Issue Date
April 28, 2009
Audit Report Number
2009-CH-1007
TO: Steven E. Meiss, Director of Public Housing Hub, 5APH
FROM: Heath Wolfe, Regional Inspector General for Audit, 5AGA
SUBJECT: The Springfield Housing Authority, Springfield, Illinois, Needs to Improve Its
Controls over Its Section 8 Housing Assistance Payments
HIGHLIGHTS
What We Audited and Why
We audited the Springfield Housing Authority’s (Authority) Section 8 Housing
Choice Voucher program (program). The audit was part of the activities in our
fiscal year 2008 annual audit plan. We selected the Authority based upon our
analysis of risk factors relating to the housing agencies in Region V’s jurisdiction.
Our objective was to determine whether the Authority administered its program in
accordance with the U.S. Department of Housing and Urban Development’s
(HUD) requirements. This is the second of two audit reports on the Authority’s
program.
What We Found
The Authority’s program administration regarding housing assistance payment
calculations and zero-income households was inadequate. The Authority did not
effectively manage its housing assistance calculation and payment process in
accordance with HUD requirements, resulting in nearly $57,000 in overpayment,
more than $21,000 in unsupported payments and nearly $22,000 in underpayment
for the period January 1, 2007, through August 31, 2008. In addition, the
Authority improperly received more than $19,000 in program administrative fees
for the households with incorrect and unsupported housing assistance payments.
Based on our statistical sample, we estimate that over the next year, the Authority
will overpay more than $96,000 and underpay more than $15,000 in housing
assistance and utility allowances due to the Authority’s calculation errors.
Further, the Authority failed to comply with its program administrative plan
regarding zero-income household reviews. It did not effectively use HUD’s
Enterprise Income Verification system or other third-party verification methods to
determine whether the households reporting zero income had unreported income.
As a result, it unnecessarily paid housing assistance totaling more than $41,000
for households that were required to meet their rental obligations. The Authority
also improperly received more than $6,000 in program administrative fees for the
reported zero income households with overpaid housing assistance. Based on our
statistical sample, we estimate that over the next year, the Authority will overpay
more than $108,000 in housing assistance and utility allowances for households
with unreported income.
We informed the Authority’s executive director and the Director of HUD’s
Chicago Office of Public Housing of minor deficiencies through a memorandum,
dated April 23, 2009.
What We Recommend
We recommend that the Director of HUD’s Chicago Office of Public Housing
require the Authority to reimburse its program from nonfederal funds for the
improper use of more than $123,000 in program funds, provide documentation or
reimburse its program more than $21,000, and implement adequate procedures
and controls to address the findings cited in this audit report. These procedures
and controls should help ensure that more than $241,000 in program funds is
spent on program administration that meets HUD’s requirements 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 review results and supporting schedules to the Director of
HUD’s Chicago Office of Public Housing and the Authority’s executive director
during the audit. We also provided our discussion draft audit report to the
Authority’s executive director, its board chairman, and HUD’s staff during the
audit. We held an exit conference with the Authority’s executive director on
April 16, 2009.
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We asked the Authority’s executive director to provide comments on our
discussion draft audit report by April 20, 2009. The Authority’s executive
director provided written comments, dated April 20, 2009. The executive director
agreed with our findings and recommendations. The complete text of the
auditee’s response, except for eight attachments consisting of 16 pages of
documentation that were not necessary to understand the Authority’s comments,
along with our evaluation of that response, can be found in appendix B of this
report. A complete copy of the Authority’s comments plus the documentation
was provided to the Director of HUD’s Chicago Office of Public Housing.
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TABLE OF CONTENTS
Background and Objective 5
Results of Audit
Finding 1: Controls over Housing Assistance and Utility Allowance Payments 6
Were Inadequate
Finding 2: The Authority’s Zero-Income Households Had Unreported Income 12
Scope and Methodology 16
Internal Controls 18
Appendixes
A. Schedule of Questioned Costs and Funds to Be Put to Better Use 20
B. Auditee Comments and OIG’s Evaluation 22
C. Federal Requirements and the Authority’s Program Administrative Plan 30
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BACKGROUND AND OBJECTIVE
The Springfield Housing Authority (Authority) was established by the State Housing Board of
Illinois in November 1937 under the laws of the State of Illinois to provide decent, safe, and
sanitary housing. The Authority is governed by a five-member board of commissioners (board)
appointed by the mayor of Springfield, Illinois, to five-year staggered terms. The board’s
responsibilities include overseeing the administration of the Authority and approving policies. The
board appoints the Authority’s executive director. The executive director is responsible for ensuring
that policies are followed and providing oversight of the Authority’s programs.
The Authority administers a Section 8 Housing Choice Voucher program (program) funded by the
U.S. Department of Housing and Urban Development (HUD). It provides assistance to low- and
moderate-income individuals seeking decent, safe, and sanitary housing by subsidizing rents with
owners of existing private housing. As of March 10, 2009, the Authority had 1,823 units under
contract with annual housing assistance payments totaling more than $7.2 million in program funds.
Our objective was to determine whether the Authority administered its program in accordance with
HUD’s requirements to include determining whether the Authority (1) accurately calculated
housing assistance and utility allowance payments and (2) appropriately verified whether reported
zero-income households had income. This is the second of two audit reports on the Authority’s
program. The first audit report (report number 2008-CH-1016, issued on September 29, 2008)
included one finding. That finding was not repeated in this audit report.
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RESULTS OF AUDIT
Finding 1: Controls over Housing Assistance and Utility Allowance
Payments Were Inadequate
The Authority did not comply with HUD’s requirements and its program administrative plan
regarding housing assistance and utility allowance payments. It did not effectively manage its
housing assistance calculation and payment process. This condition occurred because the
Authority lacked adequate procedures and controls to ensure that HUD’s requirements and its
program administrative plan were appropriately followed. As a result, the Authority overpaid
nearly $78,000 and underpaid nearly $22,000 in housing assistance and utility allowances.
Based on our statistical sample, we estimate that over the next year, the Authority will overpay
more than $96,000 and underpay more than $15,000 in housing assistance.
The Authority Miscalculated
Housing Assistance and Utility
Allowance Payments
We statistically selected 66 household files from a universe of 1,218 households
receiving housing assistance payments as of October 2, 2008, using data mining
software. The 66 files were reviewed to determine whether the Authority had
documentation for and correctly calculated households’ housing assistance and
utility allowance payments for the period January 2007 through August 2008.
Our review was limited to the information maintained by the Authority in its
household files and HUD’s Enterprise Income Verification system (system).
Of the 66 files reviewed, the Authority incorrectly calculated housing assistance
and/or utility allowance payments for 34 households in one or more of the
certifications reviewed. The incorrectly calculated housing assistance was due to
the following errors:
• 26 had incorrect annual income for one or more certifications,
• 22 had incorrect utility allowances for one or more certifications,
• Nine had incorrect payment standards for one or more certifications,
• Eight had computer system rounding errors for one or more certifications,
• Five had incorrect rents to owners for one or more certifications,
• Three had incorrect dependent allowances for one or more certifications,
• Two had incorrect elderly/disability allowances for one or more
certifications,
• One had incorrect medical allowances for one or more certifications, and
• One had incorrect childcare costs for one or more certifications.
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The Authority’s miscalculations resulted in overpayments of $25,074 in housing
assistance and utility allowances for 18 of the 34 households and underpayment of
$3,103 in housing assistance and utility allowances for 16 of the 34 households.
Further, the Authority failed to take action on unreported income found during the
examination process. Of the 66 household files reviewed, 18 had unreported
income totaling $176,748 which resulted in $31,668 in total overpaid housing
assistance and utility allowances. Through third-party verification or HUD’s
Enterprise Income Verification reports, the Authority became aware of the
unreported income for the 18 households but failed to seek repayment of the
overpaid housing assistance. According to its program administrative plan, if the
Authority has evidence of program abuse, such as misrepresenting income, it will
take action to terminate the abuse. The administrative plan also states that if a
household owes money to the Authority, it may require the household to enter
into a repayment agreement or require repayment on demand.
The Authority Lacked
Documentation to Support
Housing Assistance and Utility
Allowance Payments
Of the 66 files reviewed, 21 (32 percent) lacked documentation to support
whether the Authority correctly calculated the housing assistance and utility
allowance payments. The documentation was required by HUD’s regulations
and/or the Authority’s program administrative plan. The 21 files were missing
the following support documentation:
• 16 were missing third-party verifications of reported household
income;
• Nine were missing support for the calculation of medical, disability,
and/or dependent allowances;
• Six were missing birth certificates and/or proof of Social Security
numbers; and
• Two were missing executed housing assistance payment contracts.
The missing supporting documentation resulted in unsupported overpayment of
$16,487 for 9 of the 21 households and unsupported underpayment of $15,951 in
housing assistance and utility allowances for the remaining 12 households.
7
The Authority Incorrectly
Processed Housing Assistance
Payments
Of the 66 files reviewed, the Authority incorrectly processed housing assistance
and utility payments for 32 households (48 percent). The 32 households were
incorrectly paid due to unsupported adjustments in housing assistance, incorrect
proration of housing assistance and/or utility allowance payments, and failure to
issue utility allowance payments.
The Authority made one or more adjustments in housing assistance and/or utility
allowance payments for 22 of the 32 households; however, it was unable to
provide supporting documentation for the adjustments. In addition, the Authority
inconsistently calculated the housing assistance and utility allowance payments
for midmonth moves for nine households. Further, the Authority failed to issue
utility allowance payments for five households.
The incorrectly processed housing assistance and utility allowance payments for
the 32 households resulted in unsupported overpayment of $4,634 for 15
households and unsupported underpayment of $2,789 for the remaining 17
households.
The Authority Failed to
Effectively Manage Its Housing
Assistance Calculation and
Payment Process
The housing assistance and utility allowance payments were erroneously
calculated because the Authority lacked adequate procedures and controls to
ensure that it appropriately followed HUD’s requirements and its program
administrative plan.
The Authority’s program administrative plan states that the Authority will provide
quality control reviews to identify mistakes or program abuse. However, the
administrative plan did not detail the type or number of quality control reviews
the Authority would conduct. Of the 66 household files reviewed, there was
evidence that three quality control reviews were performed by the Authority’s
director of housing operations; however, none of the reviews revealed calculation
errors or mistakes. The administrative plan also states that the Authority assumes
full responsibility for ensuring that its staff is knowledgeable in
certification/recertification requirements and other HUD factors impacting
eligibility and household participation. Although the three quality control reviews
resulted in a passing rating, our review found incorrect income calculations,
utility allowances, and rental payments to owners. Quality control reviews are an
8
important step in ensuring that the Authority’s housing assistance and utility
allowance payments are accurate. The Authority’s director of housing operations
performed the three quality control reviews; however, a supervisory review
performed by the deputy executive director would have assisted in ensuring that
errors were not overlooked.
The Authority’s director of housing operations said that she attempted to review
100 percent of the new admission and annual certifications but did not have time.
She also said she had not had time to develop a procedure for reviewing a smaller
percentage of the household files. The Authority performed quality control
reviews of 7 percent of the active households in 2007 and less than 2 percent in
2008. None of the quality control reviews received a supervisory review to
ensure that mistakes or program abuse was identified.
In addition, the Authority lacked controls over adjustments to housing assistance
and utility allowance payments. Of the 66 files reviewed, 32 (48 percent) had one
or more unsupported adjustments to housing assistance and/or utility allowance
payments. According to its program administrative plan, the Authority will
maintain an internal control system to ensure the accurate posting and tracking of
housing assistance payments. However, the Authority’s director of housing
operations said that the specialists were not required to complete documentation
or seek management approval before processing adjustments to a household’s
housing assistance payment amount in the Authority’s computer system. She also
said that documentation was not needed since the specialists usually remember
why they made adjustments.
Conclusion
The Authority improperly used its program funds when it failed to comply with
HUD’s requirements and its program administrative plan. It overpaid $25,074
and underpaid $3,103 in housing assistance and utility allowances for a net
overpayment of $21,971. In addition, it had $16,487 in unsupported overpayment
and $15,951 in unsupported underpayment of housing assistance and utility
allowances due to insufficient supporting documentation. Further, the Authority
incorrectly processed housing assistance and utility allowance payments for 32
households resulting in unsupported overpayment of $4,634 for 15 households
and unsupported underpayment of $2,789 for 17 households.
In accordance with 24 CFR [Code of Federal Regulations] 982.152(d), HUD is
permitted to reduce or offset any program administrative fees paid to a public
housing authority if it fails to perform its administrative responsibilities correctly
or adequately under the program. The Authority received $19,071 in program
administrative fees related to the inappropriate payments for the 34 program
households with incorrectly calculated housing assistance and utility allowances,
21 program households with unsupported housing assistance and utility allowance
9
calculations, and the 32 households with incorrectly processed housing assistance
and utility allowance payments.
HUD lacked assurance that the Authority used its program funds efficiently and
effectively since it overpaid $77,863 ($25,074 plus $31,668 plus $16,487 plus
$4,634) and underpaid $21,843 ($3,103 plus $15,951 plus $2,789) in housing
assistance and utility allowances. If the Authority does not correct its certification
process, we estimate that it could overpay $96,461 and underpay $15,080 in
housing assistance and utility allowances over the next year. Our methodology
for this estimate is explained in the Scope and Methodology section of this audit
report. The Authority could put these funds to better use if proper procedures and
controls are put in place to ensure the accuracy of housing assistance and utility
allowance payments.
Recommendations
We recommend that the Director of HUD’s Chicago Office of Public Housing
require the Authority to
1A. Reimburse its program $25,074 from nonfederal funds for the overpayment of
housing assistance citied in this finding.
1B. Reimburse the appropriate households $3,103 from program funds for the
underpayment of housing assistance citied in this finding.
1C. Pursue collection from the applicable households or reimburse its program
$31,668 from nonfederal funds for the overpayment of housing assistance due
to unreported income.
1D. Provide support or reimburse its program $16,487 from non federal funds for
the unsupported overpayment of housing assistance and utility allowances for
the nine households cited in this finding.
1E. Provide support or reimburse the appropriate households $15,951 from
program funds for the unsupported underpayment of housing assistance for the
12 households cited in this finding.
1F. Provide support or reimburse its program $4,634 from nonfederal funds for the
unsupported overpayment adjustments to housing assistance and utility
allowances cited in this finding.
1G. Provide support or reimburse the appropriate households $2,789 from program
funds for the unsupported underpayment adjustments to housing assistance and
utility allowances cited in this finding.
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1H. Reimburse its program $19,071 from nonfederal funds for the improper
administrative fees related to the households cited in this finding.
1I. Ensure that its staff responsible for performing quality control reviews are
knowledgeable of HUD’s and its program policies and procedures to assure
that mistakes made during household reexaminations are not overlooked and
repayment agreements are created to recover overpaid housing assistance
when unreported income is discovered.
1J. Implement a system of supervisory reviews within its quality control process,
and implement adequate procedures for obtaining and documenting approval
for adjustments to its housing assistance payments to ensure that $111,541
($96,461 plus $15,080) in program funds is appropriately used for future
payments.
1K. Implement adequate procedures and controls to ensure that repayment
agreements are created to recover overpaid housing assistance when
unreported income is discovered during the examination process.
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Finding 2: The Authority’s Zero-Income Households Had Unreported
Income
The Authority did not effectively use HUD’s system or other third-party verification methods to
perform periodic reviews to determine that reported zero-income households had unreported
income. Of the 49 households reviewed, 27 had unreported income that affected their housing
assistance and utility allowance payments. This condition occurred because the Authority lacked
adequate procedures and controls to perform appropriate income verifications. As a result, it
unnecessarily paid housing assistance and utility allowances totaling more than $41,000 for
households that were required to meet their rental obligations.
Households Had Unreported
Income
From the 333 households claiming zero annual income as of October 2, 2008, we
statistically selected 49 households using data mining software. The 49 files were
reviewed to determine whether the Authority conducted periodic reviews of the
zero-income households and whether the households had unreported income
according to HUD’s system for certifications effective January 1, 2007, through
August 31, 2008. Our review was limited to the information maintained by the
Authority in its household files and HUD’s system.
The Authority’s program administrative plan states that the Authority will
schedule special reexaminations every 90 days for households reporting zero
income. However, the Authority did not perform reexaminations every 90 days
for the 49 household files reviewed.
Of the zero-income household files reviewed, 28 had income not reported to the
Authority but income information was available through HUD’s system. The
unreported income for 27 of the 28 households resulted in $41,569 in overpaid
housing assistance and utility allowances. As of March 2009, the Authority had
recovered $525 of the overpaid housing assistance and initiated action to recover
an additional $15,821 in overpaid funds for 14 of the 27 households.
The following are examples of households with unreported income:
• Household 18 had income, according to HUD’s system, totaling $18,565.
Since the household had unreported income, the Authority overpaid $3,402 in
housing assistance from January 1, 2007, through June 30, 2008. There was
no evidence in the household file that the Authority accessed HUD’s system
from January 2007 through June 2008. However, unreported income was
listed on HUD’s system as of March 2007. If the Authority had conducted
periodic reviews every 90 days as required in its program administrative plan
or accessed HUD’s system while completing annual certifications, it would
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have found the unreported income and been able to verify the household’s
employment status by performing a third-party verification.
• Household 42 had income, according to HUD’s system, totaling $10,537.
Since the household had unreported income, the Authority overpaid $1,376 in
housing assistance from January 1, 2007, through August 31, 2008. The
household file contained a third-party employment verification received by
the Authority on April 29, 2008, stating that a household member was
employed from July 13, 2007, through February 8, 2008. However, the
Authority did not attempt to recover the overpaid housing assistance.
As previously mentioned, 28 of the 49 files reviewed had income not reported to
the Authority but income information was available through HUD’s system. The
Authority’s program administrative plan states that the Authority’s procedures for
anticipating annual income include the use of HUD’s system. In addition, the
administrative plan states that the Authority will schedule special reexaminations
every 90 days for households reporting zero income. Therefore, the Authority
would have discovered the unreported income if it had accessed HUD’s system in
accordance with its administrative plan while conducting reviews every 90 days.
The Authority’s deputy director said that before October 2007 the Authority’s
administrative plan did not require 90-day reviews of its zero-income households.
The director of housing operations also said that since the 90-day review
requirement was implemented in October 2007, she had distributed HUD’s
Enterprise Income Verification reports to the Authority’s Section 8 specialists,
who were responsible for conducting the periodic reviews. However, the
Authority did not perform quality control reviews to ensure that the specialists
completed the 90-day reviews and was unable to provide documentation showing
that the 28 household files that had unreported income received periodic reviews.
In addition to the 49 household files reviewed, 18 contained documentation that
showed the households earned income during the periods in which zero income
was reported but the Authority did not attempt to recover the overpaid housing
assistance. The Authority did not ensure that its staff took appropriate steps to
determine whether households reporting zero income had unreported income.
The Authority’s deputy director said that prior to the specialist receiving training
in July 2008 on the use of HUD’s system, the Authority was not fully aware of
what to do with the system’s income reports. She also said this may account for
the lack of action when unreported income was discovered.
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The Authority Lacked
Adequate Procedures and
Controls
The overpayment of $41,569 in housing assistance and utility allowances to
households that reported zero income but had income occurred because the
Authority lacked adequate procedures and controls for performing appropriate
income verification. The Authority needs to make full use of HUD’s system or
perform other third-party income verification for all households at the time of
examinations. Periodic quality control reviews are an important step in ensuring
that the Authority’s housing assistance and utility allowance payments are
accurate. If the Authority had conducted periodic reviews every 90 days as
required by its program administrative plan, it would have discovered the income
information and been able to verify the households’ employment status by
performing third-party verification.
As a result of the Authority’s failure to properly verify household income for its
zero-income households and recover overpaid housing assistance, it improperly
paid $41,569 in housing assistance and utility allowances for households that
were required to meet their rental obligations. In addition, the Authority received
$6,218 in program administrative fees for the periods in which it failed to conduct
periodic reviews and for the periods income was excluded although proof of
income was documented in the household file. Since the Authority’s
administrative plan did not require a 90-day review until October 2007, the
administrative fees were not questioned prior to this date if a 90-day review was
not conducted.
Conclusion
HUD lacked assurance that the Authority used its program funds efficiently and
effectively since it overpaid $41,569 in housing assistance. If the Authority does
not correct its zero-income review process and controls, we estimate that it could
overpay $108,323 in excessive housing assistance over the next year. Our
methodology for this estimate is explained in the Scope and Methodology section
of this audit report. The Authority could put these funds to better use if proper
procedures and controls are put in place to ensure the accuracy of housing
assistance payments.
Recommendations
We recommend that the Director of HUD’s Chicago Office of Public Housing
require the Authority to
14
2A. Pursue collection from the applicable households or reimburse its program
$41,044 ($41,569 minus $525) from nonfederal funds for the overpayment of
housing assistance cited in this finding.
2B. Reimburse its program $6,218 from nonfederal funds for the improper
administrative fees related to the 27 households cited in this finding.
2C. Implement quality control procedures to include supervisory reviews of the
household files with reported zero income to ensure that periodic reviews are
performed to prevent an estimated $108,323 in improper program funds being
used for future payments over the next year.
2D. Review the remaining 284 (333 minus 49) households claiming zero income
as of October 2, 2008, to determine whether the households had unreported
income. For households that received excessive housing assistance and utility
allowance payments, the Authority should pursue collection and/or reimburse
its program the applicable amount from nonfederal funds.
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SCOPE AND METHODOLOGY
To accomplish our objectives, we reviewed
• Applicable laws, regulations, the Authority’s program administrative plan, HUD’s program
requirements at 24 CFR Parts 5 and 982, and HUD’s Housing Choice Voucher Guidebook
7420.10.
• The Authority’s accounting records; annual audited financial statements for 2004, 2005, and
2006; bank statements; household files; policies and procedures; board meeting minutes for
January 2006 through February 2008; organization chart; and program annual contributions
contract with HUD.
• HUD’s files for the Authority.
We also interviewed the Authority’s employees and board chairman, HUD staff, and program
households.
Finding 1
Using data mining software, we statistically selected 66 from the 1,218 households receiving
housing assistance payments as of October 2, 2008. The 66 files were reviewed to determine
whether the Authority had documentation for and correctly calculated households’ housing
assistance and utility allowance payments for the period January 2007 through August 2008.
Our sampling criteria used a 90 percent confidence level and precision of plus or minus 10
percent.
Our sampling results determined that the housing assistance and/or utility allowance payments were
miscalculated or unsupported for 47 households in one or more of the certifications reviewed. Of
the 47 household files, 34 had calculation errors which resulted in incorrect housing assistance
payments. Of these 34 household files with calculation errors, 18 resulted in overpayment of
housing assistance and utility allowances and the remaining 16 resulted in underpayment of housing
assistance and utility allowances.
Based on our sample review results, using difference estimation methodology, we are 95 percent
confident that the amount of overpaid housing assistance and utility allowances due to calculation
errors over the next year will be at least $96,461. This amount was determined by limiting the
estimated difference lower limit of overpaid housing assistance to one year. We divided the
estimated difference lower limit of $160,769 by 20 months and then multiplied by 12 months. In
addition, we are 95 percent confident that the amount of underpaid housing assistance and utility
allowances due to calculation errors over the next year will be at least $15,080. This amount was
determined by limiting the estimated difference lower limit of underpaid housing assistance to one
year. We divided the estimated difference lower limit of $25,133 by 20 months and then multiplied
by 12 months.
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Finding 2
Using data mining software, we statistically selected 49 from the 333 households reporting zero
annual income as of October 2, 2008. The 49 files were reviewed to determine whether the
Authority conducted periodic reviews of the zero-income households and whether the
households had unreported income according to HUD’s system for certifications effective
January 1, 2007, through August 31, 2008. Our sampling criteria used a 90 percent confidence
level and precision of plus or minus 10 percent.
Our sampling results determined that 27 households received excessive housing assistance and
utility allowance payments due to income unreported by the household. Based on our sample
review results, using difference estimation methodology, we are 95 percent confident that the
amount overpaid due to unreported income over the next year will be at least $108,323. This
amount was determined by limiting the estimated difference lower limit of overpaid housing
assistance to one year. We divided the estimated difference lower limit of $180,539 by 20 months
and then multiplied by 12 months.
We performed our on-site audit work between October 2008 and February 2009 at the Authority’s
offices located at 200 North 11th Street, Springfield, Illinois. The audit covered the period January
1, 2007, through August 31, 2008, but was expanded as determined necessary.
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 objective. We
believe that the evidence obtained provides a reasonable basis for our findings and conclusions
based on our audit objective.
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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
objective:
• 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 management 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 review, we believe that the following items are significant weakness:
• The Authority lacked adequate procedures and controls to ensure compliance
with HUD’s requirements and its program administrative plan regarding the
calculation and payment of housing assistance and utility allowance payments
and the review of zero-income households (see findings 1 and 2).
• Procedures did not exist to obtain and document approval for adjustments to
its housing assistance payments (see finding 1).
• Quality control reviews did not identify housing assistance calculation errors
or ensure that repayment agreements were created to recover overpaid housing
assistance due to unreported income discovered during the examination
process (see finding 1).
• Quality control procedures did not exist to ensure that periodic reviews of
reported zero income households were performed (see finding 2).
Separate Communication of
Minor Deficiencies
We informed the Authority’s executive director and the Director of HUD’s
Chicago Office of Public Housing of minor deficiencies through a memorandum,
dated April 23, 2009.
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APPENDIXES
Appendix A
SCHEDULE OF QUESTIONED COSTS
AND FUNDS TO BE PUT TO BETTER USE
Recommendation Ineligible Funds to be put to
number 1/ Unsupported 2/ better use 3/
1A $25,074
1B $3,103
1C 31,668
1D $16,487
1E 15,951
1F 4,634
1G 2,789
1H 19,071
1J 111,541
2A 41,044
2B 6,218
2C 108,323
Totals $123,075 $21,121 $241,707
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. These amounts include reductions in outlays, deobligation of funds,
withdrawal of interest, costs not incurred by implementing recommended improvements,
avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
that are specifically identified. In these instances, if the Authority implements our
recommendations, it will cease to incur program costs for the overpayment and/or
underpayment of housing assistance and, instead, will expend those funds in accordance
with HUD’s requirements and/or the Authority’s program administrative plan. Once the
20
Authority successfully improves its controls, this will be a recurring benefit. Our
estimate reflects only the initial year of this benefit.
21
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
22
Ref to OIG Evaluation Auditee Comments
23
Ref to OIG Evaluation Auditee Comments
24
Ref to OIG Evaluation Auditee Comments
25
Ref to OIG Evaluation Auditee Comments
Comment 1
26
Ref to OIG Evaluation Auditee Comments
27
Ref to OIG Evaluation Auditee Comments
28
OIG Evaluation of Auditee Comments
Comment 1 The Authority’s corrective action plan with HUD does not require the Authority
to implement a system of supervisory reviews within its quality control process to
ensure that program funds are appropriately used for future payments. The action
plan only requires the Authority to implement procedures for obtaining and
documenting approval for adjustments to its housing assistance payments. The
Authority should provide supporting documentation that its procedures and
controls were implemented to HUD’s staff, who will work with the Authority, to
resolve the recommendation.
29
Appendix C
FEDERAL REQUIREMENTS AND THE AUTHORITY’S
PROGRAM ADMINISTRATIVE PLAN
HUD’s regulations at 24 CFR 5.240(c) state that the responsible entity must verify the accuracy
of the income information received from the family and change the amount of the total tenant
payment, tenant rent, or program housing assistance payment or terminate assistance, as
appropriate, based on such information.
HUD’s regulations at 24 CFR 982.54 require the public housing authority to adopt a written
administrative plan that establishes local policies for the administration of the program in
accordance with HUD requirements. The administrative plan states the authority’s policy on
matters for which the authority has discretion to establish local policies. (c) The public housing
authority must administer the program in accordance with the authority’s administrative plan.
HUD’s regulations at 24 982.152(d) state that HUD may reduce or offset any administrative fee
to a housing authority, in the amount determined by HUD, if the authority fails to perform
program administrative responsibilities correctly or adequately under the program.
HUD’s regulations at 24 CFR 982.153 state that the public housing authority must comply with
the consolidated annual contributions contract, the application, HUD regulations and other
requirements, and the authority’s program administrative plan.
Section VII, part A, number 2, of the Authority’s program administrative plan states that the
Authority’s procedures for anticipating annual income include the use of Enterprise Income
Verification methods approved by HUD in conjunction with family-provided documents dated
within 60 days of the Authority’s interview date.
Finding 1
HUD’s regulations at 24 CFR 982.54(d) state that the public housing authority’s administrative
plan must cover the authority’s policies on the following subjects: (4) occupancy policies,
including (i) definition of what group of persons may qualify as a “family”.
HUD’s regulations at 24 CFR 982.158(a) state that the public housing authority must maintain
complete and accurate accounts and other records for the program in accordance with HUD
requirements, in a manner that permits a speedy and effective audit. (e) During the term of each
assisted lease, and for at least three years thereafter, the authority must keep (1) a copy of the
executed lease, (2) the housing assistance payments contract, and (3) the application from the
family.
HUD’s regulations at 24 CFR 982.201(a) state that public housing authorities may only admit an
eligible family to the program. To be eligible, the applicant must be a “family.”
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HUD’s regulations at 24 CFR 982.305(c)(2) state that the public housing authority may not pay
any housing assistance to the owner until the housing assistance payment contract has been
executed.
HUD’s regulations at 24 CFR 982.308(g)(2) state that if there are any changes in lease
requirements governing tenant or owner responsibilities for utilities or appliances, tenant-based
assistance shall not be continued unless the authority has approved a new tenancy in accordance
with program requirements and has executed a new housing assistance payments contract with
the owner.
HUD’s regulations at 24 CFR 982.516(a)(1) state that the public housing authority must conduct
a reexamination of family income and composition at least annually. (2) The Authority must
obtain and document in the tenant file third-party verification of the following factors or must
document in the tenant file why third-party verification was not available: (i) reported family
annual income, (ii) the value of assets, (iii) expenses related to deductions from annual income,
and (4) other factors that affect the determination of adjusted income. (b)(1) At any time, the
public housing authority may conduct an interim reexamination of family income and
composition.
Section IV, part B, number 1, of the Authority’s program administrative plan states that a family
is defined as one or more persons sharing residency whose income and resources are available to
meet the family’s needs, when the person to be designated head of household meets the
Authority’s definition of adult and is either related by blood, marriage, or act of law or who has
evidenced a “stable” family/spousal relationship. Persons who evidence a “stable”
family/spousal relationship must show evidence of operating as a family. Such a relationship
must be evidenced by providing birth certificates showing joint parenthood of children who
reside in the unit, joint savings/checking accounts, life insurance policies naming coresident as
beneficiary, prior leases in both parties’ names, and/or proof of “common law marriage” if
parties have previously resided in a state that recognizes common law marriages.
Section VIII, part C, number 1, of the Authority’s program administrative plan states that the
Authority will implement new payment standards at the annual reexaminations or when the
household moves or household composition changes. If the payment standards decrease, the
Authority will implement the new standards at the annual reexamination, whenever a participant
family moves or when the bedroom size, for which the family qualifies, changes.
Section IX, part A, of the Authority’s program administrative plan states that bedroom size
assignments on vouchers will be made so that no less than one and no more than two persons
will occupy a bedroom. Persons of the opposite sex shall not be required to occupy the same
bedroom except for married or cohabitating couples. Two children of the same sex may be
required to share a bedroom regardless of age. Children of the opposite sex may be required to
share a bedroom if both are under the age of three. Generally, children over the age of six shall
not be required to share a bedroom with a parent. A separate bedroom may be provided for an
individual family member if the family presents documentation sufficient to convince the
Authority that the individual’s physical or mental health requires separate sleeping quarters.
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Section XIII, part C, number 5, of the Authority’s program administrative plan states that (a) if a
change in family circumstances or income results in a decrease in tenant rent, the adjustment in
rent will be effective the first day of the month following verification of reported changes; (c) if
a change in family circumstances or income results in an increase in tenant rent, the adjustment
in rent will be made effective the first day of the second month following the change in family
circumstances (thereby giving a 30-day notice to the participant).
Section XIII, part D, of the Authority’s program administrative plan states that all participants
are required to report any change in household composition within 30 days of the change.
Appendix J, part D, number 6, of the Authority’s program administrative plan states that to
reduce procedural problems, the Authority will provide quality control reviews of work
completed by staff in an attempt to identify “honest” mistakes as well as incidences of program
abuse.
Finding 2
HUD’s regulations at 24 CFR 982.516(f) states that the public housing authority must establish
procedures that are appropriate and necessary to ensure that income data provided by applicant
or participant families are complete and accurate.
HUD’s Public and Indian Housing Notice 2005-9, section 4(e), states that families can be
required to report all increases in income between reexaminations and the public housing
authority may conduct more frequent interim reviews for families reporting no income.
Section XIII, part C, number 2, of the Authority’s program administrative plan states that the
Authority will schedule special reexaminations every 90 days for families reporting zero income.
Families reporting zero income will be required to have all adult household members sign a
certification of zero income and a release allowing the Authority to obtain a certified copy of any
tax return submitted to the Internal Revenue Service by all adults residing in the household.
Failure to comply with these reexamination requirements will be considered grounds for
termination of assistance.
Appendix J, part D, of the Authority’s program administrative plan states that the Authority will
consider any activity designed to elicit monies and/or other forms of remuneration to which the
party was not rightfully entitles as an act of “fraud or program abuse.” Resident fraud is defined
as the underreporting of income, underreporting of assets, and/or falsifying family
size/composition or income. If abuse is substantiated, the Authority may require repayment
depending on the seriousness of the abuse.
32
The Springfield Housing Authority, Springfield, Illimois, Needs to Improve Its Controls over Its Section 8 Housing Assistance Payments
Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-04-28.
Below is a raw (and likely hideous) rendition of the original report. (PDF)