oversight

The Housing Authority of the County of Los Angeles, Los Angeles, California, Did Not Adequately Administer Its Section 8 Voucher Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-02-08.

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

                                                                 Issue Date
                                                                         February 8, 2008
                                                                 Audit Report Number
                                                                          2008-LA-1007




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 Housing Authority of the County of Los Angeles, Los Angeles, California,
          Did Not Adequately Administer Its Section 8 Voucher Program


                                   HIGHLIGHTS

 What We Audited and Why

      We audited the Housing Authority of the County of Los Angeles’ (Authority) Section 8
      tenant eligibility determinations for its Section 8 Housing Choice Voucher program. The
      Authority was selected based on its ranking in our auditability survey and was
      recommended for audit by the Los Angeles Office of Public and Indian Housing. Our
      objective was to determine whether the Authority determined tenant eligibility and
      performed annual reexaminations in accordance with U.S. Department of Housing and
      Urban Development (HUD) rules and regulations.

 What We Found

      Although no eligibility issues were identified during our testing (there was only one new
      admission within our sample), the Authority did not comply with HUD’s requirements or
      its own administrative plan in performing reexaminations. It incorrectly calculated
      housing assistance payments, did not complete tenant reexaminations in a timely manner,
      and improperly changed reexamination due dates. We attribute these conditions to the
      Authority’s lack of comprehensive procedures and controls, failure to provide ongoing
      training to staff and management, inadequate computer system controls, and management
      not providing the necessary oversight to ensure that the voucher program was
      administered properly. As a result, the Authority made improper and unsupported
      housing assistance payments, collected unearned administrative fees in excess of $3.6
      million from HUD between 2005 and 2006, and continues to put its program at risk.
What We Recommend

     We recommend that the Director of the Los Angeles Office of Public Housing direct the
     Los Angeles County Board of Supervisors (Board) to replace the executive director with
     someone who has sufficient Section 8 experience and who will devote the time necessary
     to ensure that the Assisted Housing Division is run efficiently. In addition, the Board
     should direct the new executive director to hire a director with sufficient Section 8
     experience to head up the Assisted Housing Division.

     We also recommend that the Authority reimburse its program $33,464 from nonfederal
     funds for the overpayment of housing assistance, reimburse the appropriate tenants
     $2,838 for the underpayment of housing assistance, and provide adequate support or
     reimburse the program $5,860 from nonfederal funds for the unsupported costs cited in
     this audit report. We further recommend that HUD require the Authority to add policies
     and procedures to its administrative plan and update the plan throughout the year to
     incorporate changes or clarification in guidance, and for HUD to withhold 10 percent of
     the Authority’s administrative fee for fiscal year 2008 and future years, as necessary,
     until the Authority ensures that its new computer system has been properly implemented
     and the data transferred from its current system are accurate. Finally, the Director should
     direct the Authority to reimburse HUD $3.6 million, which is 10 percent of the
     Authority’s administrative fee for fiscal years 2005 and 2006.

Auditee’s Response

     We provided the auditee with the draft report on December 21, 2007, and held an exit
     conference on January 14, 2008. The Authority provided draft written comments at the
     exit conference and final comments on January 25, 2008. The Authority generally agreed
     with most of our report findings, but disagreed with some of our conclusions and
     recommendations.

     The complete text of the auditee’s response without the voluminous exhibits, along with
     our evaluation of that response, can be found in appendix B of this report. The exhibits
     will be made available upon request.




                                              2
                             TABLE OF CONTENTS

Background and Objectives                                                         4

Results of Audit
   Finding 1: The Authority Did Not Perform Annual Reexaminations in Accordance   6
              with HUD Rules and Regulations

Scope and Methodology                                                             17

Internal Controls                                                                 18

Followup on Prior Audits                                                          19

Appendixes
   A.   Schedule of Questioned Costs and Funds to Be Put to Better Use            20
   B.   Auditee Comments and OIG’s Evaluation                                     22
   C.   Schedule of Housing Assistance Payment Errors                             55
   D.   Schedule of Delinquent Annual Reexaminations                              56
   E.   Criteria                                                                  58




                                              3
                      BACKGROUND AND OBJECTIVES

The Housing Authority of the County of Los Angeles (Authority) was created in 1938 to manage
and develop affordable housing. Since 1938, the Authority has administered federally funded
public housing, rental assistance programs, and services and special programs for residents of
public and assisted housing. The Los Angeles County Board of Supervisors created the Los
Angeles County Community Development Commission in 1982 and combined it with the
Authority. The Community Development Commission manages programs in public and assisted
housing, community development, economic development, and housing development and
preservation to improve the quality of life in low- and moderate-income neighborhoods. The
Authority comprises two divisions of the Community Development Commission. The Housing
Management Division manages public housing and related programs and services, while the
Assisted Housing Division administers the Housing Choice Voucher program under the U.S.
Department of Housing and Urban Development’s (HUD) Section 8 program. The housing
choice vouchers allow very low-income families to obtain affordable, decent, and safe housing.

HUD’s approved budget authority for the Authority’s program for fiscal years 2005 and 2006
was $179.9 million and $181.6 million, respectively. The Authority currently has 20,721 Section
8 units and 2,964 low-rent units.

Under the Section 8 Housing Choice Voucher program, a public housing agency is required to
establish a family’s eligibility up front and then reexamine the income and composition at least
annually. The reexamination determines the continued eligibility of the family and establishes
the housing assistance payment amount. The public housing agency must establish a policy
which ensures that reexaminations take effect within a 12-month period for each family. It is
important that the public housing agency has tracking and monitoring procedures and systems in
place to ensure that the reexaminations are initiated and completed on time. Verifications must
be performed at reexamination to substantiate the tenant’s updated certifications. If third-party
verification information is not received in a timely fashion, the public housing agency should
choose an acceptable alternate form of verification and document its efforts in the tenant’s file.
Tenant reexamination information is recorded on HUD Family Report (HUD-50058) and then
electronically submitted to HUD’s public housing information center.

HUD measures the performance of the public housing agencies that administer the Housing
Choice Voucher Program through its Section 8 Management Assessment Program, which scores
the agencies in 14 key areas or indicators. These performance indicators show whether public
housing agencies help eligible families afford decent rental units at a reasonable subsidy cost as
intended by federal housing legislation. The Section 8 Management Assessment Program uses
HUD’s national database of tenant information (the accuracy of the public housing agency’s
submissions to that system is, therefore, critical) and information from audits conducted by
independent auditors. HUD annually assigns each public housing agency a rating for each
indicator and an overall performance rating of high, standard, or troubled. If a public housing
agency does not adequately perform on any of the 14 indicators or is assigned an overall
performance rating of troubled, HUD will conduct on-site reviews to assess the magnitude and



                                                4
seriousness of the problem. The public housing agency must implement a thorough corrective
action plan that HUD will monitor to ensure improvement in program management.

HUD Performend a 2003 Rental Integrity Monitoring Review

In January 2003, the Los Angeles Office of Public Housing performed a rental integrity
monitoring review and found that the Authority had conducted no reexaminations or only
performed partial annual tenant reexaminations in three years. For the files selected in their
sample, the error rate was 37 percent. Some of the other errors included not verifying earned
income, not verifying asset income, and not properly calculating the utility allowance. The
Authority notified HUD that all of the errors identified had been corrected.

A subcontractor, NTI/CVR, performed a rental integrity monitoring re-review in October 2003
and found more errors than in the first review. In 108 files reviewed, the subcontractor found
that 79 files (73 percent) contained errors, including the same types of errors identified in the
January 2003 rental integrity monitoring review. The re-review also indicated that only 27 of the
36 files that were previously reviewed by HUD had been satisfactorily corrected. Additionally,
HUD did not know whether the Authority performed tenant reexaminations for the files in which
a reexamination had not been performed or only partially performed.

HUD Performed a 2004 Section 8 Management Assessment Program Confirmatory Review

In 2003 the Authority received a low Section 8 Management Assessment Program score. In
response to the score and the 2003 rental integrity monitoring reviews, HUD performed a
Section 8 Management Assessment Program confirmatory review in 2004 to assess the
Authority’s Housing Choice Voucher program management and compliance with program
requirements. The confirmatory review lowered the Authority’s score, resulting in the
Authority’s being designated as a “troubled performer.” The confirmatory review revealed a
“serious level of noncompliance with HUD’s Housing Choice Voucher program requirements.”
During March 2005, the Authority appealed its score, and the Los Angeles Office of Public
Housing denied the appeal. During May 2005, the Authority appealed the score to the General
Deputy Secretary of Public and Indian Housing. The appeal was granted for indicator 5 (housing
quality standards quality control inspections), elevating the overall rating to standard.

The Authority Was Placed under a Corrective Action Plan

In response to the 2004 Section 8 Management Assessment Program review and the revised
score, HUD’s Los Angeles Office of Public Housing placed the Authority under a corrective
action plan for the period August 1, 2005, through February 28, 2006, and designated it as “near
troubled.” The Authority submitted progress reports stating that the deficiencies had been
corrected. The Los Angeles Office of Public Housing performed a closeout review, but the
results were inconclusive in determining whether the Authority had satisfactorily addressed the
issues in the corrective action plan. Therefore, the corrective action plan remained open.

The objective of the audit was to determine whether the Authority determined tenant eligibility
and performed annual reexaminations in accordance with HUD rules and regulations.



                                                5
                                 RESULTS OF AUDIT

Finding 1: The Authority Did Not Perform Annual Reexaminations in
Accordance with HUD Rules and Regulations
Although no eligibility issues were identified for new admissions during our testing (there was only
one new admission within our sample), the Authority failed to comply with HUD regulations and its
own administrative plan regarding housing assistance payments. In all 25 tenant files reviewed, the
Authority made errors in its reexamination process and incorrectly calculated housing assistance
payments. The Authority also did not complete 4,710 tenant reexaminations in a timely manner,
improperly changed annual reexamination due dates, and did not perform annual reexaminations.
This noncompliance occurred because of the Authority’s lack of comprehensive procedures and
controls, failure to provide tenant eligibility training to its staff and management, inadequate
computer system controls, and management not providing the necessary oversight to ensure that the
voucher program was administered properly. As a result, the Authority improperly made $33,464
in overpayments, $2,838 in underpayments, and $5,860 in unsupported payments, and collected
administrative fees from HUD in excess of $3.6 million to administer the Section 8 program while
not in compliance with program requirements. Although the Authority reorganized its Assisted
Housing Division (Section 8) during the course of our audit, and it was placed under its second
corrective action plan, the Section 8 program continued to remain at high risk.


 The Authority Incorrectly
 Calculated Housing Assistance
 Payments

       We reviewed annual reexaminations from 25 tenant files and found that the Authority
       made errors in its reexaminations process and incorrectly calculated housing assistance
       payments for each tenant. The tenant files contained a total of 65 reexaminations or
       HUD Family Reports, 52 of which contained errors.

       The Authority did not

           •   Calculate tenant income correctly for 17 tenants in accordance with 24 CFR [Code
               of Federal Regulations] 5.609;
           •   Use the correct utility allowance from its utility allowance schedule for 14 tenants
               in accordance with 24 CFR [Code of Federal Regulations] 982.517;
           •   Use the correct payment standard for 15 tenants in accordance with 24 CFR
               [Code of Federal Regulations] 982.505 and chapter 7 of HUD’s Housing Choice
               Voucher Guidebook, 7420.10G; and
           •   Obtain third-party verification for seven tenants in accordance with 24 CFR
               [Code of Federal Regulations] 982.516 (see appendix C).



                                                 6
         In addition, although the Authority had access to Enterprise Income Verification system
         reports, starting in July 2006, and the LEADER program reports, which are important
         tools for verifying tenant income and eligibility information, some of this information
         was not printed or used by the staff when applicable in determining eligibility.

         These errors resulted in the Authority’s overpaying $33,464 and underpaying $2,838. In
         addition, there was insufficient reexamination documentation in the Authority’s system to
         support $5,860 in housing assistance payments for tenant 05.

    The Authority Did Not Perform
    Annual Reexaminations in a
    Timely Manner
.

         Contrary to the Authority’s administrative plan, monitoring procedures, chapter 12 of
         HUD’s Housing Choice Voucher Guidebook, and 24 CFR [Code of Federal Regulations]
         982.516, the Authority was delinquent in performing 4,710 (27 percent) of the 17,723
         annual reexaminations required for its Housing Choice Voucher program tenant
         inventory.

         We initially identified delinquent annual reexaminations in HUD’s Public Housing
         Information Center database for fiscal years 2004 through 2006, ranging from 21 in fiscal
         year 2004 to 9,011 in 2006, although some of these tenants had been terminated from the
         program. Upon being notified of the delinquencies, the Authority admitted that it had at
         least 1,900 late reexaminations for current tenants, some dating back to fiscal year 2001.
         We attempted to match late reexaminations between our Public Housing Information
         Center list and the Authority’s list. Although some matched, others did not, making it
         difficult to determine whether the Authority’s list was accurate and complete. During the
         course of our field work, the Authority ultimately identified that it had been delinquent
         on 4,710 reexaminations; however, due to the discrepancies with HUD’s data, there may
         have been additional tenants with delinquent annual reexaminations and others who were
         delinquent before termination.

         The Authority reported to HUD in the Section 8 Management Assessment Program for
         indicator 9, timely reexaminations, that it performed reexaminations satisfactorily.
         However, this was not the case, and as a result, the Authority received unearned
         administrative fees from HUD relating to these delinquencies. By failing to conduct
         reexaminations as required, the Authority paid 1,900 tenants $15.2 million 1 in housing
         assistance without performing reexaminations as required.




1
  This is one year of current housing assistance payments for the 1,900 delinquent tenant reexaminations, not taking
into consideration the actual period in which the reexaminations were delinquent.


                                                         7
     After we discussed the issue with the Authority and notified HUD, the Authority began a
     concerted effort to bring the delinquent reexaminations current. It also contracted with
     four retired Housing Authority of the City of Los Angeles employees to assist in
     completing the delinquent reexaminations. As of April 2007, the Authority had
     completed reexaminations for all 4,710 tenants, and it had performed quality assurance
     reviews on a sample of these reexaminations. The Authority’s consultant, The Bronner
     Group, reviewed 519 of these reexaminations and found that 195 (38 percent) contained
     errors, resulting in the Authority’s overpaying $4,054 and underpaying $1,902 in housing
     assistance. We were also told that Authority’s supervisors performed additional quality
     control reviews; however, the Authority could not provide the number reviewed, errors
     found, or the amount of housing assistance over/underpayments identified. Although the
     Authority claimed the tenants’ accounts were adjusted accordingly, it was unable to
     provide support. The Authority provided a list of delinquent annual reexaminations
     supposedly reviewed by its supervisors, but our sample review of five tenants found that
     most were actually reviewed by the consultant. In addition, we noted that in one case, an
     income discrepancy was ignored and in two cases, the annual reexamination dates were
     changed without explanation.

     Additionally, in 13 of the 25 tenant files reviewed, the Authority did not perform annual
     reexaminations as required (see appendix C).

     The Authority recently certified in its Section 8 Management Assessment Program that it
     had correctly calculated tenant rent for indicator 10, annual reexaminations. However,
     based on the errors and discrepancies noted above, HUD does not have assurance that the
     delinquent annual reexaminations were performed correctly.

The Authority Improperly
Changed Annual
Reexamination Due Dates


     Of the 52 annual reexaminations reviewed, 36 (69 percent) were not completed in a
     timely manner (see appendix D). Of these, 28 were recorded from one to ten months late,
     while eight were completed early but had late effective dates. These reexaminations did
     not show up as delinquent because the annual reexamination due dates were changed
     contrary to chapter 12, section 12.1, of the Authority’s administrative plan; chapter 11,
     page 104, of the Authority’s admission and occupancy policy; and 24 CFR [Code of
     Federal Regulations] 982.516. Based on the Authority’s administrative plan, the annual
     reexamination date is supposed to only change when a family moves to another unit;
     however, in all 36 cases, the family did not move, but the Authority changed the annual
     reexamination dates without justification and contrary to its policy.

     Further, we found six annual reexaminations in which the housing assistance payment
     amounts remained the same as the prior year and other instances in which the amounts
     were the same for more than a year, indicating that the tenant data were not updated
     although a reexamination had been recorded. HUD wrote a finding on this issue in its



                                              8
     2003 rental integrity monitoring review report (see Background and Objectives section),
     so the Authority had been put on notice. Despite the financial impact to the tenants and
     HUD, it perpetuated the inaccurate due dates and total tenant and housing assistance
     payments instead of making the appropriate adjustments.

     Although the Authority’s manipulation of the system would give the appearance that the
     annual reexaminations had been completed correctly, the housing assistance payments
     would be inaccurate. Therefore, the Authority’s prior Section 8 Management Assessment
     Program ascertions to HUD that it performed timely annual reexaminations where false.

The Authority’s Administrative
Plan Did Not Contain Enough
Information to Effectively
Assist Its Staff in Performing
Their Duties

     The Authority’s administrative plan was not detailed enough to provide the staff essential
     guidance in performing their duties or carrying out their everyday tasks. Although the
     administrative plan cited the applicable Code of Federal Regulations requirements, it
     failed to provide specifics and examples to the staff regarding important areas that might
     impact housing assistance payment calculations. For instance, there was insufficient
     guidance concerning the verification of full-time college student status, which directly
     impacts the amount of income a family reports. As a result, we noted an instance in
     which the Authority did not adequately follow up, resulting in its overpaying $5,072 in
     housing assistance. If the Authority had provided staff with more detailed procedures,
     the problem might not have occurred. We previously cited the Authority in audit report
     2007-LA-1007, dated April 3, 2007, for its administrative plan’s not having sufficient
     guidance to ensure compliance with HUD’s housing quality standards and inspection
     requirements.

     The Authority also had not updated and amended the plan throughout the year when
     necessary, such as when HUD criteria changed. For example, the Authority did not make
     an adjustment when there was a change in 24 CFR [Code of Federal Regulations]
     5.609(b)(9) in April 2006, impacting the amount of college financial assistance
     considered as income. The director of contract maintenance and her staff were unaware
     of the revision more than a year later. Therefore, there may have been a number of
     annual reexaminations processed after April 2006 with inaccurate income calculations
     that may have resulted in housing assistance overpayments.




                                             9
The Authority Did Not Provide
Essential Training to Its Staff and
Management


     Previously, the executive director had not considered training as an important component
     of staff and management development in understanding the Section 8 program. New
     program assistants, responsible for determining tenant eligibility, would receive training
     from a manager or shadow another program assistant for a few weeks to gain an
     understanding of the program and the Authority’s systems. They would then be assigned
     their tenant case load and proceed to perform their duties. If the program assistants
     needed additional guidance on HUD’s rules and regulations, they would either decipher
     the information for themselves or obtain it through other program assistants, managers, or
     the Authority’s administrative plan. However, since the administrative plan was not
     adequate and managers and other program assistants had also not received formal
     training, the new staff members could easily misinterpret or receive inaccurate
     information on HUD’s requirements, which led to incorrect housing assistance payments.

     After we notified the executive director of the significance of our preliminary results and
     the Director of the Los Angeles Office of Public Housing advised him of the importance
     of training, he initiated formal training for the staff. Starting in January 2007, the
     Authority provided basic Section 8 training for its staff and management that was
     followed up with basic housing quality standards training. We were informed additional
     training sessions are planned.

The Authority’s Computer
System Lacked Essential
Controls Restricting Staff from
Changing Critical Tenant
Reexamination Data


     The Authority’s computer system was inadequate and lacked the necessary controls to
     restrict staff from changing information that was essential for determining the housing
     assistance payments. The Authority also could not provide its general computer control
     procedures, including those to ensure proper authorization and recording of transactions
     and activities. The Authority’s system, Emphasys, was designed between 1992 and 1995,
     and most of the Authority’s staff could access the system. Because the system was
     always in “edit mode,” critical information such as payment standards, utility allowances,
     and annual reexamination due dates were not locked after entry and could be changed
     without proper authorization. This control deficiency had a significant impact on
     whether the Authority accurately determined the effective dates of the annual
     reexaminations (as discussed above) and calculated the correct housing assistance
     payments. Further, its system had a validation feature to detect errors or contradictory
     information and notify the user to correct the problem. However, we were informed that
     most of the staff ignored these notifications and continued processing without


                                             10
     making corrections or changes. We were also informed that the Authority was about a
     year behind in obtaining vendor-provided patches.

     Our analysis of the Authority’s database identified a number of incorrect current and next
     recertification dates that should have been prevented by the system’s validation feature.
     For example, for one tenant, the year for the next certification date, June 1, 2001, was
     before the current certification date of August 19, 2006. In addition, some of the tenants’
     next certification dates and original move-in and move-out dates were missing. After
     informing the Authority of these discrepancies, we were told that there were a number of
     data entry errors and the program assistants were experiencing difficulty in determining
     the anniversary dates for the next annual reexaminations. Instead of the program
     assistants’ determining the annual reexamination dates, the system should populate this
     information as a control measure. Due to the control deficiencies and inaccurate data,
     there is no assurance that the Authority used correct annual reexamination due dates.

     Before the start of the audit, the Authority initiated the planning and selection process of
     obtaining a new computer system because its system was old and outdated. During the
     course of the audit, the Authority announced that it had selected YARDI as its new
     computer system. The YARDI system would have very important fields populated so
     that the staff would not need to enter the information into the system, thereby minimizing
     the amount of data entry the case managers would perform in determining housing
     assistance payments. However, with the inaccurate existing data, HUD does not have
     assurance that the information in the new system would be accurate and reflect the
     correct annual reexamination due dates for the tenants currently receiving Section 8.

The Authority Reorganized the
Assisted Housing Division in an
Attempt to Improve Its Ability to
Administrer the Section 8
Program

     After we informed the Authority and HUD of our prelimary results in October 2006, the
     Authority retracted previous Section 8 Management Assessment Program assertions to
     HUD in the area of timeliness of reexaminations, and it voluntarily lowered its score.
     The executive director also announced his plans for a major reorganization of the
     Authority’s Assisted Housing (Section 8) Division and major changes to upper
     management. The Authority began the implementation of this process in November
     2006. First, the director was removed (this position remained vacant as of October 2007)
     and the assistant director and manager were removed from their positions and transferred
     to other departments. The Assisted Housing Division was then divided into three
     divisions, as follows:

         1. The Management Services Division included the compliance unit responsible for
            performing quality assurance on all of the Section 8 Management Assessment




                                              11
            Program indicators. Its director was previously the Community Development
            Commission’s human resources director, who had little knowledge of Section 8.

        2. The Contract Maintenance Division was responsible for the majority of the tenant
           eligibility functions: interim reexaminations, annual reexaminations, and
           terminations. Its director was previously the quality assurance principal analyst.

        3. The Applications and Eligibility Division was responsible for portability, housing
           quality standards inspections, lease-up, and determining whether applicants were
           eligible for Section 8 assistance. The unit supervisor for applications and
           eligibility was promoted to be the department’s director with no Section 8
           knowledge before joining the Authority in May 2006.

     Of the three directors, only the director of contract maintenance had prior Section 8
     experience.

     Further, As of October 2007, the executive director had appointed the director of
     management services to be the acting director of the Assisted Housing Division although
     her backgound was in human resources with no Section 8 experience before November
     2006. The director of the Applications and Eligibility Division was also responsible for
     the Contract Maintenance Division although she also had no previous Section 8
     experience.

     The Authority also contracted with a consultant, the Bronner Group, to assist in the
     reorganization effort and perform quality control reviews on the delinquent annual
     reexaminations as noted above.

The Authority Was Placed
under an Additional Corrective
Action Plan

     In January 2007, the Los Angeles Office of Public Housing, along with HUD’s Recovery
     and Prevention Center, performed a review to address issues identified in the prior
     corrective action plan (see Background and Objectives section of the report) and issues
     identified during the course of our audit. The assessment reconfirmed the Authority’s
     Section 8 Management Assessment Program score for June 30, 2003, at 63 points instead
     of the 73 points submitted by the Authority. The Authority received a zero score on the
     following indicators:

            •   3, determining of adjusted income;
            •   6, housing quality standard enforcement;
            •   7, expanding opportunities;
            •   9, annual reexaminations;
            •   10, correct tenant rent calculations;
            •   12, annual housing quality standards inspections;


                                             12
            • 13, lease-up; and
            •   15, deconcentration bonus.

     The assessment confirmed that the Authority did not correct the deficiencies identified in
     the previous corrective action plan, despite its misleading claims to the contrary. In
     addition, after the assessment was completed, HUD’s Los Angeles Office of Public
     Housing established a new corrective action plan, signed on August 22, 2007, which will
     remain in effect until HUD determines that all of the tasks have been completed.

Management Failed to Provide
Necessary Oversight to Ensure
That Vouchers Were
Administered Properly



     The executive director, who was ultimately responsible for ensuring that the Assisted
     Housing Division determined tenant eligibility and performed reexaminations in
     compliance with program requirements, was also responsible for nine other divisions in
     the Community Development Commission. Before the reorganization, the executive
     director had only met with the senior staff once every two weeks to discuss issues and left
     the management of the Authority to the director and assistant director of the Assisted
     Housing Division.

     As illustrated by the significant problems above, the Authority did not determine tenant
     eligibility in a manner that complied with program requirements. We attribute these
     problems to the executive director’s not spending enough time at the Authority, having
     little involvement in its day-to-day operations, and allowing the previous director of the
     Assisted Housing Division to run the entire operation. Before HUD’s 2003 review,
     management should have been aware of the need to implement significant procedures and
     controls to correct the deficiencies. When HUD identified that there were annual
     reexaminations that had not been completed for more than a year, management should
     have taken action to correct housing assistance payment amounts and the inaccurate
     annual reexamination dates. Instead, the Authority wrote to HUD that it had completed
     actions to ensure that the problems had been corrected. Our audit and HUD’s 2007
     review showed that the problems had not been corrected. Therefore, management
     willingly and knowingly violated section 10(a) of the Authority’s annual contributions
     contract and did not comply with 24 CFR [Code of Federal Regulations] 982.516 when it
     did not perform required annual reexaminations.

     As stated above, the Authority reorganized the assisted housing division, but we do not
     know whether the reorganization will improve the administration of the program. We
     question some of the executive director’s decisions, such as replacing the director and
     assistant director of the Assisted Housing Division with two individuals who had no
     Section 8 experience. These positions were responsible for critical Section 8 processes




                                             13
     that required program knowledge and experience. The two directors, along with their
     staff, only recently completed basic Section 8 training. It is unclear how they will be able
     to effectively interpret HUD rules and regulations and disseminate critical information to
     staff to ensure proper administion of the program when they, themselves, are in the
     process of learning this very complex program. This can result in the perpetuation of
     significant noncompliance issues.

     We are also concerned with the number of tenants for whom the program assistants were
     responsible when completing the annual reexamination process. Previously, case
     managers (now called program assistants) were responsible for performing all tenant
     eligibility duties for 600 to 700 tenants from new contracts to terminations. Some staff
     informed us that the case loads were too high to properly complete the reexaminations.
     After the reorganization, the program assistants had an average caseload of 900 tenants
     and became responsible for current and delinquent annual reexaminations. Although the
     executive director created a Termination Division and an Interim Division that would be
     responsible for completing the terminations process and performing interim
     examinations, the bulk of the work remained with the program assistants. The
     distribution of the workload might not be appropriate, given the amount of work that is
     needed to complete an annual reexamination, and might result in further inaccuracies and
     delinquent annual reexaminations.

Conclusion


     The Authority’s management did not adequately administer the Section 8 voucher
     program. Despite HUD’s attempts to provide remedial help through monitoring and a
     corrective action plan, the executive director did not enact substantive changes until we
     notified him of our interim results, and some of those changes have left the program at
     risk. The Authority should have known about these problems before they were identified
     by HUD in 2003. As a result, the Authority overpaid $33,464, underpaid $2,838, and
     could not support $5,860 in housing assistance, and it received in excess of $3.6 million
     in administrative fees (see appendix A) to perform tenant eligibility in 2005 and 2006 that
     it did not earn. In addition, the program continued to remain at risk due to poor and/or
     inexperienced management, inaccurate tenant eligibility data in its systems, and
     reexamination errors which put the accuracy of its housing assistance payments in
     question.

Recommendations


     We recommend that the Director of the Los Angeles Office of Public Housing

     1A. Direct the Authority to reimburse its program $33,464 from nonfederal funds for
         the overpayment of housing assistance.




                                             14
1B. Direct the Authority to reimburse the appropriate tenants $2,838 from program
    funds for the underpayment of housing assistance.

1C. Direct the Authority to provide adequate support for the housing assistance
    payments disbursed or reimburse the program $5,860 from nonfederal funds for the
    unsupported cost cited in this report (see appendix C).

1D. Review a sample of the 4,710 delinquent annual reexaminations and determine
    whether they were completed accurately and the housing assistance payments were
    adjusted as necessary.

1E. Direct the Authority to perform the prior annual reexaminations to make them
    current on the 13 tenants missing annual reexaminations, ensuring that the correct
    annual reexamination due dates are used (see appendix C) in accordance with the
    Authority’s policies and HUD requirements, and make revisions to the housing
    assistance payments when necessary.

1F. Direct the Authority to correct the annual reexamination dates for the 18 tenants for
    whom the Authority improperly changed annual reexamination dates (see appendix
    C) so that they comply with Authority policies and HUD requirements and make
    revisions to the housing assistance payments when necessary.

1G. Direct the Authority to only change the tenants’ annual reexamination due dates in
    accordance with its monitoring and administrative policies and HUD regulations.

1H. Require the Authority to add policies and procedures to its administrative plan and
    include examples to ensure that it is comprehensive enough for staff to use in
    performing their duties and update the plan throughout the year to incorporate
    changes or clarification in guidance.

1I.   Require the Authority to implement a comprehensive training program for staff and
      management on its Housing Choice Voucher program, including HUD’s Public
      Housing Information Center system, to ensure that the information is accurate
      before submission.

1J.   Withhold 10 percent of the Authority’s administrative fee starting in its fiscal year
      2008 and future fiscal years, as necessary, until the Authority has had an
      independent review performed of its YARDI system to ensure that it has been
      properly implemented and the data transferred from its Emphasys system are
      accurate.

1K. Direct the Los Angeles County Board of Supervisors to remove the executive
    director from his respective position and replace him with someone who has
    sufficient knowledge of the Section 8 program and who will devote the necessary
    time to ensure that the Section 8 program is run in an efficient and effective
    manner.



                                         15
1L. Direct the Authority to hire a director for the Assisted Housing Division who has
    sufficient Section 8 experience to ensure that the Section 8 program is run in an
    efficient and effective manner and in compliance with HUD requirements.

1M. Require the Authority to reimburse HUD $3,662,972, which is 10 percent of the
    Authority’s administrative fee for fiscal years 2005 and 2006, in accordance with 24
    CFR [Code of Federal Regulations] 982.152, for not adequately administering its
    program in compliance with HUD requirements.




                                       16
                     SCOPE AND METHODOLOGY

To accomplish our objective, we

       •   Reviewed applicable laws, regulations, and the Authority’s administrative plan.
       •   Reviewed HUD’s program requirements at 24 CFR [Code of Federal Regulations]
           Parts 5, 960, and 982; HUD’s Public and Indian Housing Notices 2001-15, 2004-01,
           and 2007-15; the Authority’s consolidated annual contributions contract; and HUD’s
           Housing Choice Voucher Guidebook, 7420.10G.
       •   Reviewed the Authority’s annual audited financial statements and organizational
           charts.
       •   Reviewed HUD’s monitoring reports and corrective action plans for the Authority.
       •   Obtained and reviewed the Authority’s tenant files and obtained supporting
           documentation from its Laserfiche and Emphasys computer systems.

We also interviewed appropriate Authority employees and HUD staff.

To achieve our objective, we relied in part on the computer-processed data in the Authority’s
database. We performed an assessment of the reliability of the data and found the data were not
adequate; therefore, we performed additional procedures to verify the information received.

We statistically selected 51 of the Authority’s tenants receiving housing assistance payments
during our audit using an attribute statistical sampling method developed by our computer audit
specialist. Our universe included 17,723 families receiving housing assistance payments. We
reduced the sample to 20 of the 51 tenant files due to time constraints imposed by the number of
errors encountered in each file reviewed. We determined that one sample tenant had ported to
another jurisdiction; therefore, the responsibility for performing the annual reexamination lies
with the receiving Authority. As a result, we eliminated this tenant from our sample and
reviewed the remaining 19 tenants. We included six tenant file reviews performed during the
audit survey that were nonstatistically selected, bringing our total sample to 25 tenants. Only
one tenant sampled was a new admission, a transfer from the Housing Opportunities for People
With AIDS (HOPWA) program. The Authority noted that one of the 25 vouchers we tested was
actually a project-based voucher it had processed as a tenant-based voucher.

We extracted delinquent annual reexaminations from the Public Housing Information Center
database for the Authority’s fiscal years 2004 through 2006, and reviewed a nonstatistical sample
of the tenant information. We also obtained a list from the Authority of delinquent annual
reexaminations on tenants who were receiving Section 8 assistance.

We performed our on-site work between July 17, 2006, and July 11, 2007, at the Authority’s
office located at 12131 Telegraph Road, Santa Fe Springs, California. The audit covered the
period July 1, 2004, through June 30, 2006, but was expanded when necessary.

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



                                               17
                             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 annual reexaminations are completed
                  accurately.
              •   Policies and procedures to ensure that valid and reliable data are obtained and
                  maintained.
              •   Policies and procedures to ensure that resource use is consistent with laws and
                  regulations.
              •   Policies and procedures to ensure that resources are safeguarded against
                  waste, loss, and misuse.

       We assessed the relevant controls identified above.

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

 Significant Weaknesses

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

       The Authority did not implement adequate procedures and controls to ensure that it
       complied with HUD requirements.




                                               18
     FOLLOWUP ON PRIOR AUDITS


Audit of Housing Quality
Standards - The Housing Authority
of the County of Los Angeles,
Audit Number: 2007-LA-1007,
Issued April 3, 2007


     The fieldwork for this audit was completed in conjunction with this assignment. The
     report contained two findings that the Authority’s Section 8 units did not meet housing
     quality standards and the Authority did not complete timely housing quality standards
     inspections. On June 4, 2007, OIG entered into management decisions with HUD to
     correct the items mentioned in the recommendations, which were completed and closed
     by HUD by December 26, 2007.




                                            19
                                           APPENDIXES

Appendix A

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

     Recommendation        Ineligible 1/    Unsupported 2/      Unreasonable or      Funds to be put
         number                                                  unnecessary 3/       to better use 4/
          1A                   $33,464
          1B                                                                                  $2,838
          1C                                           $5,860
          1M                                                          $3,662,972

         Totals                $33,464                 $5,860         $3,662,972              $2,838


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/      Unreasonable/unnecessary costs are those costs not generally recognized as ordinary,
        prudent, relevant, and/or necessary within established practices. Unreasonable costs
        exceed the costs that would be incurred by a prudent person in conducting a competitive
        business. The administrative fees paid to the Authority to administer the Section 8
        Housing Choice Voucher program were not fully earned because the Authority did not
        fulfill its administrative duties relative to tenant eligibility requirements. For fiscal years
        2005 and 2006, the Authority received more than $36 million in administrative fees for
        administering the Section 8 program. We determined that at least 10 percent of the full-
        time employees in the Authority’s Assisted Housing Division were performing tenant
        eligibility and reexamination functions. Therefore, we recommend that the Authority
        reimburse HUD 10 percent of the administrative fees, or $3,662,972.

4/      Recommendations that funds be put to better use are estimates of amounts that could be
        used more efficiently if an 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


                                                  20
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 systems and controls, this will be a recurring benefit.




                                       21
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1

Comment 2




                         22
Comment 3

Comment 4




Comment 5




            23
Comment 5



Comment 4




Comment 6




            24
Comment 6




Comment 7




Comment 8




            25
Comment 4

Comment 8




Comment 2




            26
Comment 9




Comment 10




             27
Comment 1

Comment 4




            28
Comment 4




            29
30
31
32
33
34
35
36
37
Comment 11




             38
Comment 12




             39
Comment 13




             40
Comment 13




             41
Comment 14




Comment 5




             42
Comment 8




Comment 8




Comment 6




            43
Comment 15




Comment 15




             44
Comment 15




             45
Comment 16




             46
Comment 17




             47
48
49
                         OIG Evaluation of Auditee Comments


Comment 1   Our conclusions and recommendations are based on the problems identified with
            the Authority’s tenant reexaminations within the scope of our audit period. Each
            tenant file we reviewed had errors impacting the amount of housing assistance
            payments, and many of the reexaminations had multiple errors as identified in
            appendix C. Since most of the files we reviewed were selected through a
            statistical sample, we would expect to see a similar rate of errors throughout the
            voucher program. HUD had previously identified similar issues in prior years and
            the auditee purportedly addressed the problems. Per our audit finding, this was
            not the case. The high rate of errors identified by the auditee’s consultant
            confirms there were prevalent problems in the auditee’s reexamination process.
            These problems have contributed to the Authority being put into troubled status
            and being placed under an additional corrective action plan.

            Although the Authority’s reorganization and ongoing computer system
            improvement efforts have been occurring after our audit period, and are therefore
            outside the scope of our audit, we met with key authority management during the
            course of our review to obtain an understanding of its progress. We acknowledge
            that the auditee began implementing changes that should improve its operations if
            implemented and managed properly, such as the added emphasis on training and a
            new computer system with additional controls. However, we question some
            decisions relating to the selection of key management personnel.

Comment 2   The Authority takes exception to statements in the report that it made misleading
            statements and manipulated the system. However, its practice of changing
            reexamination due dates in violation of its own administrative plan gives the
            appearance that reexaminations have been done timely, when they may have been
            overdue. In other instances, reexaminations had information copied from prior
            reexaminations without verification, a repeat finding from HUD’s earlier reviews.
            This would also make reexaminations appear falsely current when they were
            overdue.

            The Authority answered “yes” to the 2005 Section Eight Management
            Assessment Program indicator (9) that the authority completes a reexamination
            for each participating family at least every 12 months, (10) the authority correctly
            calculates tenant rent, and (12) the authority inspects each unit under contract at
            least annually. Per the results of our reexamination review, and our previous
            audit of the Authority’s inspections, this was not the case.

            In March 2006, the Authority certified it had completed all items under the 2005
            corrective action plan. Some of these activities included having all voucher staff
            trained as needed to properly implement the recertification process, and ensuring
            that the annual recertification completion dates are within 12 months of the




                                             50
            anniversary date and that this information is correctly recorded on the HUD form
            50058. Our review indicates this was not the case.

Comment 3   All facts and conclusions are documented in the audit workpapers and are fully
            supported in accordance with generally accepted government auditing standards.

Comment 4   The Nelrod Company was contracted by HUD to provide technical assistance to
            the auditee in conjunction with it most recent corrective action plan. The Nelrod
            Company began its work after the Board’s acceptance of the contractor on August
            28, 2007, and the report was issued on December 14, 2007, all subsequent to the
            completion of our audit field work. Although the report was not brought to our
            attention until the exit conference, we have reviewed the subject report and it
            generally discusses the auditee's new organizational structure, IT conversion
            progress, and training plans. The report makes observations and additional
            recommendations concerning these areas and focuses on periods outside of the
            scope of our audit. The report does not contradict issues discussed in our audit
            report.

Comment 5   The Authority’s ongoing data clean-up efforts have been occurring after our audit
            period, so determining their full extent is outside the scope of our audit. We have
            reported on the problems that existed at the time of our review. During the course
            of the audit, we met with key authority management to discuss progress in its
            reorganization and other improvements. During those meetings the auditor
            discussed the need for accurate information to be transferred to the Authority’s
            new YARDI system. We acknowledge the implementation of the new system is
            in progress. However, we continue to recommend HUD ensure the Authority
            fully implements the new system and that the data transferred to the system is
            accurate, and to withhold funds as necessary to ensure this is done.

Comment 6   24 CFR [Code of Federal Regulations] 982.152 and 155 allow HUD to reduce or
            offset administrative fees and reserves if the Authority fails to perform its
            administrative responsibilities correctly or adequately under the program. As
            stated in Appendix A, at least 10 percent of the Authority’s staff work on the
            tenant eligibility and reexamination function. Based on the issues cited in the
            report, we have concluded the applicable fee was not properly earned. We have
            noted prior and current HUD notices that call for penalties or withholding of 10
            percent of the administrative fee, such as PIH notices 2007-27, 2006-03, 2005-17,
            2000-28, 96-20, etc. In keeping with HUD’s practice we have limited the
            questioned administrative fees to 10 percent.

Comment 7   We have not received any documentation to show that the implementation of the
            recommendations will result in “severe negative programmatic repercussions.”
            Information from HUD’s 2007 limited financial management review of the
            Authority indicated that as of December 31, 2006, it had administrative fees and
            reserves of almost $8.4 million.




                                            51
Comment 8     The executive director was in charge of the voucher program when the Section 8
              issues were initially identified by HUD in 2003 (see the Background and
              Objectives section), and when they were supposedly corrected under the initial
              corrective action plan. However, per our audits (including our prior audit report
              2007-LA-1007, issued on April 3, 2007) and HUD's 2007 review, the problems
              continued. The executive director’s previous lack of day-to-day involvement in
              the operation of the Assisted Housing Division appears to have contributed to its
              problems. We were informed that once the current changes have been made, the
              executive director planned to again spend less time at the Authority. We believe a
              housing authority of this size, with the problems we noted, needs an executive
              director that can devote sufficient time to ensure the Section 8 program operates
              properly.

              The current Assisted Housing Division director is only “acting” in this position.
              A permanent Division Director needs to be appointed. The acting director has no
              prior Section 8 experience and her background was in human resources, not the
              operation of a Housing Choice Voucher program. We previously discussed the
              lack of Section 8 experience and knowledge among the auditee's new
              management with the executive director on February 7, 2007.

              We have no objection to the Authority hiring a second assistant executive
              director. However, the duties and responsibilities of this position have not been
              provided to us. Given the above, it is not clear this position will sufficiently make
              up for the executive director’s lack of involvement.

Comment 9     The auditee has not submitted any documentation to support this assertion. There
              is no such HUD guidance or criteria, and the local HUD hub office could not
              corroborate the auditee’s claims. According to the system extract pulled by HUD,
              the Authority had listed that 100 percent of its reexaminations had been
              completed on time as of June 30, 2005, which was not the case.

Comment 10 We have made some adjustments to the report to indicate that planning for the
           reorganization occurred prior to our notification of preliminary audit results;
           however, we cannot verify when this planning was initiated or to what extent,
           because inadequate documentation has been submitted on the matter. It is not
           clear why the auditee would appoint a “crisis team” in April 2006, per its
           timeline, immediately after certifying to HUD in March 2006 that it completed all
           activities on its corrective action plan to resolve these problems. The OIG and
           HUD were not informed of these planned changes until after we notified the
           auditee of our preliminary results. As acknowledged in the auditee's comments
           and timeline, the changes were implemented subsequent to those discussions.




                                               52
Comment 11 The auditee states that its quality control reviews determined that reexaminations
           “were completed accurately.” However, prior quality control reviews performed
           by the Bronner Group, reported in December 2006, showed that 40 percent of the
           reexaminations had errors. The quality control reports provided under attachment
           1 included results from reviews performed by unknown persons between January
           2007 and September 2007. These reports show various error rates of 20 to 100
           percent of the files reviewed (38 percent overall), resulting in under and
           overpayments. We therefore remain concerned with the accuracy of those
           reexaminations not tested.

Comment 12 Based on the information submitted by the auditee, reexaminations have been
           performed in 2007 that should make the reexaminations current. However, the
           effective dates of the reexaminations and projected date of the next reexamination
           still do not appear to be in accordance with the tenant’s anniversary dates (based
           on the information we have up to fiscal year 2006). There is also insufficient
           information to confirm that these reexams were done timely or that all appropriate
           adjustments have been made to the housing assistance payments or tenants’ rent.

Comment 13 We note that during a July 11, 2007, meeting, in which the problems with the
           Authority’s procedures were discussed, management previously agreed that the
           administrative plan needed to be revised to include more specific information.

              We agree there is basic information in the Authority’s administrative plan
              concerning the verification of full-time student status. However, the narrative
              was brief and there was insufficient information relating to when information
              should be obtained to verify students were maintaining their full-time course
              loads. As a result, we noted a lack of follow up by the Authority staff.

              Although the auditee provided a staff memo concerning the change in policy, we
              noted that its director of contract maintenance was not aware of the change almost
              a year later. This demonstrates the need to maintain an updated and
              comprehensive source for the Authority’s policies and procedures so that staff can
              easily identify changes in HUD requirements. The Authority may also develop
              additional reference material, such as the desk top guides suggested by Nelrod
              and the Bronner Group that are in compliance with its administrative plan and
              HUD requirements.

              In addition to the examples cited in the body of the report, we also noted
              insufficient information concerning how the Authority handles erroneous housing
              assistance payments due to the Authority being late in processing a
              reexamination, as the policy only addresses instances when the tenant causes the
              reexamination to be late. There was also insufficient information concerning
              retroactive adjustments to the housing assistance payments when a tenant does not
              submit information timely that impacts housing assistance payments.




                                              53
Comment 14 The auditee states it has had a commitment to training for the last five years per
           its budget, which includes amounts for fiscal years 2004 to 2006. Although
           dollars may have been budgeted, no information has been submitted to show
           Section 8 staff actually received formal training prior to the reorganization effort.
           During an October 25, 2006, meeting, the executive director informed us that
           training had not been considered as important in the past. However, we recognize
           the auditee's current emphasis on training.

Comment 15 We did not perform an audit of the auditee’s existing computer system, but
           obtained an understanding of the system through discussions with the auditee’s
           management and technical staff. The auditee provided no documentation on the
           existing computer system’s procedures or controls. Overall, the system lacked
           controls and was insufficient to meet the Authority’s needs; however, we
           acknowledge the Authority is implementing a new system to help resolve existing
           problems.

Comment 16 We stated in the report that the Authority was planning for this change prior to the
           initiation of the audit. However, we were not informed of this until after our
           initial finding was presented to the Authority. In any case, we have modified
           some of the wording in the report to reflect some of the Authority’s concerns.

Comment 17 The auditee provides no information to support that the reorganization has
           reduced caseloads. Based on prior conversations with management, it is our
           understanding that a special team was assigned to exclusively work on the
           delinquents to improve the delinquency rate, so it is unclear whether the Authority
           can maintain its current delinquency rate under the current structure. We remain
           concerned that high case loads may not give staff enough time to perform
           reexaminations in compliance with HUD requirements.




                                              54
  Appendix C

      SCHEDULE OF HOUSING ASSISTANCE PAYMENT ERRORS 2




                                                                changed re-
                                                                Improperly
                                                 performing

                                                 verification



                                                                exam dates




                                                                                                                     Total over-
           calculation




                                                                                           calculation
                                                                              Annual re-

                                                                              performed




                                                                                                         supported
                                                                              exams not
                         allowance
           Incorrect




                         Incorrect



                                     Incorrect




                                                                                           Incorrect




                                                                                                         Total un-
                                     standard



                                                 3rd party
                                     payment




                                                                                                                     payment




                                                                                                                                   payment
           income
Tenant




           earned




                                                                                                                                   under-
                         utility




                                                                                                                                   Total
                                                                                           rent
                                                 Not
01            X            X            X            X            X              X             X                      $3,269
02            X            X                         X            X              X             X                       $24          $48
03            X            X            X                         X              X             X                      $2,331
04            X            X            X            X                           X             X                      $1,494
05            X            X            X            X            X              X             X         $5,860       $1,192
06            X            X            X            X                           X             X                      $2,688       $240
07                         X            X                         X                            X                       $95
08            X            X            X                         X              X             X                       $84         $1,496
09                         X                                      X                                                    $132         $378
10                                      X                         X              X             X                       $74          $246
11            X           X                                       X                            X                       $231         $15
12                        X3           X3                                                      X                       $168
13                                                                X                            X                       $12
14            X                         X                         X                            X                       $876        $192
15                         X            X                         X                            X                                   $30
16            X                                                   X              X             X                      $2,160
17            X                                                   X              X             X                      $1,402
18            X            X                         X            X                            X                      $5,072
19            X            X                         X                                         X                      $1,572
20            X                                                                  X             X                      $3,434
21                                      X                         X                            X                       $59          $4
22                                      X                                        X             X                       $146        $189
23            X                                                   X                            X                       $729
24            X                         X                         X                            X                      $1,102
25            X                         X                                        X             X                      $5,118
Total         17          14           15            7           18             13            24         $5,860 $33,464 $2,838




  2
    The “X” identifies the errors that were found during the review of the tenant files for the Authority’s fiscal years
  2005 and 2006.
  3
    The Authority incorrectly processed a project-based voucher as a tenant-based Housing Choice Voucher and
  applied an inapplicable payment standard in fiscal year 2005 and an incorrect utility allowance in 2005 and 2006.


                                                                  55
     Appendix D

         SCHEDULE OF DELINQUENT ANNUAL REEXAMINATIONS

Tenant Description           Date           Date to       Effective      Actual        Timeliness Months
                             created        HUD           date           reexamination            late/early
                                                                         date
01        Annual             Dec. 3,        Dec. 10,      Jan. 1,        Oct. 1, 2004  Late       3
          reexamination      2004           2004          2005
01        Annual             Aug. 2,        Aug. 3,       Sept. 1,       Oct. 1, 2005 4      Late/not        11
          reexamination      2006           2006          2006                               performed
02        Annual             May 20,        May 21,       July 1,        July 1, 20054       Early/not       12
          reexamination      2004           2004          2004                               performed
03        Annual             Oct. 19,       Oct. 22,      Dec. 1,        Dec. 1, 20054       Early/not       12
          reexamination      2004           2004          2004                               performed
04        Annual             Nov. 17,       Nov. 21,      Nov. 24,       Nov. 1, 20054       Early/not       11
          reexamination      2005           2004          2004                               performed
05        Annual             Dec. 3,        Dec. 10,      Feb. 1,        Nov. 1, 2004        Late            10
          reexamination      2004           2004          2005
05        Annual             July 8,        July 13,      Sept. 1,       Nov. 1, 20054       Late/Not        11
          reexamination      2006           2006          2006                               performed
06        Annual             Dec. 22,       Dec. 23,      Nov. 29,       Nov. 1, 20054       Early/not       11
          reexamination      2004           2004          2004                               performed
07        Annual             May 30,        June 5,       July 1,        May 1, 2006         Late            2
          reexamination      2006           2006          2006
08        Annual             May 27,        May 28,       July 1,        June 1, 2004        Late            1
          reexamination      2004           2004          2004
08        Annual             Sept. 16,      Sept. 19,     Oct. 1,        June 1, 2005        Late            4
          reexamination      2005           2005          2005
09        Annual             Nov. 18,       Nov. 19,      Jan. 1,        July 1, 2004        Late            6
          reexamination      2004           2004          2005
09        Annual             Apr. 28,       May 4,        May 1,         July 1, 2005        Late            10
          reexamination      2006           2006          2006
10        Annual             Sept. 11,      Sept. 17,     Nov. 1,        May 1, 2004         Late            6
          reexamination      2004           2004          2004
10        Annual             Sept. 17,      Sept. 19,     Nov. 1,        May 1, 2005         Late            6
          reexamination      2005           2005          2005
11        Annual             June 22,       June 23,      July 1,        Nov. 1, 2004 5      Early           4
          reexamination      2004           2004          2004



     4
       Annual reexaminations were not performed. The housing assistance payment amount was carried over from the
     previous year.
     5
       Annual reexaminations were completed early; however, the effective dates are incorrect.


                                                          56
Tenant Description     Date        Date to      Effective   Actual        Timeliness Months
                       created     HUD          date        reexamination            late
                                                            date
11     Annual          May 17,     May 20,      July 1,     Nov. 1, 20055 Early      4
       reexamination   2005        2005         2005
13     Annual          Aug. 11,    Aug. 13,     Oct. 1,     Mar. 1, 2004    Late    7
       reexamination   2004        2004         2004
13     Annual          Sept. 26,   Sept. 30,    Nov. 1,     Mar. 1, 2005    Late    8
       reexamination   2005        2005         2005
14     Annual          July 30,    July 30,     Sept. 1,    Dec. 1, 20045   Early   3
       reexamination   2004        2004         2004
14     Annual          Sept. 28,   Sept. 30,    Oct. 1,     Dec. 1, 20055   Early   2
       reexamination   2005        2005         2005
15     Annual          Oct. 25,    Oct. 28,     Dec. 1,     May 1, 2005     Late    6
       reexamination   2005        2005         2005
15     Annual          Apr. 20,    Apr. 21,     June 1,     May 1, 2006     Late    1
       reexamination   2006        2006         2006
16     Annual          Sept. 21,   Sept. 23,    Nov. 1,     Oct. 1, 2005    Late    2
       reexamination   2005        2005         2005
17     Annual          Apr. 12,    Apr. 21,     June 1,     Feb. 1, 2006    Late    4
       reexamination   2006        2006         2006
18     Annual          Dec. 8,     Dec. 9,      Feb. 1,     Jan. 1, 2006    Late    1
       reexamination   2005        2005         2006
20     Annual          Feb. 1,     Feb. 10,     Apr. 1,     Dec. 1, 2005    Late    4
       reexamination   2006        2006         2006
21     Annual          Feb. 24,    Feb. 27,     Apr. 1,     Mar. 1, 2004    Late    1
       reexamination   2004        2004         2004
21     Annual          Mar. 11,    Mar. 11,     May 1,      Mar. 1, 2005    Late    2
       reexamination   2005        2005         2005
21     Annual          Mar. 7,     Mar. 10,     Apr. 1,     Mar. 1, 2006    Late    1
       reexamination   2006        2006         2006
22     Annual          Mar. 29,    Apr. 4,      Mar. 1,     Apr. 1, 20055   Early   1
       reexamination   2005        2005         2005
22     Annual          Mar. 30,    Apr. 6,      May 1,      Apr. 1, 2006    Late    1
       reexamination   2006        2006         2005
23     Annual          Feb. 10,    Feb. 11,     Apr. 1,     May 1, 20055    Early   1
       reexamination   2005        2005         2005
23     Annual          Feb. 15,    Feb. 17,     Mar. 1,     May 1, 20065    Early   2
       reexamination   2006        2006         2006
24     Annual          Feb. 17,    Feb. 22,     Apr. 1,     May 1, 20055    Early   1
       reexamination   2005        2005         2005
25     Annual          Nov. 16,    Nov. 21,     Nov. 3,     Aug. 1, 2005    Late    3
       reexamination   2005        2005         2005




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Appendix E

                                        CRITERIA
The consolidated annual contributions contract, section 10(a), HUD Requirements, states
that the housing authority must comply and must require owners to comply with the
requirements of the U.S. Housing Act of 1937 and all HUD regulations and other requirements,
including any amendments or changes in the law or HUD requirements.

24 CFR [Code of Federal Regulations] 5.609, Annual Income

       (a) Annual income means all amounts, monetary or not.
       (b) Annual income includes, but is not limited, to the full amount of wages and salaries,
           overtime pay, commissions, fees, tips and bonuses, and other compensation for
           personal services, net income, dividends. It also includes periodic payments received
           from Social Security, welfare, unemployment, alimony, child support, Armed Forces
           pay. In addition, as of April 2006, section (9) was added, stating that for Section 8
           programs only, any financial assistance in excess of amounts received for tuition that
           an individual receives under the Higher Education Act of 1965, from private sources,
           or from an institution of higher education, shall be considered income to that
           individual, except that financial assistance described in this paragraph is not
           considered annual income for persons over the age of 23 with dependent children.
           For purposes of this paragraph, financial assistance does not include loan proceeds for
           the purpose of determining income.
       (c) Annual income does not include income for items such as the employment of children
           under the age of 18 years; a lump-sum addition to family assets; temporary,
           nonrecurring, or sporadic income; and earnings in excess of $480 for each full-time
           student 18 years or older.

24 CFR [Code of Federal Regulations] 982.152, Administrative Fee, allows HUD to
“…reduce or offset any administrative fee to the PHA [public housing authority], in the amount
determined by HUD, if the PHA fails to perform PHA administrative responsibilities correctly or
adequately under the program.” 24 CFR [Code of Federal Regulations] 982.152, Administrative
Fee Reserve, allows HUD to direct an authority to use funds in its administrative fee reserve to
improve administration of the program or to reimburse ineligible expenses.

24 CFR [Code of Federal Regulations] 982.158, Program Accounts and Records
      (a) 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. The records must be in the form required by
          HUD, including requirements governing computerized or electronic forms of record-
          keeping.




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24 CFR [Code of Federal Regulations] 982.505, Voucher Tenancy: How to Calculate
Housing Assistance Payment

(a) Use of payment standard. A payment standard is used to calculate the monthly housing
assistance payment for the family. The “payment standard” is the maximum monthly subsidy
payment.

       (b) Amount of monthly housing assistance payment. The Public Housing Agency shall
           pay a monthly housing assistance payment on behalf of the family that is equal to the
           lower of:
           (1) The payment standard for the family minus the total tenant payment; or
           (2) The gross rent minus the total tenant payment
       (c) Payment standard for a family.
           (1) The payment standard for a family is the lower of:
               (i) The payment standard amount for the family unit size; or
               (ii) The payment standard amount for the size of the dwelling unit rented by the
                    family.

24 CFR [Code of Federal Regulations] 982.516, Family Income and Composition: Regular
and Interim Examinations
       (a) Public Housing Authority responsibility for reexamination and verification
           (1) The Public Housing Authority must conduct a reexamination of family income
               and composition at least annually.
           (2) The Public Housing Authority must obtain and document in the tenant file third
               party verification, or must document in the tenant file why the third party
               verification was not available.

24 CFR [Code of Federal Regulations] 982.517, Utility Allowance Schedule
      (a) Maintaining a schedule
          (1) The Public Housing Agency must maintain a utility allowance schedule for all
              tenant-paid utilities, and provide HUD a copy.

24 CFR [Code of Federal Regulations] 982.518, Regular Tenancy; How to Calculate
Housing Assistance Payment, states that the monthly housing assistance payment equals the
gross rent, minus the higher of
      (a) The total tenant payment; or
      (b) The minimum rent as required by law.

HUD Notice PIH 2005-17, issued June 15, 2005, (renews and revises Notice 2000-13, issued
April 7, 2000), states: “all PHAs that administer public housing or HCV [Housing Choice
Voucher] programs must submit, on timely basis, 100 percent of family records to HUD’s PIC
[Public Housing Information Center] as set forth by 24 CFR Part 908 and the consolidated
annual contributions contract (CACC). PIC is the Department’s official system to track and
account for public housing and HCV family characteristics of income, rent, and other occupancy
factors. PHAs must submit their Form HUD-50058 records electronically to HUD for all current
public housing and HCV families. PHAs must submit accurate records with no fatal edits (edits



                                               59
that cause PIC to reject records to maintain integrity of the PIC data) for HUD to consider the
records successfully submitted.” In addition, it states: “PHAs must have a minimum of 95
percent Form HUD-50058 reporting rate for both public housing and HCV at the time of their
annual assessment to avoid sanctions.”

HUD’s Housing Choice Voucher Guidebook, 7420.10G, April 2001, states as follows:

•      Chapter 5 (eligibility and denial of assistance): “Accurate determination of income
       eligibility, allowances, and family rent can occur only with full verification of all factors
       related to income and family circumstances. While the regulations regarding verification
       are brief, this activity takes a significant amount of time and attention in administration of
       the program. Well-designed verification procedures are essential to obtaining full and
       accurate information, which is essential for the best use of program funds and fair and
       equitable treatment of all participants. A PHA may resort to use of family certification of
       facts only when neither a third party nor documents are available.”

•      Chapter 7 (payment standards): “Payment standards are used to calculate the housing
       assistance payment (HAP) that the PHA pays to the owner on behalf of the family leasing
       unit… The level at which the payment standard is set directly affects the amount of
       subsidy a family will receive and the amount paid by the program participants.”

•      Chapter 12 (reexaminations): “The PHA is required to reexamine the income and
       composition of housing choice voucher families at least annually. The annual
       reexamination determines the continued eligibility of the family and establishes the
       housing assistance payment (HAP) to be made on behalf of the family… The PHA must
       establish reexamination procedures that allow for proper and timely verification of all
       information and advance notification to the family of any rent change. The PHA must
       establish a policy regarding annual reexamination effective dates that ensures that
       reexamination for every family takes effect within a 12-month period. It is important that
       the PHA has tracking and monitoring procedures and systems in place to ensure that the
       required reexaminations for each assisted family are initiated and completed on time.
       The PHA’s plan for reexaminations should provide for supervisory monitoring of the
       timely initiation of the reexamination process, the progress of each reexamination, and its
       completion.”

The Authority’s administrative plan, chapter 12, Reexamination, section 12.1, states that
when families move to another unit, reexamination is completed, and the anniversary date
changed.

The Authority’s admission and occupancy policy, chapter 11, page 104, states that
reexaminations should be performed no later than 12 months from the anniversary of the tenant’s
move-in day.




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