Issue Date
August 15, 2008
Audit Report Number
2008-PH-1012
TO: Dennis G. Bellingtier, Director, Office of Public Housing, Pennsylvania State
Office, 3APH
FROM: John P. Buck, Regional Inspector General for Audit, Philadelphia Regional
Office, 3AGA
SUBJECT: The Delaware County Housing Authority, Woodlyn, Pennsylvania, Did Not
Adequately Administer Its Housing Assistance Payments
HIGHLIGHTS
What We Audited and Why
We audited the Delaware County Housing Authority’s (Authority) Section 8
Housing Choice Voucher program (program). We selected the Authority for an
audit 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) Philadelphia regional office. This is the first of two audit
reports that we plan to issue on the Authority’s program. Our audit objective was
to determine whether the Authority administered its housing assistance payments
in compliance with HUD requirements and its own administrative plan.
What We Found
The Authority did not adequately administer its housing assistance payments in
compliance with HUD requirements and its own administrative plan. It
incorrectly calculated housing assistance and utility allowance payments and
failed to execute housing assistance contracts in a timely manner, resulting in
about $58,900 in ineligible payments and more than $3,300 in tenant
underpayments. It also could not support more than $26,500 in housing
assistance and utility allowance payments. If the Authority does not implement
sufficient controls or procedures to ensure that its program is administered in
compliance with HUD requirements, we estimate that over the next year it will
pay more than $926,300 in ineligible housing assistance.
What We Recommend
We recommend that HUD require the Authority to reimburse the program from
nonfederal funds for ineligible payments of about $58,900, reimburse the
appropriate tenants or households more than $3,300 for the underpayment of
housing assistance and utility allowances, provide documentation or reimburse the
program more than $26,500 from nonfederal funds for unsupported payments, and
implement sufficient controls or procedures to prevent ineligible payments of
more than $926,300 in program funds over the next year.
For each recommendation without a management decision, please respond and
provide status reports in accordance with HUD Handbook 2000.06, REV-3.
Please furnish us copies of any correspondence or directives issued because of the
audit.
Auditee’s Response
We provided our discussion draft audit report to the Authority on July 7, 2008.
We discussed the report with the Authority during the audit and at an exit
conference on July 10, 2008. Following the exit conference, we provided an
updated draft to the Authority on July 21, 2008. The Authority provided written
comments to our draft report on August 4, 2008. The complete text of the
Authority’s response, along with our evaluation of that response, can be found in
appendix B of this report.
2
TABLE OF CONTENTS
Background and Objectives 4
Results of Audit
Finding: The Authority Did Not Adequately Administer Its Housing Assistance 5
Payments
Scope and Methodology 10
Internal Controls 12
Appendixes
A. Schedule of Questioned Costs and Funds to Be Put to Better Use 14
B. Auditee Comments and OIG’s Evaluation 15
3
BACKGROUND AND OBJECTIVES
The Delaware County Housing Authority (Authority) was created by the Delaware County
Council in January 1938. The Authority was created to address the lack of decent, safe, and
sanitary housing for the low-income families in the Delaware County, Pennsylvania, area.
The Authority is governed by a board of commissioners made up of a chairman, vice chairman,
secretary, assistant secretary, treasurer, and assistant treasurer. All members of the board, except
the secretary, are appointed by the Delaware County Council. The appointed members of the
board appoint a secretary who also acts as the Authority’s executive director. The present
executive director is Lawrence E. Hartley. The Authority employs a staff of approximately 75
individuals at its offices located at 1855 Constitution Avenue, Woodlyn, Pennsylvania.
The Authority is authorized to have 2,753 contracted units under its consolidated annual
contributions contract with the U.S. Department of Housing and Urban Development (HUD).
The contract defines the terms and conditions under which the Authority agrees to develop and
operate all projects under the agreement. HUD authorized the Authority the following financial
assistance for fiscal years 2005 through 2007:
Authority fiscal Annual budget
year authority Disbursed
2005 $21,541,266 $21,541,266
2006 $20,026,512 $20,026,512
2007 $20,560,195 $20,560,195
Totals $62,127,973 $62,127,973
Our audit objective was to determine whether the Authority administered its housing assistance
payments in compliance with HUD requirements and its own administrative plan. As part of this
audit, we also reviewed the Authority’s Family Self-Sufficiency program. Minor findings noted
in relation to that program were separately communicated to the Authority in a letter, dated
June 9, 2008.
4
RESULTS OF AUDIT
Finding: The Authority Did Not Adequately Administer Its Housing
Assistance Payments
The Authority did not administer its housing assistance payments in compliance with HUD
requirements and its own administrative plan. It often incorrectly calculated housing assistance
and utility allowance payments and did not execute some of its housing assistance contracts
within the required timeframe. It also did not have appropriate documentation to support
housing assistance and utility allowance payments in more than 18 percent of the sample cases
reviewed. These problems occurred because the Authority did not implement sufficient controls
to ensure that it followed applicable requirements and did not assign sufficient staff to properly
administer its tenant files and related assistance payments. As a result, the Authority made about
$58,900 in ineligible payments, underpaid tenants more than $3,300, and was unable to support
more than $26,500 in payments. The Authority will also make approximately $926,300 in
ineligible payments from program funds over the next year if it does not implement sufficient
controls or procedures to ensure that it administers its assistance payments in compliance with
applicable requirements.
The Authority Incorrectly
Calculated Housing Assistance
and Utility Allowance Payments
We reviewed tenant files for 65 program participants. In 37 cases, the Authority
incorrectly calculated housing assistance and/or utility allowance payments. As a
result, it made ineligible overpayments of $30,759 and underpaid tenants more
than $3,300. The payments were incorrectly calculated because of the following
deficiencies noted in the files:
¾ 30 files had errors in the calculation of income for one or more
certifications,
¾ Nine files had incorrect calculations for deductions from annual income,
¾ Six files had incorrect utility allowance calculations for one or more
certifications,
¾ Five files had incorrect payment standards for one or more certifications,
¾ Two files had zero income reported by a member of the family that was
not periodically certified by the Authority as required by its administrative
plan, and
¾ Two files had unreported income by the household that the Authority
became aware of in subsequent certifications through its use of HUD’s
Enterprise Income Verification (EIV) system; however, the Authority did
5
not determine the resulting overpayments to the households and
accordingly set up repayment plans for the tenants as required by its
administrative plan.
HUD’s Housing Choice Voucher Guidebook 7420.10G, chapter 6, describes the
guidelines for calculating rent and subsidies. Chapter 22 of the guidebook
describes the quality control procedures necessary for ensuring that the
calculations are correct. Specifically, chapter 22 states that establishing good
quality control procedures will help housing authorities to ensure that staff’s daily
decision making on tenant eligibility and tenant rent complies with program
regulations and is based on accurate information. With respect to families that
report zero income, the Authority’s administrative plan requires interim
certifications every 90 days for families that report zero income. The Authority’s
administrative plan also requires tenants to report any changes in their income
within 10 days of the change. The plan further states that tenants are responsible
for repaying any excess payments that result from their actions or inactions.
The Authority established and implemented a quality control review process as
described in chapter 22 of HUD’s Housing Choice Voucher Guidebook. The
Authority’s quality control reviews showed problems with the accuracy of its
housing assistance and utility allowance payment calculations. However, it did
not take action or implement procedures to stop the deficiencies noted during the
reviews from recurring.
The Authority can reduce the risk of error associated with calculations of rent and
subsidies by implementing quality control procedures to ensure that the results of
its quality control reviews are used as a tool to reduce and/or prevent recurring
deficiencies.
The Authority Made Ineligible
Payments Because It Did Not
Execute Assistance Contracts as
Required
The Authority did not execute housing assistance contracts within 60 days of the
beginning of the lease term as required in 6 of 65 cases reviewed. As a result, it
made $28,229 in ineligible housing assistance payments. In four of the six cases,
the contracts were executed by the Authority after the allowed 60-day period. In
the remaining two cases, the housing assistance contracts were never executed by
the Authority. In both cases, the tenants have moved and are no longer active in
the Authority’s program.
The Authority’s administrative plan and HUD requirements at 24 CFR [Code of
Federal Regulations] 982.305 state that the Authority must make a best effort to
ensure that the housing assistance contract is executed before the beginning of the
6
lease term and that the housing assistance contract must be executed no later than
60 calendar days from the beginning of the lease term. Any housing assistance
contract executed after the 60-day period is void, and the Authority may not make
housing assistance payment to the owner.
The Authority did not follow its own administrative plan and HUD requirements
when it failed to execute the six housing assistance contracts within the required
timeframe. Therefore, the $28,229 paid to the applicable tenants while there were
no executed contracts is ineligible.
The Authority Lacked
Documentation to Support
$26,596 in Payments
The Authority lacked documentation to support housing assistance and utility
allowance payments in the amount of $26,596 for 12 or approximately 18 percent
of the cases reviewed. Of the 67 files statistically selected for review, 10 were
missing supporting documentation for income, one reflected an increase in the
housing assistance payment that was not supported, and the Authority could not
provide two of the files before the completion of our audit fieldwork due to errors
in its archiving system.
According to 24 CFR 982.158, the Authority must maintain complete and
accurate accounts and other records for the program in accordance with HUD
requirements in a manner that permits a speedy and effective audit. During the
term of each assisted lease and for at least three years thereafter, the Authority
must keep a copy of the executed lease, housing assistance payments contract, and
application from the family. Also, the Authority must keep records that provide
income data for three years.
Since the Authority lacked appropriate documentation for 12 sample cases, the
$26,596 in housing assistance and utility allowance payments made to the related
tenants is unsupported.
The Authority Needs to
Strengthen Its Controls
The miscalculations of housing assistance and utility allowance payments
generally occurred as a result of administrative errors by the Authority’s staff.
The staff often did not use due care in calculating housing assistance and utility
allowance payments. Authority staff also stated that housing assistance contracts
were in some cases executed beyond the required 60-day timeframe because the
staff lost track of the related tenant files.
7
The Authority also did not implement sufficient controls to ensure that its
program was administered in compliance with HUD requirements and its
administrative plan. The Authority performed quality control reviews as required
by HUD; however, its management did not take action to stop the deficiencies
noted during the reviews from recurring. The Authority needs to strengthen its
control process by implementing procedures to ensure that the results of its
quality control reviews are used as a tool to reduce and/or prevent recurring
deficiencies.
The Authority Needs to
Evaluate Its Staff Levels
During the period we reviewed, the Authority lost three or 30 percent of its 10
housing choice voucher occupancy aides. This situation may have created some
difficulty for the Authority in terms of its case load management. Of the seven
aides that remained, all had received Section 8 training; however, as of the end of
our audit fieldwork on May 16, 2008, two had not passed the proficiency
examinations.
The Authority had hired three additional aides to assist with its caseload;
however, these individuals had not received formal Section 8 training as of the
end of our audit fieldwork. Two of the aides were hired during our audit review
period but were not assigned case loads before the end of our review period. The
Authority should evaluate its staff levels and staff competencies with respect to its
program and if necessary, make the appropriate adjustments to ensure that it has
sufficient staff with the competencies required to administer the program in
compliance with HUD requirements and its administrative plan.
Conclusion
The Authority failed to administer its program in compliance with HUD
requirements and its own administrative plan. As a result, it paid about $58,900
in ineligible housing assistance, underpaid more than $3,300 in housing
assistance, and made more than $26,500 in unsupported housing assistance
payments. The deficiencies in the Authority’s administration of its program
occurred because it did not implement sufficient controls to ensure that it
followed applicable requirements and did not assign sufficient staff with the
competencies needed to administer the program.
If the Authority does not implement adequate controls or procedures to ensure
that it complies with HUD requirements and its administrative plan, we estimate
that it will make more than $926,300 in ineligible payments over the next year.
8
Our methodology for this estimate is explained in the Scope and Methodology
section.
Recommendations
We recommend that the Director, Office of Public Housing, Pennsylvania State
Office, require the Authority to
1A. Reimburse its Section 8 program from nonfederal funds $58,988 for the
ineligible housing assistance and utility allowance payments.
1B. Reimburse the appropriate households $3,376 for the underpayment of
housing assistance and utility allowances.
1C. Provide support or reimburse its Section 8 program $26,596 from
nonfederal funds for unsupported housing assistance and utility allowance
payments.
1D. Improve its controls by implementing procedures to help reduce and/or
prevent recurring deficiencies in its payments calculation process, and
ensure that housing assistance contracts are executed as required, thereby
helping to put to better use $926,312 in ineligible payments over the next
year.
1E. Evaluate and adjust its staffing levels if necessary to ensure that it has
adequate staff with the competencies needed to administer its program in
compliance with applicable requirements.
1F. Provide program training for all of its housing choice voucher occupancy
aides who have not received training.
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SCOPE AND METHODOLOGY
We performed our on-site audit work between October 2007 and May 2008 at the Authority’s
office located at 1855 Constitution Avenue, Woodlyn, Pennsylvania. The audit covered the
period October 1, 2005, through September 30, 2007, and was expanded when necessary to
include other periods.
To determine whether the Authority administered its program in compliance with applicable
HUD requirements, we reviewed
• Applicable laws and regulations; the Authority’s administrative plan; HUD’s program
requirements at 24 CFR Parts 5, 982, and 984; HUD’s Public and Indian Housing Notice
2004-01; and HUD’s Housing Choice Voucher Guidebook 7420.10G;
• The Authority’s accounting records, annual audited financial statements for 2005 and
2006, tenant files, computerized databases including housing assistance payment and
family data, board meeting minutes, organizational chart, and annual contributions
contract; and
• HUD’s monitoring reports for the Authority.
We also interviewed the Authority’s employees and HUD staff.
We performed our audit in accordance with generally accepted government auditing standards.
During the audit, 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 statistically selected 67 of the tenants who received housing assistance payments during our
audit period using a variable statistical sampling method developed by our computer audit
specialist. The sampling criteria used a variable sampling methodology with a 90 percent
confidence level and 10 percent precision. Our universe included 2,875 families that received
more than $35 million in housing assistance payments. We only reviewed 65 of the 67 sample
cases because the Authority was unable to locate two tenant files before the completion of our
fieldwork. To be conservative we treated the two files that were not reviewed as having no
discrepancies.
The Authority made ineligible payments in the amount of $58,988 for the period October 1,
2005, through September 30, 2007. The $58,988 represents the sum of overpayments ($30,759)
from incorrect housing assistance and utility allowance calculations in 37 cases and ineligible
payments ($28,229) stemming from the Authority’s failure to execute housing assistance
contracts within the required timeframe in six cases. Three of the six cases were included in the
37 cases in which we found erroneous housing assistance and utility allowance calculations.
Because of this overlap, we only associated ineligible payments with 40 of 65 cases reviewed.
10
Unless the Authority improves its housing assistance payment calculation process, as well as its
execution of housing assistance contract processes, we estimate that it could make $926,312 in
ineligible housing assistance and utility allowance payments over the next year.
To determine our estimate of $926,312 in potential ineligible payments over the next year, we
used difference estimation techniques to project the sample results. This yielded a point estimate
of $5,679,288 in housing assistance and utility allowance overpayments during our two year
audit period with overpayments of $1,852,625 and $9,505,951 based on the upper and lower
limits respectively. For reporting purposes, we annualized the upper limit ($1,852,625 divided
by the audit period of 2 years) to obtain a one year estimate of $926,312. The upper limit
provides the most conservative estimate of potential ineligible payments over the next year. The
estimate is presented solely to demonstrate the annual amount of program funds that could be put
to better use if the Authority implements our recommendations. While these benefits would
recur indefinitely, we were conservative in our approach and only included the initial year in our
estimate.
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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 objective:
• Program operations – Policies and procedures that management has
implemented to reasonably ensure that it calculated housing assistance
payments correctly, properly maintained documentation in its tenant files,
and properly administered its Family Self-Sufficiency program.
• 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.
We assessed the relevant controls identified above.
A significant weakness exists if internal controls do not provide reasonable
assurance that the process for planning, organizing, directing, and controlling
program operations will meet the organization’s objectives.
Significant Weakness
Based on our audit, we believe the following item is a significant weakness:
12
• The Authority did not implement sufficient controls to ensure compliance
with HUD requirements and/or its program administrative plan with
regard to calculations of households’ housing assistance and utility
allowance payments, execution of housing assistance contracts, and tenant
file documentation (see finding).
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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 $58,988
1B $3,376
1C $26,596
1D $926,312
Totals $58,988 $26,596 $929,688
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 use $3,376 in program funds to serve its purpose of assisting
eligible families and prevent approximately $926,300 in program funds from being spent
on ineligible housing assistance and utility allowance payments annually.
14
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
15
16
Comment 1
17
18
OIG Evaluation of Auditee Comments
Comment 1 Following our exit conference on July 10, 2008, we reviewed the four additional
files provided by the Authority and issued an updated draft report to the
Authority on July 21, 2008, which only reflected unsupported payments totaling
$26,596. However, the Authority’s response to the finding appears to be based
on the initial version of the draft report. This report reflects the updated amount
of the Authority’s unsupported payments as reported in our revised draft issued
to the Authority on July 21, 2008.
19
The Delaware County Housing Authority, Woodlyn, Pennsylvania, Did Not Adequately Administer Its Housing Assistance Payments
Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-08-15.
Below is a raw (and likely hideous) rendition of the original report. (PDF)