled files with errors; one can determine a relevant probability
            or likelihood of an observed sample result.

            Our methodology for the review of files was discussed with the Authority during
            our audit. We statistically selected 125 household files from a universe of 34,895
            households receiving housing assistance payments as of September 24, 2007,
            using data mining software. The 125 files reviewed during the survey phase were
            not limited to household eligibility or the calculation of housing assistance
            payments. The 71 files noted in this audit report were reviewed to determine
            whether the Authority and/or its contractor had documentation for and correctly
            calculated households’ housing assistance and utility allowance payments for the
            period January 2006 through August 2007.

            We disagree with the Authority that there was a double-counting of errors and a
            recommendation for reimbursement for the same housing assistant payment
            dollars were counted twice for the same program household.




                                             40
Comment 3   We disagree with the Authority that our Office did not take into account the
            upgrading of the scanning process; we accepted alternate documents and adjusted
            our findings and recommendations where appropriate.

            The Authority began its scanning process in October 2006 and completed clearing
            the queue in June 2008. However, the Authority had not provided us with the
            missing documents for the remaining 25 households as of August 15, 2008. The
            Authority will have further opportunity to provide supporting documentation to
            HUD’s staff, who will work with the Authority, to resolve the recommendation.

Comment 4   The Authority is required to adopt a written administrative plan that establishes
            local policies for the administration of the program in accordance with HUD’s
            regulations at 24 CFR 982.54. According to HUD’s regulations at 24 CFR
            982.516(b)(3), the Authority must conduct an interim certification in accordance
            with its administrative plan. The Authority’s contractor did not conduct an
            interim certification in accordance with the administrative plan. The Authority’s
            administrative plan states that the Authority will conduct an interim certification
            when there is a decrease or increase in the household’s income that is expected to
            last at least 30 days.

            The Authority’s administrative plan, dated September 20, 2005, and December
            19, 2006, are in agreement when an interim certification should be conducted.
            However, the Authority’s procedures manual, dated October 2006, was
            inconsistent with the Authority’s previous and current administrative plans on
            when to conduct an interim certification. Because of the inconsistency in the use
            of the Authority’s policy and procedures, we used the Authority’s administrative
            plan in accordance with HUD’s regulations. When the Authority’s contractor did
            not follow the administrative plan, it resulted in housing assistance and utility
            allowance overpayments.

Comment 5   The Authority is correct that a statement was made during the exit conference that
            finding 2 might be removed from the report and addressed in a separate “minor
            finding” letter. However, we do not agree with the Authority that it met existing
            requirements because it did not attempt to recover housing assistance payments in
            accordance with its requirements. We agree that the Authority is in the process of
            attempting to recover the housing assistant payments; therefore, we adjusted the
            report to accurately reflect the Authority’s actions.

Comment 6   In accordance with 24 CFR 982.152(d), HUD may reduce or offset any
            administrative fee to public housing authorities, in the amount determined by
            HUD, if the authorities fail to perform their administrative responsibilities
            correctly or adequately under the program. We limited the questioned
            administrative fee to the gross error amount of the housing assistance payment.

Comment 7   We adjusted recommendations 1A, 1B, 1C, 1D, and finding 2 based upon additional
            documentation provided by the Authority.


                                             41
Comment 8      As previously mentioned in comment 2, the Authority’s statistician’s report agreed
               with our error rate computation methodology. The Authority’s acceptable margin of
               error was 10 percent. Per the statistician’s report in practice, only a sample of files is
               examined and the percent of sampled files with errors is computed. An inference
               regarding the actual percent of files with errors was made based upon this sample
               percent. If we find the probability of an observed sample result is less than or equal
               to 5 percent, we reject the assumption that 10 percent or fewer files contain errors
               and conclude that more than 10 percent of the files contain errors. We determined
               that of the 71 files reviewed, 42 (59 percent) had missing or incomplete documents
               and 60 (85 percent) contained errors in one or more of their income certifications.

               While the Authority may disagree with the finding, its interest in implementing a
               new quality assurance program indicates its willingness to further address the
               importance of this issue.

Comment 9      While the Authority may disagree with the finding, its interest in implementing
               controls and procedures indicates its willingness to further address the importance of
               this issue. As previously mentioned in comment 5, we do not agree with the
               Authority that it met existing requirements because it did not attempt to recover
               housing assistance payments in accordance with its requirements.

Comment 10 We disagree that the audit report inaccurately reflected the fact that documentation
           was provided in many cases. As previously mentioned in comment 3, the Authority
           will have further opportunity to provide supporting documentation to HUD’s staff,
           who will work with the Authority, to resolve the recommendation.

               The recommendations in this report were adjusted to reflect the Authority’s
               comments and documentation. As noted in the finding 1, the contractor obtained
               new or original documentation for 17 of the 42 household files after we notified it
               of the missing or incomplete documents during the audit. As a result, the
               questioned cost cited in recommendation 1A only reflects the missing
               documentation for the remaining 25 household files (42 minus 17).

Comment 11 We disagree with the Authority that any double counting of unsupported or
           ineligible payments are presented in this audit report. The four files were reviewed
           for different purposes (household eligibility and the calculation of housing assistance
           payments). We did not combine the results of the separate testing.

Comment 12 The recommendations in this report were adjusted to reflect the Authority’s
           comments and documentation provided during and after the issuance of the
           discussion draft audit report. As previously mentioned in comment 10, the
           contractor obtained new or original documentation files after we notified it of the
           missing or incomplete documents during the audit. As a result, the questioned
           cost cited in recommendation 1A only reflects the missing documentation for the
           remaining household files where documentation was not provided.



                                                  42
Comment 13 We agree with the Authority that HUD’s regulations at 24 CFR 982.305(d) states
           that after receiving the family request for approval of the assisted tenancy, the
           public housing authority must promptly notify the family and owner whether the
           assisted tenancy is approved. We do not agree that this regulation does not
           require a specific form. The regulation states after receiving the family request
           for approval refers to HUD form 52517, Request for Tenancy Approval.

              HUD’s regulations at 24 CFR 982.305(a) states that the public housing authority
              may not give approval for the family of the assisted tenancy, or execute a housing
              assistance payment contract, until the public housing authority has determined
              that all the following meet program requirements: (1) the unit is eligible; (2) the
              unit has been inspected by the public housing authority and passes housing quality
              standards; (3) the lease includes the tenancy addendum; (4) the rent to owner is
              reasonable; and (5) at the time a family initially receives tenant-based assistance
              for occupancy of a dwelling unit, and where the gross rent of the unit exceeds the
              applicable payment standard for the family, the family share does not exceed 40
              percent of the family’s monthly adjusted income. Eligible families must submit
              this information to he public housing authority on HUD form 52517 when
              applying for housing assistance under Section 8 of the U.S. Housing Act of 1937
              (42 U.S.C. 1437f). The public housing authority uses the information to
              determine if the family is eligible, if the unit is eligible, and if the lease complies
              with program and statutory requirements. In addition, HUD form 52517 requires
              an owner and household signature.

              As previously mentioned in comment 10, the contractor obtained new or original
              documentation files after we notified it of the missing or incomplete documents
              during the audit. As a result, the questioned cost cited in recommendation 1A
              only reflects the missing documentation for the remaining household files where
              documentation was not provided. In addition, we did not question program
              administrative fees or housing assistance payments for the files where only the
              request for tenancy approval was not provided.

Comment 14 We adjusted recommendation 1A based upon alternative documentation provided
           by the Authority.

Comment 15 The audit report does not reflect double counting of housing assistance payments.
           The recommendations are reflected of the separate errors found in the household
           files. The 71 files were reviewed to determine whether the Authority and/or its
           contractor had documentation for and correctly calculated households’ housing
           assistance and utility allowance payments. We determined 25 files had missing or
           incomplete documents and the contractor miscalculated and failed to comply with
           program requirements resulted in housing assistance and utility allowance
           overpayments and underpayments in 60 household files.

              The differences noted in attachment 3 were due to work in progress. The original
              numbers dated May 7, 2008, were noted in a draft finding outline and was


                                                43
              updated due to additional work. The schedule dated July 16, 2008, was the result
              of the additional work and supporting documentation provided by the Authority.

Comment 16 We disagree with the Authority. The Authority did not provide documentation to
           support that it conducted quality control reviews of its contractor. It provided us
           with its Authority wide housing choice voucher review conducted by its internal
           audit division. The final review was released on February 3, 2005, with an
           overall risk rating of high. A high observation includes control weaknesses that
           are causing disruption of the process or adversely affecting the Authority’s ability
           to achieve process objectives.

              The review noted that it did not appear that responsibility for contract
              administration and performance management had been clearly defined. It also
              noted that it did not appear that the Authority was effectively reviewing its
              contractor’s performance results in a timely manner to ensure they met the
              established performance measurements. It further stated that 7 of the 17 (41
              percent) of the quality control standards required of the contractor were above the
              tolerable percentage of error for the majority of the year. Moreover, the internal
              review found the Authority’s current quality control measures at its contractor
              were inadequate.

              The Authority also provided us an onsite review conducted by Nan McKay and
              Associates of a representative sample of the Authority’s tenant-based Section 8
              files. On-site work was performed from November 28 through November 30,
              2008. The purpose of the review was to provide Nan McKay and Associates
              with a deeper understanding of how public housing authorities’ policies and
              procedures impact the execution of program requirements. This was clearly not a
              quality control review on the behalf of the Authority.

              In addition, the Authority provided us with its reviews of its contractor to confirm
              its 2007 section eight management assessment program scores. The contractor
              provided the Authority the supporting documentation and the Authority stated that
              it reviewed the documentation and found an error only in the deconcentration
              bonus indicator. There were no errors found in the other section eight
              management assessment program indicators. The Authority did not pull
              independent samples to review; it relied on the contractor’s supporting
              documentation, information in the Authority’s system, and information that was
              entered into HUD’s systems. The Authority only confirmed indicator 4, utility
              allowance schedules, with an outside entity.

              These three reviews provided by the Authority only further emphasizes that the
              Authority’s weaknesses in its procedures and controls over its contractor.

Comment 17 We revised this audit report to show that the Authority’s contract requires the
           contractor to implement a quality control system in which an error rate of no more
           than 10 percent is acceptable in the calculation of household contribution.


                                               44
Comment 18 The Authority did not provide sufficient documentation with its written comments
           to support that the three files we identified did not have errors in housing
           assistance and utility allowance payments.

Comment 19 We disagree with the Authority that HUD’s rental integrity reviews in August
           2002 and 2004 have no relevance to this audit. The prior reviews conducted by
           HUD shows that the Authority was aware of previous errors the contractor made
           in its housing assistance and utility payments functions. In addition, the errors
           noted in HUD’s rental integrity reviews were the same issues we identified during
           our audit which further emphasizes that the Authority has weaknesses in its
           procedures and controls over its contractor.

Comment 20 We revised the report based on the documentation received from the Authority
           during and after the issuance of the discussion draft audit report.

Comment 21 We disagree with the Authority that the entire discussion regarding the
           Authority’s use of HUD’s Enterprise Income Verification system should be
           removed from this audit report. Per the Authority’s program administrative plan,
           an interim reexamination must be conducted if a family’s increase in income is
           expected to last at least 30 days. As previously mentioned in comment 4, the
           Authority must conduct an interim certification in accordance with its
           administrative plan in accordance with HUD’s regulations at 24 CFR
           982.516(b)(3). For 38 of the 71 households reviewed, when the contractor ran a
           system report and it indicated an increase in the household’s reported income, the
           contractor did not conduct an interim certification, resulting in an
           over/underpayment of housing assistance and utility allowance payments.

Comment 22 The Authority did not provide sufficient documentation to show that its program
           administrative plan was revised on July 15, 2008.

Comment 23 While the Authority may disagree with the finding, its interest in revising the
           application form to avoid any possibility for confusion on the part of the applicant
           as to the procedures for reporting changes in income indicates the Authority’s
           willingness to further address the importance of this issue.

Comment 24 While the Authority may disagree with the finding, its interest in implementing
           controls and procedures indicates the Authority’s willingness to further address
           the importance of this issue.

Comment 25 While the Authority may disagree with the finding, its interest in implementing
           controls and procedures indicates the Authority’s willingness to further address
           the importance of this issue. As previously mentioned in comment 22, the
           Authority did not provide sufficient documentation to show that its program
           administrative plan was revised.




                                              45
Comment 26 The audit report accurately reflects that the Authority’s contractor recovered
           overpayments of $21,614. Additional language was added to the audit report to
           reflect the contractor’s attempts to collect the remaining amount. The Authority
           did not provide sufficient documentation to show that it made efforts to reimburse
           the appropriate households $1,423 for the underpayment of housing assistance and
           utility allowances cited in this audit report.

Comment 27 The sub-heading was revised to reflect that the Authority had not recovered
           housing assistance and utility allowance payments for two households.

Comment 28 We added additional language to the audit report to accurately reflect the
           contractor’s attempts to collect the remaining amount for the deceased household.

Comment 29 We added additional language to the audit report to accurately reflect the
           contractor’s attempts to repay the underpaid housing assistance payments.

Comment 30 We added additional language to the audit report to accurately reflect the
           contractor’s attempts to recover the overpaid housing assistance payments and
           repay the underpaid housing assistance payments.

Comment 31 The Authority’s efforts are commendable. The Authority’s proposed actions, if
           fully implemented, should substantially improve its procedures and controls to
           ensure that funds paid related to deceased tenants are collected according to its
           administrative plan and interim certifications are performed when household
           members are reported as deceased.

Comment 32 See comment 6. The administrative fees were only questioned during the time the
           Authority was not seeking recovery or repayment for the underpaid and overpaid
           housing assistance payments for the three households cited in the audit report.




                                              46
Appendix C

        FEDERAL REGULATIONS AND THE AUTHORITY’S
                    REQUIREMENTS

HUD’s regulations at 24 CFR 982.54 require the public housing authority to adopt a written
administrative plan that establishes local policies for the administration of the program in
accordance with HUD requirements. The administrative plan states the public housing
authority’s policies on matters for which the public housing authority has discretion to establish
local policies. The public housing authority must administer the program in accordance with its
administrative plan.

The Authority’s agreement executed on February 6, 2000, part II, article I (A), states that the
Authority is subject to the requirements of the annual contributions contracts, the United States
Housing Act of 1937, and other HUD requirements, except as necessary to implement the
Authority’s activities described in the memorandum of approval and resident protection
agreement.

The revised contract between the Authority and its contractor, effective December 1, 2002,
section 7.01, states that an event of default as the contractor’s material failure to perform the
contractor’s services in accordance with the performance standards set forth in exhibit B under
the agreement or material failure to comply with the quality controls set forth in exhibit E under
the agreement. According to exhibit E, quality control plan, the goal for integrity of basic
program functions including 50058 preparations, housing assistance payments calculation, and
compliance with lead-based paint regulations covering all programs, is 10 percent error rate.
Also, the error rate goal for the accuracy of primary participant file review or quality control
reviews and error correction reports from initial file reviews to assess performance of the quality
control specialist is 10 percent.

Section 2.18 of the revised contract effective December 1, 2002, state there shall be a contract
performance review committee ("review committee"), which shall consist of the Authority chief
of staff, managing director of resident services, director of section 8, other Authority staff as
designated by the Authority, and contractor representatives designated by the contractor. The
review committee shall meet no less frequently than quarterly to review management issues, the
operating budget, and other matters related to the smooth, orderly and efficient management and
operation of the section 8 programs. These meetings shall take place within the month following
the end of each quarter if possible, and shall be scheduled by the Authority with advance notice
and agenda provided to all parties. At least three (3) days prior to each scheduled quarterly
meeting of the review committee, or as otherwise agreed to by the parties, the contractor shall
submit a copy of its most recent written monthly performance report and quarterly community
impact report to each representative serving on the committee, as specified in exhibit D, as well
as financial and budget reports, and such other information as the Authority and the contractor
agree is reasonably required or may be required by the terms of this agreement or for purposes of
any specific meeting. It shall be the duty of the review committee to: (1) review and resolve any


                                                47
differences regarding the contractor's performance relative to contract goals, including status of
incentive goals and claims for payment of incentive fees; (2) discuss and resolve issues, if any,
impeding the ability of the contractor to achieve the performance standards and/or performance
incentive fees; (3) review the operating budget and actual operating expenses and reports; (4)
review any requests by the contractor for operating budget amendments; (5) review and discuss
any and all performance deficiencies of the contractor so that the contractor can take steps to
correct said deficiencies, including such steps as may be suggested by the review committee
consistent with the Agreement; and (6) consider any other matters affecting or regarding the
Authority’s section 8 programs and their administration by the contractor.

Finding 1

HUD’s regulations at 24 CFR 5.216(a) state that each assistance applicant must submit the
complete and accurate Social Security number assigned to the applicant and to each member of
the household who is at least six years of age. The documentation necessary to verify the Social
Security number of an individual is a valid Social Security number issued by the Social Security
Administration or such other evidence of the Social Security number as HUD and, as applicable,
the public housing authority may prescribe in administrative instructions.

HUD’s regulations at 24 CFR 5.230(a) state that each member of the family of an assistance
applicant or participant who is at least 18 years of age and each family head and spouse
regardless of age shall sign one or more consent forms.

HUD’s regulations at 24 CFR 5.508 require evidence of citizenship or eligible immigration
status for each household member regardless of age. For U.S. citizens or U.S. nationals, the
evidence consists of a signed declaration of U.S. citizenship or U.S. nationality.

HUD’s regulations at 24 CFR 982.158(a) state that the public housing authority must maintain
complete and accurate accounts and other records for the program in accordance with HUD
requirements in a manner that permits a speedy and effective audit. During the term of each
assisted lease and for at least three years thereafter, the authority must keep (1) a copy of the
executed lease, (2) the housing assistance payments contract, and (3) the application from the
family. The authority must keep the following records for at least three years: records that
provide income, racial, ethnic, gender, and disability status data on program applicants and
participants; unit inspection reports; lead-based paint records as required by part 35, subpart b of
this title; and other records specified by HUD.

HUD’s regulations at 24 CFR 982.201 state that the public housing authorities must follow
certain criteria when determining the family’s eligibility for the programs. The family must meet
the family, citizenship, and income eligibility requirements.

HUD’s regulations at 24 CFR 982.305(b)(ii) states that the public housing authority may not
give approval for the family of the assisted tenancy or execute a housing assistance payment
contract until the authority has determined that the landlord and the tenant have executed the
lease (including the HUD-- prescribed tenancy addendum and the lead-based paint disclosure
information as required in section 35.92(b) of this title).


                                                 48
HUD’s regulations at 24 CFR 982.516(a)(1) state that the public housing authority must conduct
a reexamination of family income and composition at least annually.

HUD’s regulations at 24 CFR 5.240(c) state that the public housing authority must verify the
accuracy of the income information received from a household and change the amount of the
total tenant payment, tenant rent, or program housing assistance payment or terminate assistance,
as appropriate, based on such information.

HUD’s regulations at 24 CFR 982.516(a)(1) require the public housing authority to conduct a
reexamination of family income and composition at least annually. The public housing authority
must obtain and document in the household file third-party verification or why third-party
verification was not available for the following factors: (1) reported family annual income, (2)
the value of assets, (3) expenses related to deductions from annual income, and (4) other factors
that affect the determination of adjusted income. At any time, the public housing authority may
conduct an interim reexamination of family income and composition.

HUD’s regulations at 24 CFR 982.451 require the public housing authority to determine the
amount of the monthly housing assistance payment in accordance with HUD regulations and
other requirements.

The Authority’s administrative plan at part III General Administration, Interim Reexaminations,
states that the rent and other charges shall remain in effect for the period between regularly
scheduled reexaminations except that a family previously receiving a zero housing assistance
payment must report within 30 days any change in income that will last more than 30 days and a
decrease or increase in income expected to last at least 30 days. A decrease in the tenant’s total
tenant payment, whether completed at annual, biennial or interim reexamination, will be
effective the first day of the month following the month in which the change was reported,
provided the change was reported within the required 30 days. An increase in the tenant’s total
tenant payment, whether completed at an annual, biennial or interim reexamination, will be
effective the first day of the second month following the date the change occurred, except in
cases in which underreporting of income by the participant has occurred.

Finding 2

HUD’s regulations at 24 CFR 982.516(b)(3) states that the housing authority must conduct an
interim certification in accordance with its administrative plan.

The Authority’s program administrative plan, section III, General Administration,
Reexamination of Household Composition, Income, Allowances and Rent, requires the
Authority to conduct an interim certification when there is a change in family composition.

The Authority’s program administrative plan, section III, General Administration, Repayment
Agreement, states that the Authority will provide the owner the opportunity to repay immediately
or enter into a repayment agreement. Also, the owners who are currently receiving housing
assistance payments will automatically have the overpayment deducted from their current
housing assistance payments unless otherwise agreed upon by the Authority.


                                                49
The Authority’s program procedures manual, chapter 18, part 9, states once the Authority
becomes aware of an overpayment, an overpayment letter is mailed to the owner. The owner
then has 30 days to repay the outstanding balance. If the owner owing money to the Authority is
currently receiving housing assistance, the Yardi System will auto-deduct the overpayments
amount from the owner’s current assistance payments.




                                              50