oversight

The Anaheim Housing Authority, Anaheim, California, Did Not Always Operate Its Section 8 Housing Choice Voucher Program Effectively

Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-01-16.

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

                                                                Issue Date
                                                                        January 16, 2008
                                                                Audit Report Number
                                                                         2008-LA-1005




TO:        K.J. Brockington, Director, Los Angeles Office of Public Housing, 9DPH



FROM:      Joan S. Hobbs, Regional Inspector General for Audit, Region IX, 9DGA

SUBJECT: The Anaheim Housing Authority, Anaheim, California, Did Not Always Operate
           Its Section 8 Housing Choice Voucher Program Effectively

                                   HIGHLIGHTS

 What We Audited and Why

      We audited the Anaheim Housing Authority’s (Authority) tenant eligibility and
      reexamination policies and procedures for its Section 8 Housing Choice Voucher
      program (program) based on a suggestion from the Los Angeles U.S. Department of
      Housing and Urban Development (HUD) Office of Public Housing. HUD requested that
      we review the Authority’s reexamination process after a recent admission by the
      Authority’s executive director that the Authority was experiencing problems with its
      eligibility and reexamination activities. HUD had also identified problems with the
      Authority’s rent reasonableness determinations.

      The objective of the audit was to determine whether the Authority followed HUD rules
      and regulations in determining tenant eligibility, rent calculations, and rent
      reasonableness.

 What We Found


      Although we did not identify any tenants that were not eligible for the Authority’s
      program in the sample of 10 tenant files reviewed (three of which were new admissions),
     we determined that the Authority incorrectly calculated housing assistance payments and
     processed annual recertifications without ensuring that all HUD requirements were met.
     We identified a total of $6,097 in housing assistance overpayments and $90 in housing
     assistance underpayments related to tenant reexaminations. In addition, although we
     noted that the Authority had significantly improved its rent reasonableness practices since
     late 2006, the Authority’s rent reasonableness procedures were not in accordance with all
     HUD rules and regulations.

What We Recommend

     We recommend that the Director of HUD’s Los Angeles Office of Public Housing
     require the Authority to reimburse the program $6,097 from nonfederal funds for the
     overpayment of housing assistance; reimburse the appropriate tenant $90 from program
     funds for the underpayment of housing assistance; provide support for the use of the
     “energy efficient” utility allowance schedule for one tenant and the rent amounts for two
     tenants or adjust the housing assistance payments as necessary; ensure that the new
     administrative plan is properly implemented throughout the organization; and implement
     additional procedures and controls over eligibility, quality control reviews, and rent
     reasonableness determinations.

     For each recommendation without a management decision, please respond and provide
     status reports in accordance with HUD Handbook 2000.06, REV-3. Please furnish us
     copies of any correspondence or directives issued because of the audit.

Auditee’s Response

     We provided the Authority the draft report on December 14, 2007, and held an exit
     conference with the Authority on December 20, 2007. The Authority generally agreed
     with our report.

     We received the Authority’s response on January 10, 2008. The complete text of the
     auditee’s response can be found in appendix B of this report.




                                              2
                             TABLE OF CONTENTS

Background and Objectives                                                      4

Results of Audit
   Finding 1: The Authority Did Not Determine Housing Assistance Payments in   5
              Accordance with HUD Rules and Regulations
   Finding 2: The Authority Did Not Fully Document Rent Reasonableness in      9
              Accordance with HUD Rules and Regulations

Scope and Methodology                                                          12

Internal Controls                                                              13

Appendixes
   A.   Schedule of Questioned Costs and Funds to Be Put to Better Use         14
   B.   Auditee Comments                                                       15
   C.   Schedule of Tenant Eligibility Errors Noted in Tenant Files            17
   D.   Criteria                                                               18




                                              3
                     BACKGROUND AND OBJECTIVES

The Anaheim Housing Authority (Authority) was established in 1975 and is a subdivision of the
Housing Services Division of the Community Development Department of the city of Anaheim.
The Authority is the largest subdivision, and it has more employees than the combined total of
the other three subdivisions. The Authority is governed by a five-member board, which also acts
as the Anaheim City Council.

The Anaheim Housing Services Division provides affordable housing opportunities to eligible
residents in the community and aims to preserve, improve, and expand the supply of affordable
housing in the city by providing direct financial assistance to renters, homeowners, and
affordable housing development. The Housing Services Division receives funding from several
federal housing programs, including the Section 8 Housing Choice Voucher program and the
HOME program.

The Authority administers a tenant-based Housing Choice Voucher Section 8 program (program)
and currently has 6,216 Section 8 tenant-based assistance vouchers. The Authority does not own
or operate any conventional public housing units.

On April 16, 2007, The U.S. Department of Housing and Urban Development (HUD) lowered
the Authority’s Section Eight Management Assessment Program (SEMAP) score for 2006 and
put the Authority under troubled status, based on a recent admission by the Authority’s executive
director that the Authority was experiencing problems with its eligibility and reexamination
activities, including using housing assistance payments to pay the tenants’ portion of rent. As a
result, HUD suggested that we review the Authority’s reexamination process. Before our
entrance conference, the Authority provided HUD with a list of all questioned costs associated
with the Authority’s paying the tenants’ portion of rent. On August 31, 2007, HUD required the
Authority to pay back $421,329 in questioned costs to the program.

In addition, the Authority had previously received zero points for its rent reasonableness SEMAP
indicator for 2006. HUD had not yet conducted its follow-up review to determine whether the
Authority had corrected these practices.

The objective of the audit was to determine whether the Authority followed HUD rules and
regulations in determining tenant eligibility, rent calculations, and rent reasonableness.




                                               4
                                 RESULTS OF AUDIT

Finding 1: The Authority Did Not Determine Housing Assistance
Payments in Accordance with HUD Rules and Regulations
Although we did not identify any tenants that were not eligible for the Authority’s program in the
sample of 10 tenant files we reviewed (three of which were new admissions), we determined that
the Authority incorrectly calculated housing assistance payments and processed annual
recertifications without ensuring that all HUD requirements were met. We reviewed 10 files and
identified problems in six of the files, four of which resulted in overpayment and underpayment
of housing assistance. These errors were a result of the Authority’s failure to maintain and
follow an updated administrative plan that followed all HUD rules and regulations. As a result,
HUD improperly made $6,097 in housing assistance overpayments and $90 in housing assistance
underpayments.


 Reexamination Errors Resulted
 in the Overpayment and
 Underpayment of Housing
 Assistance


       Our review of the Authority’s initial and annual examinations for 10 tenant files identified
       errors in four files that resulted in overpayment or underpayment of housing assistance, as
       follows:

             •   In two files, the Authority did not conduct an interim reexamination after the
                 tenant reported a significant increase in income. Regulations at 24 CFR [Code of
                 Federal Regulations] 982.516(b)(3) provide that “interim examinations must be
                 conducted in accordance with policies in the PHA [public housing agency]
                 administrative plan,” and the Authority’s administrative plan instructs staff to
                 conduct an interim reexamination when families have an increase in income of
                 more than $300 per month. The Authority’s failure to conduct an interim
                 reexamination resulted in its overpaying $4,760 in housing assistance. Also, in
                 one of the two files, the Authority did not obtain any new income or asset
                 documentation at the time of the reexamination.

             •   In one file, the Authority miscalculated tenant income during two separate annual
                 reexaminations and used the incorrect number of dependents for one annual
                 reexamination, resulting in overpayments of $564 in housing assistance for the
                 tenant during our audit period. In addition, the Authority used the “energy
                 efficient” utility allowance schedule without any supporting documentation as to
                 how the unit qualified as “energy efficient,” which further impacted the housing
                 assistance payment amounts. The “energy efficient” utility allowance schedule


                                                 5
              provides a lower utility allowance in light of the energy-efficient appliances and
              setup of the unit.

          •   In one file, the Authority issued a duplicate check and, therefore, double paid one
              month of housing assistance totaling $773. The Authority also miscalculated the
              tenant’s income, which resulted in underpayments of housing assistance from May
              1, 2006, through January 31, 2007, totaling $90.


Other Reexamination Issues
Were Identified during File
Reviews


     We identified various other errors during our file reviews of the tenant’s initial and/or
     annual reexamination (see appendix C for a schedule of discrepancies). In these instances,
     there was no impact to the housing assistance payment amount and/or we were able to
     verify that the housing assistance payments were acceptable upon further follow-up.
     However, these types of issues generally impact the housing assistance payment calculations
     and, therefore, represent problems with the Authority’s eligibility and reexamination
     practices.

          •   The Authority did not sufficiently verify full-time student status.

          •   The Authority used the incorrect payment standard when completing rent
              calculations for two separate reexaminations.

          •   The Authority did not obtain source income documents and instead relied on
              income information obtained from HUD’s Enterprise Income Verification system.
              The system is intended to be used in conjunction with family-provided documents
              as verification of income and, therefore, should not be the sole source of all
              income calculations.

          •   The Authority did not complete sufficient third-party verification of income
              relating to annual child support payments.

     Additionally, the Authority did not complete the reexamination within sufficient time to
     give the tenant 30 days’ notice of rent increase in four files. This delay resulted in the
     ineligible use of housing assistance payments for the tenants’ portion of rent from October
     2004 through January 2007. However, HUD learned of this issue before our audit, and the
     Authority paid back $421,329 in funds related to this problem on October 22, 2007 (see the
     Background and Objectives section of this report).




                                               6
Policies and Procedures Were
Inadequate

     The tenant eligibility issues occurred because the Authority did not maintain updated
     comprehensive policies and procedures, nor did it follow its administrative plan to ensure
     that its initial and annual examinations were performed in accordance with HUD rules
     and regulations. Specifically, it did not maintain its administrative plan to ensure that
     policies and procedures were updated in accordance with HUD regulations and that staff
     was informed of all the details necessary to perform essential duties relating to the
     calculation of housing assistance payments and to ensure compliance with HUD
     requirements.

     Further, the Authority’s quality control review practices failed to detect reexamination
     errors. We identified seven quality control reviews applicable to our sample of tenant
     files, each with no findings. The quality control reviews were performed by the
     supervisor of the staff members who conducted the reexamination. We noted errors in
     four of the applicable reexaminations, including the use of an incorrect payment standard,
     miscalculated income, and incorrect number of dependents (see appendix C).

     The Authority had not updated its administrative plan since June 28, 2004. As a result,
     its staff did not correctly calculate tenant income and made other errors that resulted in
     $6,097 in overpayments and $90 in underpayments of housing assistance for the four files
     reviewed. During the course of our audit, the Authority issued a revised version of the
     administrative plan in July 2007. The new administrative plan was much more detailed
     and inclusive of HUD rules and regulations than the outdated plan, which should help
     address most of the reexamination discrepancies. The Authority needs to ensure that the
     new plan is properly implemented throughout the organization. We noted no changes in
     the Authority’s quality control review procedures.

Recommendations



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

     1A.    Reimburse its program $6,097 from nonfederal funds for overpayment of housing
            assistance.

     1B.    Reimburse the appropriate tenant $90 from program funds for the underpayment
            of housing assistance.

     1C.    Provide support for the use of the “energy efficient” utility allowance schedule for
            tenant S2 or adjust the housing assistance payments as necessary.




                                             7
1D.   Follow-up with the errors noted in this report and make corrections to the housing
      assistance payments for the periods outside our audit scope.

1E.   Ensure that the new administrative plan is properly implemented throughout the
      organization to ensure that Authority staff follows the administrative plan,
      including the issues identified in the audit finding.

1F.   Implement procedures and controls to ensure that quality control reviewers
      provide accurate and complete quality control reviews.




                                       8
Finding 2: The Authority Did Not Fully Document Rent
Reasonableness in Accordance with HUD Rules and Regulations
Although the Authority had significantly improved its rent reasonableness practices since late
2006, we identified instances in which rent reasonableness determinations were not fully
documented. The incomplete rent reasonableness reviews were a result of the Authority’s failure
to maintain an updated administrative plan that followed all HUD rules and regulations. As a
result, HUD may have improperly made at least $200 in housing assistance overpayments. In
addition, HUD faces an inherent risk that incomplete rent reasonableness reviews could result in
paying more rent for units than is reasonable.


 The Authority Initiated New
 Rent Reasonableness Practices
 to Correct Prior Deficiencies


       We reviewed four files from our statistical sample and confirmed that the Authority had
       previously not followed HUD’s rent reasonableness requirements under 24 CFR [Code of
       Federal Regulations] 982.507 or HUD’s Housing Choice Voucher Guidebook 7420.10G,
       chapter 9, to ensure that tenant rent was reasonable. It had previously only obtained one
       comparable and did not necessarily perform the rent reasonableness review at the time of
       the rent increase request. In addition, the Authority had not documented its analysis of
       the comparables’ factors (such as amenities, square footage, age, condition, and services)
       in accordance with 24 CFR 982.507(b). Further, the Authority did not include
       documentation to support the source of the comparable in the tenant’s file.

       However, the Authority had improved its rent reasonableness practices after subscribing
       to a Web-based database in August 2006. The rent reasonableness data are updated and
       evaluated by Pierce-Eislen, an independent company. The database provides more
       detailed documentation of the comparables than the Authority had previously
       documented in the tenant files. The Authority now obtains three comparables and uses a
       new form that compares various factors for the unit and the comparables.

 Rent Reasonableness
 Determinations Were Not
 Always Fully Documented

       To determine whether the Authority met rent reasonableness requirements, we reviewed
       five files from our statistical sample. We were able to confirm that the Authority
       implemented the new practices identified above, which significantly improved the quality




                                               9
     and support for the Authority’s rent reasonableness determinations. However, we noted
     some procedural issues with the Authority’s current rent reasonableness practices.

            •   The rent reasonableness documentation for one file (tenant S1) was
                incomplete and unsigned and did not fully support the $50 rent increase,
                effective June 1, 2007.

            •   Review of the five files showed that the Authority did not document its
                comparison of assisted unit rent to unassisted units within the same complex in
                accordance with 24 CFR [Code of Federal Regulations] 982.507 and Housing
                Choice Voucher Guidebook 7420.10G, chapter 9.2, to ensure that the owner did
                not charge a higher rent than the comparable unassisted units on the premises.
                Authority management confirmed that it did not document this information
                unless it was completing a new request for tenancy approval for a tenant. In one
                case, the proposed $880 rent for a new admission (tenant S10) exceeded the
                comparable unassisted unit rent of $780 identified by the owner on its request for
                tenancy approval by $100 per month. The Authority approved it without
                justification documented in the file, so it is unclear whether the additional $200
                paid through the end of our audit period ($100 per month for March and April
                2007) was reasonable.

            •   Although the Authority obtained amenity information, it did not document its
                comparison of the amenities. Regulations at 24 CFR 982.507(b) state that the
                Authority must consider amenities in its rent reasonableness determinations.

Policies and Procedures Were
Inadequate

     As in finding 1, the rent reasonableness issues existed because the Authority did not
     maintain updated comprehensive policies and procedures, nor did it follow its
     administrative plan to ensure that its rent reasonableness reviews were performed in
     accordance with HUD rules and regulations. As a result, there was an inherent risk that
     HUD or the program participants would pay more rent for units than was reasonable.

     During the course of our audit, the Authority issued a revised version of the
     administrative plan in July 2007. The new administrative plan included detail on how the
     rents were to be determined and set forth policy regarding the use of rent data provided
     by a third-party provider. However, the plan did not require the verification of the rent
     charged for unassisted comparable units on the premises during all rent reasonableness
     reviews.




                                             10
Recommendation



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

    2A.    Provide support to justify the rent increases for S1 and S10 or adjust the housing
           assistance payments and reimburse the program from nonfederal funds as
           necessary (at least $200).

    2B.    Ensure that the new administrative plan is properly implemented throughout the
           organization to ensure that Authority staff follows the administrative plan when
           determining rent reasonableness procedures.

    2C.    Implement procedures to ensure that Authority staff verify and document that the
           rent charged for unassisted comparable units on the premises does not exceed the
           rent of the assisted unit during all rent reasonableness reviews and that the
           comparison of unit amenities is documented in the tenant files.




                                            11
                         SCOPE AND METHODOLOGY

We performed our on-site audit work from May through September 2007 at the Authority’s
office in Anaheim, California. The audit generally covered the period May 1, 2006, through
April 30, 2007. We expanded our audit period as needed to accomplish our objectives.

To accomplish our audit objectives, we

     •   Reviewed applicable HUD regulations, including 24 CFR [Code of Federal
         Regulations] Part 982 and Housing Choice Voucher Guidebook 7420.10G.
    •    Reviewed the Authority’s last updated administrative plan, dated 2004.
    •    Interviewed personnel from the HUD Office of Public Housing, Los Angeles field
         office.
    •    Interviewed Authority supervisors and staff to determine their job responsibilities and
         their understanding of tenant eligibility and rent reasonableness.
    •    Reviewed paper and electronic records maintained by HUD pertaining to the Authority.
    •    Reviewed the Authority’s financial audit reports for fiscal years 2005 and 2006, as well
         as its staff listing and organizational chart.
    •    Reviewed data from HUD’s Public Housing Information Center and Enterprise Income
         Verification systems regarding tenants in our statistical sample.
    •    Reviewed a portion (10 tenant families) of a statistical sample to determine whether the
         Authority followed HUD rules and regulations in determining tenant eligibility and rent
         calculations.
    •    Reviewed a portion of a statistical sample to determine whether the Authority had
         previously followed HUD rules and regulations in determining rent reasonableness
         before new procedures became effective in 2006 (reviewed four tenant families) and
         since new procedures became effective in 2006 (reviewed five tenant families).

Using the universe of Section 8 housing assistance payments, we statistically selected a sample
of payments that the Authority made on behalf of its program tenants. The universe contained
5,917 tenants whose property owners received $46.4 million on their behalf during our audit
period, represented by 67,610 individual transactions. We obtained a statistical sample of 53
tenants to review during our survey and audit phases, based on a confidence level of 90 percent.
Our statistical sample consisted of 53 tenants who were paid $407,032 during our audit period,
represented by 597 individual transactions. However, after reviewing 10 of the 53 files (almost
19 percent of our sample), we decided to stop our audit at the survey phase, due to the low
severity of the errors and the corrective actions the Authority had already taken.

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




                                                12
                              INTERNAL CONTROLS

Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following objectives are being achieved:

            •   Effectiveness and efficiency of operations,
            •   Reliability of financial reporting, and
            •   Compliance with applicable laws and regulations.

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance.



 Relevant Internal Controls


       We determined the following internal controls were relevant to our audit objectives:

                •   Policies and procedures to ensure that housing assistance payments and rent
                    reasonableness reviews are complete and accurate.
                •   Policies and procedures to ensure that active tenants are eligible.
                •   Policies and procedures to ensure that adequate tenant/financial management
                    and tenant record-keeping systems are in place.

       We assessed the relevant controls identified above.

       A significant weakness exists if management controls do not provide reasonable assurance
       that the process for planning, organizing, directing, and controlling program operations will
       meet the organization’s objectives.

 Significant Weaknesses

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

                •   The Authority did not have adequate policies and procedures to ensure that
                    housing assistance payments (finding 1) or rent reasonableness reviews
                    (finding 2) were complete and accurate.




                                                13
                                   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                $6,097
               1B                                                         $90
               2A                                      $200


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 this instance, if the Authority implements our
     recommendations, it will ensure that tenants are reimbursed for personal funds they
     should not have expended as the Authority underpaid the amount of assistance they were
     entitled to receive under the Section 8 Housing Choice Voucher program. Once the
     Authority successfully improves its controls, this will be a recurring benefit.




                                              14
Appendix B

             AUDITEE COMMENTS




                    15
16
Appendix C

           SCHEDULE OF TENANT ELIGIBILITY ERRORS
                  NOTED IN TENANT FILES


Tenant                      S1     S2    S3 S4 S5 S6       S7     S8    S9 S10   Total
Reexamination not                  X     X        X               X               4
timely
No income documents         X            X                                         2
obtained
No reexamination after      X                              X                       2
significant increase in
income
Miscalculated tenant               X                              X                2
income
Double paid one month                                             X                1
of housing assistance
No asset documents          X                                                      1
obtained
No/Insufficient third-      X                                                      1
party verification of
income
Unexplained “energy                X                                               1
efficient” unit
Incorrect number of                X                                               1
dependents
Insufficient support to            X                                               1
verify full-time student
status
Incorrect payment                        X                                         1
standard
Total errors                 4     5     3    0   0   1     1     3     0   0     17

Quality control              0     2     1    0   1   1     0     1     1   0      7
review(s)
Overpayments               $2,744 $564                    $2,016 $773            $6,097
Underpayments                                                    $90              $90




                                             17
Appendix D

                                     CRITERIA


    The following sections of the Code of Federal Regulations apply to tenant eligibility and
    housing assistance payment calculations (finding 1), as well as rent reasonableness
    reviews (finding 2):

       •   24 CFR [Code of Federal Regulations] 982.54(a) requires the public housing
           authority to adopt a written administrative plan that establishes local policies for
           administration of the program in accordance with HUD requirements.

       •   24 CFR [Code of Federal Regulations] 982.54(b) specifies that the administrative
           plan must be in accordance with HUD requirements and requires the public
           housing authority to revise the administrative plan if needed to comply with HUD
           requirements.

    The following sections of the Code of Federal Regulations apply to tenant eligibility and
    housing assistance payment calculations (finding 1):

       •   24 CFR [Code of Federal Regulations] 5.609(c)(11) states that annual income
           does not include earnings in excess of $480 for each full-time student 18 years old
           or older.

       •   24 CFR [Code of Federal Regulations] 5.611(a)(1) states that the public housing
           authority must deduct $480 for each dependent when determining adjusted
           income.

       •   24 CFR [Code of Federal Regulations] 982.153 states that the public housing
           authority must comply with the consolidated annual contributions contract, the
           application, HUD regulations and other requirements, and its program
           administrative plan.

       •   24 CFR [Code of Federal Regulations] 982.505(a) explains that a payment
           standard is used to calculate the monthly housing assistance payment for a family
           and that the payment standard is the maximum monthly housing assistance
           payment.

       •   24 CFR [Code of Federal Regulations] 982.505(c)(4) states that if the payment
           standard amount is increased during the term of the contract, the increased
           payment standard amount shall be used to calculate the monthly housing
           assistance payment for the family beginning on the effective date of the family’s




                                            18
       first regular reexamination on or after the effective date of the increase in the
       payment standard amount.

   •   24 CFR [Code of Federal Regulations] 982.516(a) requires the public housing
       authority to conduct a reexamination of family income and composition at least
       annually. The authority must obtain and document in the client file third-party
       verification of the following factors or must document in the client file why third-
       party verification was not available: (i) reported family annual income, (ii) the
       value of assets, (iii) expenses related to deductions from annual income, and (iv)
       other factors that affect the determination of adjusted income.

   •   24 CFR [Code of Federal Regulations] 982.517(a) requires the public housing
       authority to maintain a utility allowance schedule for all tenant-paid utilities, for
       cost of tenant-supplied refrigerators and ranges, and for other tenant-paid housing
       services. The authority must give HUD a copy of the utility allowance schedule,
       and the authority must provide any information or procedures used in preparation
       of the schedule when requested.

The following sections of the Code of Federal Regulations apply to rent reasonableness
reviews (finding 2):

   •   24 CFR [Code of Federal Regulations] 982.54(d)(15) states that the public
       housing authority administrative plan must cover policies for the method of
       determining that rent to owner is a reasonable rent (initially and during the term of
       a housing assistance payments contract).

   •   24 CFR [Code of Federal Regulations] 982.158(f)(7) requires the public housing
       authority to keep records to document the basis for the authority’s determination
       that rent to owner is a reasonable rent (initially and during the term of a housing
       assistance payments contract) for at least three years.

   •   24 CFR [Code of Federal Regulations] 982.507(a) states that the authority may
       not approve a lease until the authority determines that the initial rent to owner is a
       reasonable rent. The authority must redetermine the reasonable rent (i) before any
       increase in the rent to owner, (ii) if there is a 5 percent decrease in the published
       fair market rent in effect 60 days before the contract anniversary (for the unit size
       rented by the family) as compared with the fair market rent in effect one year
       before the contract anniversary, or (iii) if directed by HUD. The authority may
       also redetermine the reasonable rent at any other time, and at all times during the
       assisted tenancy, the rent to owner may not exceed the reasonable rent as most
       recently determined or redetermined by the authority.

   •   24 CFR [Code of Federal Regulations] 982.507(b) requires the authority to
       determine whether the rent to owner is a reasonable rent in comparison to rent for
       other comparable unassisted units. To make this determination, the authority
       must consider (1) the location, quality, size, unit type, and age of the contract unit


                                         19
       and (2) any amenities, housing services, maintenance, and utilities to be provided
       by the owner in accordance with the lease.

   •   24 CFR [Code of Federal Regulations] 982.507(c) states that by accepting each
       monthly housing assistance payment from the public housing authority, the owner
       certifies that the rent to owner is not more than rent charged by the owner for
       comparable unassisted units on the premises. The owner must give the authority
       information requested by the authority on rents charged by the owner for other
       units on the premises or elsewhere.

In addition, HUD’s Housing Choice Voucher Guidebook 7420.10G, section 9.2, requires
that before any proposed increase in the rent to owner is approved, the public housing
authority must determine and document whether the proposed rent is reasonable
compared to similar units in the marketplace and not higher than those paid by unassisted
tenants on the premises.




                                       20