oversight

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)

                                                               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.




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                            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




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                      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.


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             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.




                                           9
                         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.




                                               11
                             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.




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