oversight

The Puerto Rico Housing Finance Authority Generally Calculated Housing Assistance Correctly

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-02-25.

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

                                                                 Issue Date
                                                                      February 25, 2009
                                                                 Audit Report Number
                                                                        2009-AT-1003




TO:         Olga I. Saez, Director, Public and Indian Housing, San Juan Field Office, 4NPH



FROM:       James D. McKay, Regional Inspector General for Audit, 4AGA

SUBJECT: The Puerto Rico Housing Finance Authority, San Juan, Puerto Rico, Generally
           Calculated Housing Assistance Correctly


                                    HIGHLIGHTS

 What We Audited and Why

             We audited the Puerto Rico Housing Finance Authority’s (Authority) Section 8
             Housing Choice Voucher program as part of our audit plan. Our audit objectives
             were to determine whether the Authority properly determined housing assistance
             subsidies, properly determined the eligibility of tenants, and recertified tenants in
             a timely manner.

 What We Found

             The Authority generally administered its Section 8 program in accordance with
             HUD requirements. It properly determined the eligibility of the tenants reviewed
             and recertified tenants in a timely manner. Our review identified minor errors in
             calculating the housing assistance of Section 8 tenants, but the errors were not
             monetarily significant. We discussed the deficiencies with Authority officials
             who implemented corrective action.
What We Recommend


           This report does not contain any recommendations as it contains no findings.


Auditee’s Response


           On January 14, 2009, we provided the Authority with the information on the
           vouchers containing errors in housing assistance subsidies. The Authority agreed
           with our review results and initiated remedial measures to correct the errors
           found. We provided our discussion draft audit report to the Authority’s executive
           director and HUD’s staff during the audit. The Authority decided not to provide a
           written response to the report or hold an exit conference because the report
           contained no findings.




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                        TABLE OF CONTENTS

Background and Objectives                   4

Results of Audit                            5

Scope and Methodology                       7

Internal Controls                           9




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                      BACKGROUND AND OBJECTIVES

The Puerto Rico Housing Finance Authority (Authority), a subsidiary of the Government
Development Bank for Puerto Rico, was created in 1977. The Authority provides a full range of
services, including interim and permanent financing through mortgage loans for the construction,
improvement, operation, and maintenance of rental housing for low- and moderate-income
families.

The Authority administers approximately 1,400 housing choice vouchers within Puerto Rico. It
uses its Section 8 voucher funds to provide rental assistance to eligible families. From July 1,
2007, through June 30, 2008, the U.S. Department of Housing and Urban Development (HUD)
authorized and disbursed $7.85 million to the Authority in Section 8 program voucher funds.
The Authority’s housing projects administration department was assigned the responsibility of
administering the Section 8 program. The Authority’s records for the Section 8 program are
maintained at 606 Barbosa Avenue, San Juan, Puerto Rico.

The objectives of our audit were to determine whether the Authority properly determined
housing assistance subsidies, properly determined the eligibility of tenants, and recertified
tenants in a timely manner.




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                                       RESULTS OF AUDIT

We reviewed a sample of 20 vouchers to determine whether the Authority correctly determined
housing assistance for Section 8 tenants. Based on our review of 20 household files, the
Authority generally complied with housing assistance determination requirements. It properly
determined the eligibility of the tenants reviewed and recertified tenants in a timely manner.
However, it made minor errors in calculating housing assistance, which resulted in overpayments
and underpayments totaling $2,933.
         Overhoused tenants – We identified 12 potentially overhoused tenants out of the 1,441
         Section 8 active tenants. We reviewed a sample of eight of the twelve vouchers to
         determine whether there was acceptable justification for issuing a voucher larger than the
         Authority’s administrative plan allowed. For three vouchers, the Authority assigned the
         correct voucher size, but it overhoused five in our sample. The Authority overhoused
         tenants because it did not reduce the voucher size (used a higher payment standard) at its
         annual reexamination for tenants who had experienced a change in family composition.
         As a result, it overpaid assistance totaling $2,534 to three of the five overhoused tenants.1

                               Voucher number                     Overpaid assistance
                            2000-015                                 $1,911
                            2000-033                                    568
                            2003-570                                     55
                            98-023                                       01
                            2001-154                                     01

         Calculation errors - We statistically selected 48 of the 1,462 household files to determine
         whether the Authority properly calculated the housing assistance payments of its Section
         8 tenants. We only reviewed 12 of the 48 statistically selected household files and
         discontinued further review because our initial sample did not identify significant
         deficiencies. The Authority did not properly calculate housing assistance payments for
         three of the twelve household files reviewed. It did not properly determine the tenant’s
         adjusted gross income, resulting in an underpayment of $399.

                               Voucher number                  Underpaid assistance
                            2003-303                                 $231
                            2003-330                                   168
                            2004-106                                    02




1
  It did not overpay for the remaining two tenants since the contracted rent was lower than the applicable payment
standard for the family.
2
  The Authority used an incorrect payment standard, but it did not affect the housing assistance amount.
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The Authority agreed with our review results and initiated remedial measures to correct the
errors found. The specific deficiencies were not monetarily significant and did not justify
additional audit work. Thus, the report contains no finding, and no further action is necessary.




                                                 6
                             SCOPE AND METHODOLOGY

To accomplish our objectives, we did the following:

        Reviewed applicable laws, regulations, and other HUD program requirements.

        Reviewed the Authority’s Section 8 policies, procedures, and administrative plan.

        Interviewed HUD and Authority management and staff.

        Reviewed the Authority’s latest independent public accountant report and HUD program
        monitoring reviews.

        Obtained a download of the Authority’s Section 8 units for the Housing Choice Voucher
        program as of October 9, 2008.3

We identified 12 potentially overhoused tenants from the 1,441 active vouchers the Authority
had as of October 9, 2008. We defined an overhoused tenant voucher as any voucher that did not
have the minimum number of household members required by the Authority’s payment
standards for voucher size. We reviewed the files of the first eight potentially overhoused
tenants to determine whether there was acceptable justification for assigning vouchers larger than
the Authority’s administrative plan allowed.4 We discontinued further review because our initial
sample did not identify significant deficiencies.

To perform our housing assistance review, we relied upon computer-processed data provided by
the Authority. Specifically, we relied upon a spreadsheet that contained data on housing
subsidies paid to landlords and tenants during our 15-month audit period for 1,462 households.
We analyzed the data and concluded that the data were sufficiently reliable for our purposes of
sample selection and projection. We statistically selected 48 of the 1,462 household files for
detailed review. We only reviewed the first 12 of the 48 statistically selected household files and
did not use these files for projecting our sample results. We discontinued further review because
our initial sample did not identify significant deficiencies.

To determine whether the Authority properly calculated the housing assistance payments made
during our audit period for the sample households, we analyzed information entered into the
Authority’s certification system as well as supporting documentation such as household
composition, fair market rent data, income verifications, and rental unit records. We then


3
  To achieve our audit objectives, we relied in part on computer-processed data contained 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.
4
  We selected a nonstatistical sample and did not use these files for projecting our sample results.

                                                          7
recalculated the housing assistance payment amounts covering each month of our audit period,
and in some cases, we expanded our audit period as needed to accomplish our objectives.
We conducted our fieldwork from October through December 2008 at the Authority’s offices in
San Juan, Puerto Rico. Our audit period was from July 1, 2007, through September 30, 2008,
but we expanded our audit period as needed to accomplish our objectives.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




                                                8
                              INTERNAL CONTROLS

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

       Program operations,
       Relevance and reliability of information,
       Compliance with applicable laws and regulations, and
       Safeguarding of assets and resources.

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



 Relevant Internal Controls
              We determined that the following internal controls were relevant to our audit
              objectives:

                      Compliance with laws, regulations, policies, and procedures that
                      management has implemented to reasonably ensure that resources use is
                      consistent with laws and regulations.

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


 Significant Weaknesses


              Based on our review, we did not identify any significant weakness in the controls
              cited above.



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