oversight

The District of Columbia Housing Authority, Washington, DC, Did Not Implement Effective Controls for Its Leased Housing under its Moving to Work Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-07-30.

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

                                                                 Issue Date
                                                                      July 30, 2008
                                                                 Audit Report Number
                                                                      2008-PH-1010




TO:        William D. Tamburrino, Director, Baltimore Public Housing Program Hub,
            3BPH



FROM:      John P. Buck, Regional Inspector General for Audit, Philadelphia Regional
            Office, 3AGA

SUBJECT:   The District of Columbia Housing Authority, Washington, DC, Did Not
            Implement Effective Controls for Its Leased Housing under Its Moving to
            Work Program

                                  HIGHLIGHTS

 What We Audited and Why

           We audited the District of Columbia Housing Authority’s (Authority) controls
           over its leased housing under its Moving to Work Demonstration program based
           on our analysis of various risk factors relating to the housing authorities under the
           jurisdiction of the U.S. Department of Housing and Urban Development’s (HUD)
           Baltimore field office. This is the third of three audit reports on the Authority’s
           program. The audit objectives addressed in this report were to determine whether
           the Authority implemented adequate controls to prevent overhousing, ensured that
           it made assistance payments only for the time period that families resided in units,
           and effectively implemented a family self-sufficiency program.

 What We Found

           The Authority had not implemented adequate controls to prevent overhousing and
           prevent it from making assistance payments for vacant units and had not
           effectively implemented a family self-sufficiency program. The Authority paid
           for 194 families to live in larger housing units than its policy allowed. As a result,
           it made excessive housing assistance payments totaling $42,955 monthly. In
           addition, it made ineligible housing assistance payments totaling $322,389 for
           vacant units. During the audit, the Authority recovered $278,561 of the $322,389
           in ineligible payments. It needs to recover the remaining $43,828 in housing
           assistance payments related to these units. Further, the Authority did not operate
           its family self-sufficiency program according to HUD requirements. As a result,
           it made ineligible and unsupported payments to participants’ escrow accounts
           totaling $44,702 and did not make contributions of more than $8,900 to the
           escrow account for one participant.

What We Recommend

           We recommend that the Director of HUD’s Baltimore Public Housing Program
           Hub require the Authority to reimburse the applicable programs for its improper
           use of more than $80,000 in funds, provide documentation or reimburse the
           applicable program more than $51,000 for the unsupported payments cited in this
           audit report, and implement adequate procedures and controls to address the
           findings cited in this audit report to prevent the Authority from spending more
           than $426,000 in program funds for overhoused tenants. We also recommend that
           the Director of HUD’s Baltimore Public Housing Program Hub verify that the
           Authority contributed more than $8,900 to the family self-sufficiency escrow
           account for one participant.

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

Auditee’s Response

           We discussed the report with the Authority during the audit and at an exit
           conference on July 2, 2008. The Authority provided written comments to our
           draft report on July 15, 2008. The Authority agreed with the findings and
           recommendations. The complete text of the Authority’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 Sometimes Paid for Larger Housing Units Than Its      6
      Policy Allowed
      Finding 2: The Authority Made Housing Assistance Payments for Vacant Units     10
      Finding 3: The Authority Did Not Operate Its Family Self-Sufficiency Program   14
      According to HUD Requirements

Scope and Methodology                                                                18

Internal Controls                                                                    20

Appendixes
   A. Schedule of Questioned Costs and Funds to Be Put to Better Use                 22
   B. Auditee Comments                                                               23




                                             3
                     BACKGROUND AND OBJECTIVES

The District of Columbia Housing Authority (Authority) operates the city’s public housing
programs. The Authority was, by court order, placed in receivership on May 19, 1995.
Receivership terminated on September 30, 2000. The Authority is governed by a nine-member
board of commissioners consisting of four commissioners appointed by the mayor with the
advice and consent of the city council, three commissioners elected by residents of the
Authority’s housing properties, one commissioner representing labor and designated by the
central labor council, and the deputy mayor for planning and economic development serving ex
officio. The board of commissioners grants authority to the executive director to develop
policies, plans, and goals and to direct the day-to-day operation of the Authority.

In 1996, Congress authorized the Moving to Work Demonstration program (Moving to Work) as
a U.S. Department of Housing and Urban Development (HUD) demonstration program. The
Authority was accepted into the program on July 25, 2003, when HUD’s Assistant Secretary for
Public and Indian Housing signed the Authority’s Moving to Work agreement. The signed
agreement requires the Authority to abide by the statutory requirements in Section 8 of the
United States Housing Act of 1937 until such time as the Authority proposes and HUD approves
an alternative leased housing program. HUD accepted the alternative leased housing program
the Authority proposed under its Moving to Work agreement.

Under the Section 8 Housing Choice Voucher program, the Authority was authorized to provide
leased housing assistance payments to more than 9,500 eligible households. HUD authorized the
Authority the following financial assistance for housing choice vouchers:

                   Authority fiscal year            Annual budget authority
                          2005                          $112,811,038
                          2006                          $115,848,213
                          2007                          $144,294,714
                          Total                         $372,953,965

HUD has competitively awarded the Authority the following grants for its family self-sufficiency
program since 2005:

                               Fiscal year            Grant amount
                                  2005                  $189,000
                                  2006                  $190,890
                                  Total                 $379,890

HUD awarded the grants to the Authority to fund a family self-sufficiency coordinator and a
family self-sufficiency homeownership coordinator.

The purpose of the family self-sufficiency program is to promote the development of local
strategies to coordinate the use of public housing assistance and housing assistance under the


                                                4
Section 8 Housing Choice Voucher program with public and private resources to enable eligible
families to achieve economic independence and self-sufficiency.

Our audit objectives were to determine whether the Authority implemented adequate controls to
prevent overhousing, ensured that it made assistance payments only for the time period that
families resided in units, and effectively implemented a family self-sufficiency program. This is
the third of three audit reports on the Authority’s leased housing program.




                                                5
                                 RESULTS OF AUDIT

Finding 1: The Authority Sometimes Paid for Larger Housing Units
Than Its Policy Allowed
In most cases, the Authority applied the correct voucher size in accordance with its adopted
subsidy standards. However, it allowed 194 families to live in units that were larger than its
standards allowed because it lacked controls to detect and prevent overhousing. As a result, the
Authority made excessive and unsupported housing assistance payments totaling at least
$42,955.



 The Authority Established
 Subsidy and Payment
 Standards



               HUD regulations at 24 CFR [Code of Federal Regulations] 982.54 require the
               Authority to adopt a written administrative plan that establishes local policies for
               operation of the housing programs within the context of federal laws and
               regulations. Regulations at 24 CFR 982.402 require the Authority to establish
               subsidy standards that determine the number of bedrooms needed for families of
               different sizes and compositions. The subsidy standards must provide for the
               smallest number of bedrooms needed to house a family without overcrowding.
               The Authority’s subsidy standards in effect during the audit were as follows:

                                         Subsidy standards
                                        Minimum number of            Maximum number of
                   Voucher size               persons                     persons
                    Efficiency                   1                           1
                         1                       1                           2
                         2                       2                           4
                         3                       3                           6
                         4                       4                           8
                       5-6                       6                         10-12

               The regulations also require the Authority to establish payment standards. The
               Authority established payment standards by number of bedrooms, and it used
               them to calculate the amount of housing assistance it would pay to a landlord on
               behalf of the family leasing the unit. The Authority’s payment standards in effect
               during the audit were as follows:


                                                 6
                                 Payment standards
                     Number of bedrooms      Payment standard
                         Efficiency             Up to $1,095
                              1                 Up to $1,247
                              2                 Up to $1,415
                              3                 Up to $1,825
                              4                 Up to $2,388
                              5                 Up to $2,747
                              6                 Up to $3,104

    The Authority Made Excessive
    and Unsupported Housing
    Assistance Payments for 194
    Families


                 The Authority did not follow its administrative plan and overhoused 194 families.
                 In January 2008, the Authority provided a spreadsheet containing housing
                 assistance payment information for the 194 families as of December 2007. It
                 stated that it had issued enhanced vouchers 1 to 28 families and regular vouchers
                 to the remaining 166 families. Although enhanced vouchers differ from regular
                 vouchers, all 194 families were overhoused regardless of the type of voucher
                 issued. The following table provides a summary of the overhoused families
                 identified.

                   Number in        Number of bedrooms in              Number of
                    family              assisted unit                   families
                      1                       2                           56
                      1                       3                           26
                      2                       3                           62
                      2                       4                           17
                      2                       5                            3
                      3                       4                           21
                      3                       5                            4
                      3                       6                            2
                      4                       5                            2
                      4                       6                            1
                                     Total                                194

                 Using the family data that the Authority provided, we compared the number of
                 bedrooms and the contract rent for the 194 families to the subsidy and payment

1
  HUD’s policy on Notice PIH [Public and Indian Housing] 2001-41 (HA), which was in effect during the audit,
limited enhanced assistance to one year. After one year, the Authority’s normal payment standard would be used to
determine the housing assistance payment.

                                                        7
                   standards that were in force during the audit for the size unit appropriate for the
                   family. Using automated data the Authority provided, we attempted to determine
                   when the families became overhoused. For 68 families without enhanced
                   vouchers, the data indicated that the overhoused condition began in 2006 and
                   earlier. We could not determine when the overhoused condition started for the
                   other families. We requested the Authority provide information to identify when
                   the overhoused condition began, but the Authority did not provide any
                   information. Therefore, we could not determine the total amount of excessive
                   housing assistance payments and used the December 2007 housing assistance
                   payment information the Authority provided to conservatively quantify
                   questioned costs. The Authority made excessive and unsupported housing
                   assistance payments of $42,955 for the month ($35,517 of excessive payments for
                   the families with regular vouchers and $7,438 of unsupported payments for the
                   families with enhanced vouchers). This condition occurred because the Authority
                   did not have controls to detect and prevent overhousing.

    The Authority Took Action
    Based on the Audit


                   The Authority acknowledged the problem and issued transfer vouchers to 38
                   families. Transfer vouchers give families 180 days to find an appropriately sized
                   housing unit. The Authority stated that it sent letters to the remaining overhoused
                   families in March 2008 to arrange meetings to discuss their housing
                   accommodations.


    Conclusion


                   The Authority made housing assistance payments for overhoused families
                   because it lacked controls to detect, correct, and prevent the overhousing. As a
                   result, it made excessive and unsupported housing assistance payments of at least
                   $42,955. The Authority needs to determine how long the families were
                   overhoused and reimburse its program for any excess amounts it paid. The
                   Authority also needs to implement procedures and controls to ensure that housing
                   assistance payments are based on the appropriate subsidy and payment standards
                   for the family. By taking action to house families in appropriately sized units, the
                   Authority will avoid spending an estimated $426,204 2 in excessive subsidy
                   payments over the next year.




2
    $426,204 = $35,517 per month multiplied by 12 months to annualize.

                                                         8
Recommendations


          We recommend that the Director of HUD’s Baltimore Public Housing Program
          Hub require the Authority to

          1A.     Reimburse its program $35,517 from nonfederal funds for the excessive
                  housing assistance payments it made for overhoused families with regular
                  vouchers.

          1B.     Provide documentation to demonstrate that the one-year limit applicable to
                  enhanced vouchers had not expired for the families with enhanced
                  vouchers or reimburse its program $7,438 or the amount that cannot be
                  supported from nonfederal funds.

          1C.     Determine when each family became overhoused, calculate the amount of
                  excess housing assistance payments it made, and reimburse its program
                  from nonfederal funds.

          1D.     Establish and implement procedures and controls to ensure that housing
                  assistance payments are based on the appropriate subsidy and payment
                  standards for the family, thereby ensuring that $426,204 in program funds
                  is expended on appropriately sized units over a one-year period.




                                           9
Finding 2: The Authority Made Housing Assistance Payments for
Vacant Units

The Authority made ineligible housing assistance payments totaling $322,389 for units that it
should have known were vacant and did not take action to recover payments after becoming
aware that it paid for vacant units. This occurred because the Authority did not conduct annual
reexaminations and did not comply with policy in its administrative plan to recover from owners
payments to which they were not entitled. During the audit, the Authority recovered $278,561 of
the $322,389 in ineligible payments. The Authority needs to recover the remaining $43,828 in
housing assistance payments related to our review.




The Authority Made Ineligible
Housing Assistance Payments


              The Authority made $322,389 in ineligible housing assistance payments on behalf
              of families in which the head of household was deceased. Regulations at 24 CFR
              982.311 require that housing assistance payments be paid to the owner in
              accordance with the terms of the housing assistance payments contract and that
              housing assistance payments only be paid during the lease term and while the
              family is residing in the unit. Chapter 22 of HUD’s Housing Choice Voucher
              Guidebook, 7420.10G, states that public housing authorities are ultimately
              responsible for ensuring that the right people receive the right amount of subsidy,
              and they must maintain a high degree of accuracy in administering the housing
              choice voucher program. Authorities must have preventive measures in place so
              that any irregularity can be quickly detected and resolved as efficiently,
              professionally, and fairly as possible. Because preventive measures are the most
              effective way to deter widespread program irregularities, they should be an
              integral part of daily operations. Consideration should be given to whether the
              measure allows for the identification of errors before or after the housing
              assistance payments are made. Errors that go undetected translate into increased
              collection costs and losses for the public housing authority. The Authority was
              unaware of this condition because it did not conduct annual reexaminations and it
              did not take action to recover payments after becoming aware that it paid for
              vacant units, as required.

              During the period October 2004 to September 2006, the Authority made housing
              assistance payments for housing units in which the head of household was
              deceased. The Authority provided an automated data file containing Form HUD-
              50058 (Family Report) information for all persons participating in its leased
              housing program as of October 2006. We analyzed the data in the file and
              determined that the Authority had identified 10,239 persons as heads of


                                              10
                 household. We screened the Social Security numbers for these persons against a
                 database provided to us by the Social Security Administration to determine
                 whether heads of household were deceased. We matched the deceased heads of
                 household to the Authority’s housing assistance payment register to determine
                 whether the Authority made payments for them. The Authority made housing
                 assistance payments for 124 housing units in which our analysis indicated that the
                 head of household was deceased. We provided a spreadsheet with our results to
                 the Authority.

    The Authority Began Taking
    Action during the Audit


                 The Authority was proactive and initiated action to recover ineligible funds and
                 began developing controls during the audit. Of the 124 deceased heads of
                 household identified, the Authority agreed that in 55 cases, 3 the head of
                 household was deceased and that it made ineligible payments totaling $305,813
                 for the units. In 27 of the 55 cases, the Authority was unaware the head of
                 household was deceased because it failed to perform the annual reexaminations.
                 In the other 28 cases, it was aware the head of household deceased and it stopped
                 making payments, but it did not take action to recover payments until we raised
                 the issue. The Authority processed reimbursement adjustments to either withhold
                 overpaid amounts from future payments to owners or initiate collection actions
                 for those owners no longer participating in the program. It provided explanations
                 and documentation to support its actions. We considered the Authority’s
                 explanations and reviewed the related documentation. We identified an additional
                 $16,576 in ineligible payments that the Authority had not identified. This number
                 increased the total ineligible payments related to this issue to $322,389. The
                 Authority recovered $278,561 of the ineligible payments during the audit. It
                 stated that it was working toward recovering the remaining $43,828. However,
                 the Authority will be responsible for reimbursing its program $14,420 of the
                 $43,828 if it does not recover the funds because it made these payments more
                 than 12 months after the date of death.

                 In addition, the Authority developed a set of procedures to incorporate the use of
                 the deceased tenants report from HUD’s Enterprise Income Verification system
                 into its operations to identify deceased tenants. HUD encourages public housing
                 authorities to use the report to verify deceased tenants and update family
                 composition. Although the Authority’s action to implement this control is not
                 required, by being proactive, the Authority will improve the efficiency of its


3
  For the remaining 69 cases, the Authority reported that there was no effect because either there were remaining
family members still residing in the units, the head of household was not deceased, the Authority had stopped
making assistance payments after the month of death, the head of household was not deceased and had vacated the
unit, or the Authority became aware of the death and issued a stop payment on a check.

                                                        11
                 program by identifying and resolving family composition issues that affect
                 subsidy payments.

    The Authority Did Not Comply
    with Applicable Requirements


                 The Authority made ineligible payments because it did not conduct annual
                 reexaminations and did not comply with policy in its administrative plan to
                 recover from owners payments to which they were not entitled. In 27 of the 55
                 cases, the Authority had not conducted annual reexaminations 4 as required by
                 HUD regulations at 24 CFR 982.516. Had the Authority performed annual
                 reexaminations in these cases, it would have determined that the tenant was
                 deceased and could have taken action as appropriate. In the other 28 cases,
                 although the Authority stopped making monthly assistance payments for the units
                 after becoming aware that the head of household deceased, it did not take action
                 to recover from the owners payments to which they were not entitled. Chapter 21
                 of the Authority’s administrative plan states that if the Authority determines that
                 an owner has inadvertently or unintentionally obtained housing assistance
                 payments to which the owner is not entitled, it will either deduct the questioned
                 amount from future payments to the owner or will pursue one or more of six
                 collection activities delineated in the plan. The Authority needs to emphasize this
                 policy to its responsible employees.

    Conclusion



                 The Authority made ineligible housing assistance payments totaling $322,389 for
                 units in which the heads of household were deceased. This occurred because the
                 Authority did not conduct annual reexaminations and did not recover from owners
                 payments to which they were not entitled. During the audit, the Authority took
                 action and recovered $278,561 of the ineligible funds identified by the audit. The
                 Authority needs to recover the remaining $43,828 in housing assistance payments
                 or reimburse its program.


    Recommendations


                 We recommend that the Director of HUD’s Baltimore Public Housing Program
                 Hub require the Authority to



4
 This weakness was addressed in a recommendation in our first audit report (2007-PH-1008). In February 2008, the
Authority completed its corrective actions to close out the recommendation.

                                                      12
2A.   Recover the balance remaining from the $322,389 of ineligible housing
      assistance payments identified and reimburse its program from nonfederal
      funds if it does not recover any of the payments it made more than 12
      months after the tenant’s date of death.

2B.   Emphasize to responsible employees the need to follow the policy in its
      administrative plan regarding recovery of payments from owners.




                              13
Finding 3: The Authority Did Not Operate Its Family Self-Sufficiency
Program According to HUD Requirements

The Authority did not accurately determine annual income on participation contracts and make
contributions to the escrow account for one participant. This condition occurred because the
Authority did not have adequate procedures and controls to ensure that it complied with HUD
requirements and it did not assign an adequate number of staff to manage the program. As a
result, the Authority made ineligible and unsupported payments to participants’ escrow accounts
totaling $44,702 and did not credit more than $8,900 to one participant’s escrow account.




 The Authority Understated
 Annual Income and Made
 Ineligible and Unsupported
 Payments of $44,702 to
 Participants’ Escrow Accounts


              We reviewed the files of the eight participants who completed the Authority’s
              program and found that the Authority made unsupported payments to the escrow
              accounts for three of them. The Authority understated the annual family income
              on the family self-sufficiency program contract of participation for all three
              participants. The annual family income amount listed on the contract is used to
              determine future monthly payments to the family’s escrow account. As earned
              income increases with employment, the escrow accounts are funded with a
              portion of the increases in the household’s rent because of increases in earned
              income and are credited to the escrow account in accordance with HUD
              requirements. Essentially, the escrow accounts were funded with program funds
              since the household’s portion of the rent was not adjusted when the household’s
              income increased.

              In one instance, the Authority did not properly determine annual earned income
              for a participant who was also an employee of the Authority. Documentation
              maintained in the Authority’s human resources department showed that the
              Authority employed this person, effective December 2, 2002, at an annual starting
              salary of $25,077. The Authority should have used this income in the calculations
              for the December 1, 2002, annual reexamination but did not. The Authority used
              $5,640 as the annual income for the family. Regulations at 24 CFR 5.609 state
              that annual income means all amounts anticipated to be received from a source
              outside the family during the 12-month period following admission or annual
              reexamination effective date.




                                              14
Further, the Authority did not update the family’s annual income as required
before entering into the contract of participation. Section 23.4 of HUD’s Housing
Choice Voucher Program Guidebook, 7420.10G, states that the contract of
participation must be executed no more than 120 days after the household’s most
recent annual or interim reexamination. If more than 120 days have passed since
the last reexamination, a new reexamination must be completed. In this case, the
contract of participation was effective May 1, 2003, and it showed that the
family’s annual earned income was $5,640, which was from the December 1,
2002, reexamination. The Authority should not have used this reexamination
because it was more than 120 days old.

By not properly determining annual income, the Authority made excessive
payments to the participant’s escrow account. Documentation in the participant’s
file showed that, effective July 1, 2003, the family’s annual income had increased
to $25,077. As a result of the increase, the Authority began making monthly
payments of $368 to the participant’s escrow account. However, the
contributions to the escrow account were excessive because the participant was
already employed and the family’s annual income had not actually increased. The
Authority made unsupported escrow payments totaling $24,180 for this
participant.

In another instance, the Authority understated a participant’s annual income
because it accepted the participant’s certification of zero income although
documentation in the participant’s file indicated that the participant was employed
at the time the Authority executed the contract of participation. Excessive
contributions to the escrow account result when annual income is understated on
the contract of participation. The Authority made unsupported escrow payments
totaling $19,640 for this participant.

In the last instance, the Authority understated a participant’s annual income by
$3,039 on the contract of participation. The contract showed that the annual
income for this participant was $24,097, but a third-party employment verification
form in the participant’s file showed that the annual income was $27,136.
Excessive contributions to the escrow account result when annual income is
understated on the contract of participation. The Authority informed us that it
determined that it should not have made any escrow payments for this participant.
Therefore, the $882 the Authority contributed for this participant was ineligible.

The Authority needs to reimburse its program $882 for the ineligible payment
discussed above and recalculate the escrow payments for the other two
participants and reimburse its program $43,820 or the amount determined to be
ineligible as a result of the review.




                                15
The Authority Did Not Make
Required Escrow Contributions
for One Participant


           The Authority did not make contributions to the escrow account for one
           participant. The contract of participation states that the Authority will make
           contributions to the escrow account in accordance with HUD requirements. As
           earned income increases with employment, the Authority should increase credits
           to the escrow account. Documentation in the participant’s file indicated that the
           Authority should have been making contributions due to an increase in annual
           income, but it had not. We informed the Authority of this situation during the
           audit. The Authority reviewed its escrow calculations for 2007 and 2008,
           determined that it should have made a contribution to the escrow account, and
           informed us that it had made a contribution of $8,936 to the escrow account for
           the participant.

A Lack of Controls and
Inadequate Staffing Caused
Problems


           The Authority did not have adequate procedures and controls to ensure that it
           complied with HUD requirements, and it lacked an adequate number of staff to
           properly manage the program. During the audit period, the Authority employed
           two program coordinators, but due to an extended leave situation concerning one
           of them, only one was left to manage more than 400 program participants. The
           ratio of program participants to coordinators severely impacted the efficient and
           effective management of the program. During the audit, the Authority informed
           us that it had increased the number of program staff. The Authority needs to
           develop and implement controls over its family self-sufficiency program to ensure
           that it follows HUD requirements. It also needs to review its staffing to ensure
           that it is adequate to effectively administer the program.


The Authority Took Action
during the Audit


           The Authority initiated actions during the audit to correct deficiencies that we
           identified and improve its management of the program. The Authority

               •   Contributed $8,936 to the escrow account for one participant,
               •   Increased the number of program staff,
               •   Sent letters to all of the program participants to discuss their progress and
                   terminated 199 participants because they did not respond to the letters, and


                                            16
                •   Initiated the use of Form HUD-52650 (Family Self-Sufficiency Program
                    Individual Training and Service Plan) for all participants rather than using
                    its own form.


Recommendations


          We recommend that the Director of HUD’s Baltimore Public Housing Program
          Hub

          3A.       Verify that the Authority contributed $8,936 to the escrow account for one
                    participant.

          We recommend that the Director of HUD’s Baltimore Public Housing Program
          Hub require the Authority to

          3B.       Reimburse its program $882 for the ineligible escrow payment identified
                    in the audit.

          3C.       Recalculate the escrow payments for the participants identified in the audit
                    and reimburse its program $43,820 or the amount determined to be
                    ineligible as a result of the review from nonfederal funds.

          3D.       Develop and implement procedures and controls to ensure that it follows
                    HUD requirements.

          3E.       Review the staffing for the program and adjust it if necessary to ensure
                    that it is adequate to effectively administer the program.




                                             17
                        SCOPE AND METHODOLOGY

To accomplish our objectives, we reviewed

   •   Applicable laws; regulations; the Authority’s administrative plan; HUD’s program
       requirements at 24 CFR [Code of Federal Regulations] Parts 5, 982, and 984; HUD’s
       Public and Indian Housing Notices 2001-41 and 2008-12; HUD’s Housing Choice
       Voucher Program Guidebook, 7420.10G; and the United States Code.

   •   The Authority’s accounting records; annual audited financial statements for 2004 and
       2005; check register; tenant files; family self-sufficiency participant files; computerized
       databases, including housing assistance payments and Form HUD-50058 (Family Report)
       data; board meeting minutes; organizational chart; correspondence; family self-
       sufficiency action plan; and Moving to Work program documents including the
       agreement, plans, and reports.

   •   HUD’s monitoring reports for the Authority.

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

To achieve our audit objectives, we relied in part on computer-processed data in the Authority’s
database. Although we did not perform a detailed assessment of the reliability of the data, we
did perform a minimal level of testing and found the data to be adequate for our purposes.

We analyzed an automated data file that the Authority provided in December 2007 containing
information for 10,416 families receiving leased housing assistance. We compared the data to
the Authority’s subsidy standards to determine the minimum number of persons for the bedroom
size and the applicable payment standard. The analysis showed that the Authority allowed 194
families to live in units larger than its policy allowed.

We analyzed an automated data file that the Authority provided containing Form HUD-50058
(Family Report) information for all persons participating in its leased housing program as of
October 2006. We determined that the Authority had identified 10,239 persons as heads of
household. We screened the Social Security numbers for these persons against a database
provided to us by the Social Security Administration to determine whether heads of household
were deceased. We matched the deceased heads of household to the Authority’s housing
assistance payment register to determine whether the Authority made payments for them. The
Authority made housing assistance payments for 124 housing units in which our analysis
indicated that the head of household was deceased.

We reviewed all disbursements the Authority made from October 2004 to December 2007 from
its family self-sufficiency escrow account and all the family self-sufficiency files for the
participants who completed the program.




                                               18
We statistically selected and reviewed the files for 52 active participants using the U.S. Army
Audit Agency’s statistical software from 212 active program participants as of December 31,
2007. The Authority did not always ensure that participants established appropriate final goals
in their contracts of participation as required. We addressed this minor issue with the Authority
during the audit and it reviewed and revised the goals in the contracts as appropriate.

We performed our on-site audit work between November 2007 and April 2008 at the Authority’s
office located at 1133 North Capital Street, NE, Washington, DC. The audit covered the period
October 1, 2004, through September 30, 2007, but was expanded when necessary to include
other periods.

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




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                             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 objectives:

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

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

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

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

              We assessed the relevant controls identified above.

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




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Significant Weaknesses

           Based on our audit, we believe the following items are significant weaknesses:

           The Authority did not implement procedures and controls to ensure that it

               •   Based housing assistance payments on the appropriate subsidy and
                   payment standards for the assisted family (see finding 1).

               •   Made housing assistance payments only for the time families resided in
                   units and recovered payments after becoming aware that it paid for vacant
                   units (see finding 2).

               •   Maintained the correct escrow balance in its family self-sufficiency
                   program in accordance with HUD requirements (see finding 3).




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                                   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               $35,517
                 1B                                     $7,438
                 1D                                                      $426,204
                 2A            $322,389 (1)
                 3A                                                       $8,936
                 3B                $882
                 3C                                     $43,820
                Totals           $358,788               $51,258          $435,140


     (1) The Authority recovered $278,561 of this amount. It needs to recover the remaining
     $43,828.

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 the 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 cease to incur program costs for overhoused tenants. Once the
     Authority successfully improves its controls, there will be recurring benefits. Our
     estimate reflects only the initial year of these benefits.



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Appendix B

             AUDITEE COMMENTS




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