oversight

The Cincinnati Metropolitan Housing Authority, Cincinnati, Ohio, Did Not Effectively Administer Its Section 8 Housing Choice Voucher Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-09-17.

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

                                                                 Issue Date
                                                                         September 17, 2009
                                                                 Audit Report Number
                                                                         2009-CH-1014




TO:         Thomas S. Marshall, Director of Public Housing Hub, 5DPH


FROM:       Heath Wolfe, Regional Inspector General for Audit, 5AGA

SUBJECT: The Cincinnati Metropolitan Housing Authority, Cincinnati, Ohio, Did Not
           Effectively Administer Its Section 8 Housing Choice Voucher Program

                                   HIGHLIGHTS

 What We Audited and Why

             We audited the Cincinnati Metropolitan Housing Authority’s (Authority) Section
             8 Housing Choice Voucher program (program). The audit was part of the
             activities in our fiscal year 2009 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 third of three audit
             reports on the Authority’s program.

 What We Found

             The Authority’s Family Self-Sufficiency program was operated in compliance
             with HUD’s and its requirements. The Authority properly funded its participants’
             escrow accounts, made escrow payments when appropriate, and maintained
             documentation to support its Family Self-Sufficiency program operations.
             However, the Authority’s administration regarding housing assistance payments
             for larger housing units than its policy permitted, its use of HUD’s Enterprise
             Income Verification system regarding households claiming to have zero income,
             and the timeliness of initial housing quality standards inspections need
             improvement.
           The Authority provided program vouchers to 32 families for units that were larger
           than its subsidy standards allowed because it lacked controls to detect and prevent
           overhousing. As a result, it made excessive housing assistance payments of more
           than $100,000. By implementing adequate procedures and controls regarding its
           housing assistance payments, we estimate that more than $25,000 in payments
           will be accurately spent over the next year.

           The Authority did not effectively use HUD’s Enterprise Income Verification
           system (system) or other third-party verification methods to determine that
           reported zero-income households had unreported income. It made excessive
           housing assistance payments of more than $32,000 for 20 of 31 households that
           had unreported income. Based on our statistical sample, we estimate that over the
           next year, the Authority will overpay more than $11,000 in housing assistance and
           utility allowances.

           The Authority did not always comply with HUD’s requirements when conducting
           initial inspections after receiving a request for tenancy approval. Untimely
           inspections occurred due to the Authority’s inability to track the time between the
           receipt of the request and the initial inspection.

           We informed the Authority’s executive director and the Director of HUD’s
           Cleveland Office of Public Housing of a minor deficiency through a
           memorandum, dated September 14, 2009.

What We Recommend

           We recommend that the Director of HUD’s Cleveland Office of Public Housing
           require the Authority to reimburse its program from nonfederal funds for the
           improper use of more than $136,000 in program funds and implement adequate
           procedures and controls to address the findings cited in this audit report to prevent
           more than $36,000 in program funds from being spent on excessive housing
           assistance 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 issued because of the audit.

Auditee’s Response

           We provided our review results and supporting schedules to the Director of
           HUD’s Cleveland Office of Public Housing and the Authority’s executive director
           during the audit. We 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 executive director on August 26, 2009.


                                             2
We asked the executive director to provide comments on our discussion draft
audit report by September 7, 2009. The executive director provided written
comments, dated September 3, 2009. The executive director generally disagreed
with our findings. The complete text of the written comments, along with our
evaluation of those comments, can be found in appendix B of this report except
for 235 pages of documentation that was not necessary for understanding the
Authority’s comments. A complete copy of the Authority’s comments plus the
documentation was provided to the Director of HUD’s Cleveland Office of Public
Housing.




                               3
                            TABLE OF CONTENTS

Background and Objectives                                                            5

Results of Audit
      Finding 1: Controls to Prevent Making Housing Assistance Payments for Units
                 Larger Than Necessary Need Improved                                 6

      Finding 2: The Authority’s Zero-Income Households Had Unreported Income        8

      Finding 3: Controls over Timely Inspections Needs Improvement                 12

Scope and Methodology                                                               15

Internal Controls                                                                   17

Appendixes
   A. Schedule of Questioned Costs and Funds to Be Put to Better Use                19
   B. Auditee Comments and OIG’s Evaluation                                         20
   C. Federal Requirements and the Authority’s Program Administrative Plan          28




                                            4
                     BACKGROUND AND OBJECTIVES

The Cincinnati Metropolitan Housing Authority (Authority) was established in 1933 under
Section 3735.27 of the Ohio Revised Code to provide decent, safe, and sanitary housing. In
2006, the Authority merged with the Hamilton County, Ohio, Housing Authority’s Section 8
Housing Choice Voucher program. The Authority serves households in neighborhoods
throughout Cincinnati, Ohio, and Hamilton County. A five-member board of commissioners
governs the Authority. Board members are appointed for five-year terms. The commissioners
are appointed by the Probate Court (one appointment), the city manager (two appointments, one
of which must be a public housing resident), Hamilton County Board of Commissioners (one
appointment), and the Court of Common Pleas (one appointment). The board makes operational
and budgetary decisions regarding the use of federal funds allocated for housing. The
Authority’s executive director is appointed by the board of commissioners and is responsible for
coordinating established policy and carrying out the Authority’s day-to-day operations.

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 June 2009, the Authority had 9,979 units under
contract with annual housing assistance payments totaling more than $59 million in program
funds.

This is the third of three planned audit reports on the Authority’s program. Our objectives were
to determine whether the Authority (1) applied the correct voucher size in accordance with its
adopted subsidy standards, (2) appropriately verified that reported zero-income households had
income, (3) ensured that initial inspections were conducted according to HUD requirements, and
(4) properly administered its Family Self-Sufficiency program. The first audit report (report
#2008-CH-1012, issued on September 23, 2008) included one finding. The objective of the first
audit was to determine whether the Authority’s inspections were sufficient to detect housing
quality standards violations and provide decent, safe, and sanitary housing to its households.
The second audit report (report #2009-CH-1010, issued on May 19, 2009) included two findings.
The objectives of our second audit were to determine whether the Authority (1) accurately
calculated housing assistance and utility allowance payments, (2) maintained adequate
documentation to support household eligibility, and (3) adequately administered its Section 8
project-based certificate contract.




                                               5
                                RESULTS OF AUDIT

Finding 1: Controls to Prevent Making Housing Assistance Payments
           for Units Larger Than Necessary Need Improved
The Authority generally applied the correct voucher size in accordance with its adopted subsidy
standards. However, it housed 32 households in units that were larger than its standards allowed
(overhoused) because it lacked adequate procedures to detect and prevent overhousing. As a
result, the Authority made excessive housing assistance payments totaling more than $100,000.


 The Authority Overpaid
 Assistance for Households That
 Were Overhoused

              The Authority provided a spreadsheet listing all the vouchers it issued between
              January 1, 2007, and December 31, 2008. The file contained 10,903 households
              with each household’s address, payment standard, number of bedrooms in the
              unit, household size, gross rent, and utility allowance. From this spreadsheet, we
              determined whether the number of bedrooms was greater than household size and
              whether the payment standard exceeded or was 110 percent of the fair market
              rent. We identified 79 exceptions. We reviewed the household files and family
              reports (HUD Form 50058) for each of the 79 exceptions and determined that 32
              households were overhoused and excess housing assistance was paid from federal
              funds.

              The Authority is required by HUD’s regulations to establish subsidy standards
              that determine the number of bedrooms needed for households of different sizes
              and compositions. The subsidy standards must provide for the smallest number of
              bedrooms needed for a household without overcrowding. HUD also requires the
              Authority to establish payment standards. The Authority established payment
              standards by the number of bedrooms and used them to calculate the amount of
              housing assistance it would pay to a landlord on behalf of the household leasing
              the unit.

 The Authority Lacked
 Appropriate Procedures


              The overhousing occurred because the Authority did not have adequate
              procedures to detect and prevent overhousing. Although its process for
              performing certifications gave its housing specialists discretion to review previous
              file documentation, the Authority did not require them to do so. Also, the
              Authority uses Emphasys Elite (Elite) software to manage its program data.
              When recertifications are conducted, the HUD form 50058 (family report) is
                                               6
             electronically produced by the Elite software with certain fields, including the
             household bedroom size, automatically completed. Therefore, if an error was
             made on a prior certification or a tenant’s household size was reduced between
             annual recertifications, it is the responsibility of the housing specialist to ensure
             the form is appropriately changed in the Elite software. The Elite software system
             did not show an exception if a household was overhoused. If the unit size was not
             changed on the annual recertification, that error could continue from one
             certification to another.

             The Authority conducted peer reviews of 50 percent of the initial certifications
             and 33 percent of its certifications. Supervisors conducted monitoring reviews of
             1 in 10 certifications. These reviews were performed in the same manner as the
             certifications that the housing specialists performed. The Authority randomly
             chose certifications for review instead of performing a full file review. It ensured
             that all new housing specialists received formal training and extensive training
             with a supervisor and shadowed housing specialists before performing
             certifications. Also, the Authority conducted training with all housing specialists
             using the results from peer and supervisory reviews. Although the Authority had
             external and internal training processes and performed monitoring reviews of the
             certifications, the overhousing errors occurred. Therefore, additional procedures
             and controls are needed to ensure full implementation of HUD’s regulations and
             the Authority’s program administrative plan.

Conclusion


             As a result of its procedural weaknesses, the Authority made excess housing
             assistance payments of $100,073 for 32 households. If the Authority implements
             adequate procedures regarding its housing assistance payments to ensure
             compliance with federal regulations and its program administrative plan, we
             estimate that more than $25,000 in payments will be accurately spent over the
             next year. Our methodology for this estimate is explained in the Scope and
             Methodology section of this audit report.

Recommendations

             We recommend that the Director of HUD’s Cleveland Office of Public Housing
             require the Authority to

             1A.    Reimburse its program $100,073 from nonfederal funds for the improper
                    payments related to the households cited in this finding.

             1B.    Implement adequate procedures over its overhoused tenants to ensure that
                    it complies with HUD’s requirements to prevent $25,224 in program funds
                    from being spent on units that do not comply with HUD’s and its
                    requirements over the next year.

                                               7
Finding 2: The Authority’s Zero-Income Households Had Unreported
                               Income
The Authority did not effectively use HUD’s Enterprise Income Verification system (system) or
other third-party verification methods to determine that reported zero-income households had
unreported income. Of the 129 households statistically selected for review, 20 had unreported
income that affected their housing assistance and utility allowance payments. As a result, the
Authority unnecessarily paid housing assistance totaling more than $32,000 for households that
were able to meet their rental obligations. We estimate that over the next year, the Authority will
pay more than $11,000 in housing assistance for reported zero-income households that had
unreported income.


 Zero-Income Households Had
 Unreported Income

               Using data mining software, we statistically selected 129 of the Authority’s zero-
               income program households from the 952 households which received full housing
               assistance payments from January 1, 2007, through December 31, 2008, and was
               expanded as necessary. We reviewed the 129 households using HUD’s system
               and Public and Indian Housing Information Center to determine whether the
               Authority properly adjusted the housing assistance payments or entered into a
               repayment agreement for the overpaid subsidy once it became aware of the
               unreported income for households claiming zero-income. Of the 129 households
               reviewed, HUD’s system showed that 52 households had earned income during
               the time their zero-income certifications were effective. We reviewed the 52
               household files further to determine whether the households had unreported
               income.

               Thirty-one households had income that should have been reported. The
               remaining 21 were correctly reported as zero-income by the Authority for various
               reasons including meeting HUD’s requirements for excluded income. Of the 31
               households, 20 (15.5 percent) of the households had unreported income resulting
               in the Authority providing $32,395 in excessive housing assistance payments.
               Our review was limited to the information maintained in HUD’s system and the
               Authority’s household files.

               The following are examples of households with unreported income:

                   •   Household 75969 had income, according to HUD’s system, totaling
                       $18,959 from January through December 2007. The household had
                       consistently been employed for the same employer since 2002. The file
                       contained a third-party employment verification, which the Authority
                       determined to be outdated. The third-party employment verification was
                       received by the Authority in October 2006, and the new admission
                       certification for the household was effective January 2007. The Authority
                                                8
                   did not attempt to receive updated third-party employment verification and
                   determined the household had zero income. Since the household had
                   income, the Authority overpaid $4,019 in housing assistance from the
                   household’s date of admission on January 1, 2007, through February 1,
                   2008.

               •   Household 69436 had income, according to HUD’s system, totaling
                   $19,595 from January through September 2008. The household file
                   contained a system report, dated August 14, 2008, showing that the
                   household member was employed and receiving income. The Authority
                   overpaid $2,976 in housing assistance from the household’s date of
                   admission on December 14, 2007, through November 30, 2008. It did not
                   attempt to recover the overpaid housing assistance.

            As a result of the Authority’s failure to properly adjust the housing assistance
            payments or pursue repayment for its zero-income households with unreported
            income totaling $251,461, HUD paid $32,395 in housing assistance for 20
            households having income that were able to meet their rental obligations.

            The Authority pursued repayment for 9 of the 20 tenants identified as zero income
            households during our audit. This action resulted in a reduction in
            recommendation 2A of $18,163. As a result, the improper payments cited in
            recommendation 2A shows the remaining 11 files (20 minus 9).

The Authority’s Did Not Follow
Its Administrative Plan


            The Authority did not require 37 of the 52 zero-income households execute the
            income verification forms as required by its program administrative plan. It also
            failed to perform the interim reexamination every 60 days for households
            claiming to have reported zero income as its administrative plan requires. The
            Authority’s acting program director said that its 2009 administrative plan was
            being revised to state that interim reexaminations for changes in income would be
            performed on households reporting zero income at the discretion of the Authority.
            Additionally, the Authority failed to perform third-party employment verifications
            in nine household files and failed to adjust annual income and the housing
            assistance payments after the household had reported a change in five household
            files.

The Authority Lacked
Adequate Procedures and
Controls


            The Authority lacked adequate procedures and controls to ensure that housing
            assistance payments met HUD’s requirements and those of the Authority’s
            program administrative plan. The overpayments occurred because the Authority’s
                                             9
             process for performing certifications did not require its housing specialists to
             review previous household file documentation. Therefore, when a zero-income
             household notified the Authority of its household income situation, the Authority
             did not compare the current information with past documentation. As a result, it
             did not always attempt to recover overpaid housing assistance. This process also
             resulted in the housing specialists only being concerned with the current income
             information and not with income information regarding previous certifications.

Conclusion


             As a result of the Authority’s failure to properly verify household income for its
             zero-income households and identify unreported income, it improperly paid more
             than $32,000 in housing assistance for households that were able to meet their
             rental obligations. If the Authority does not implement adequate controls over its
             zero-income households, we estimate that it could pay more than $11,000 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.

             In accordance with 24 CFR 982.152(d), HUD may reduce or offset any
             administrative fee to public housing authorities, in the amount determined by
             HUD, if the authorities fail to perform their administrative responsibilities
             correctly or adequately under the program. The Authority received $3,893 in
             program administrative fees for the 20 households with incorrect housing
             assistance.

Recommendations

             We recommend that the Director of HUD’s Cleveland Office of Public Housing
             require the Authority to

             2A.    Pursue collection from the applicable households or reimburse its program
                    $36,395 ($32,502 in housing assistance payments plus $3,893 in
                    associated administrative fees) from nonfederal funds for the overpayment
                    of housing assistance cited in this finding, of which $16,034 ($14,319 in
                    housing assistance payments plus $1,715 in associated administrative fees)
                    remains for pursuit of collection or reimbursement.

             2B.    Implement adequate procedures and controls regarding its zero-income
                    households to prevent the overpayment of $11,024 in excessive housing
                    assistance over the next year.

             2C.    Review the remaining 823 (952 minus 129) households claiming zero
                    income between January 1, 2007, and December 31, 2008, to determine
                    whether the households had unreported income. For households that
                    received excessive housing assistance payments, the Authority should
                    pursue collection and/or reimburse its program the applicable amount
                                             10
from nonfederal funds and/or terminate housing assistance for the
applicable households.




                        11
Finding 3: Controls over Timely Initial Inspections Need Improvement
The Authority did not always comply with HUD’s requirements when conducting initial
inspections after receiving a request for tenancy approval (request). Untimely inspections
occurred due to the Authority’s inability to track the time between the receipt of the request and
the initial inspection. As a result, the Authority did not fully comply with HUD’s requirements
and placed unnecessary hardships on households and landlords.


 The Authority Conducted
 Initial Inspections Late 16
 Percent of the Time

               We statistically selected 67 initial inspections from a universe of 4,174 initial
               inspections during the period January 2007 through December 2008 using data
               mining software. We reviewed 67 household files to determine whether the
               Authority performed initial inspections within 15 days of receipt of the request for
               tenancy approval. We determined whether any of the identified inspections was
               appropriately delayed due to a unit being unavailable for inspection.
               HUD’s regulations at 24 CFR 982.305(b)(2)(i)(B) state that the Authority must
               inspect the unit, determine whether the unit meets housing quality standards, and
               notify the family and the owner of the determination. In the case of a public
               housing authority with more than 1,250 budgeted units in its tenant-based
               program, this process should take place within a reasonable time after the family
               submits a request for approval of the tenancy. To the extent practicable, such
               inspection and determination must be completed within 15 days after the family
               and owner submit a request for approval of the tenancy. Regulations at 24 CFR
               982.305(b)(ii) state that the 15-day clock (under paragraph (b)(2)(i)(B) of this
               section) is suspended during any period when the unit is not available for
               inspection.

               Of the 67 initial inspections statistically selected for review, 11 inspections (16
               percent) did not have initial inspections within 15 days of receipt of the request
               and availability of the unit for inspection. The average days late for the 11
               inspections were 23 days. The requests that exceeded 15 days are listed in the
               following table.




                                  Latest date
                      Inspection beginning the        Date of initial    Days

                                                 12
                     number      15 day clock        inspection       late
                     143899      Nov. 16, 2007        Feb. 2, 2008     52
                     137109      Aug. 15, 2007       Oct. 18, 2007     49
                     141536        Nov. 2, 2007      Dec. 28, 2007     41
                     145075      Sept. 19, 2007      Oct. 25, 2007     21
                     147115       Feb. 13, 2007      Mar. 19, 2008     20
                     140122        Nov. 1, 2007       Dec. 3, 2007     17
                     131084        June 5, 2007        July 6, 2007    16
                     136919      Sept. 12, 2007      Oct. 11, 2007     14
                     130752      May 29, 2007        June 26, 2007     13
                     138072        Oct. 1, 2007      Oct. 29, 2007     13
                     137901        Oct. 1, 2007      Oct. 18, 2007      2

             From the sample results, we are 90 percent confident that of 4,174 initial
             inspections conducted by the Authority, 686 were not conducted within 15 days.

The Authority’s Procedures
and Controls Had Weaknesses

             The weakness regarding late initial inspections occurred because the Authority
             lacked procedures and controls to track the timeliness of initial inspections. Its
             Elite software did not automatically track whether initial inspections were
             conducted in a timely manner. The Authority did not track whether initial
             inspections were conducted within the prescribed timeframe stated in HUD’s
             requirements. During our audit, the Authority created a report to track the
             timeliness of initial inspections. The tracking report process had not been in place
             long enough to determine whether it eliminated or reduced the late initial
             inspections. The controls need to be further evaluated during HUD’s follow-up
             on our audit recommendations to ensure that the procedures and controls
             adequately ensure timely initial inspections.
Conclusion


             As a result of its procedural and control weaknesses, the Authority did not always
             follow HUD’s requirements and subjected landlords and households to
             unnecessary hardships and quite possibly limited landlord participation in its
             program. For its program to be efficient and effective, there must be a landlord
             base that is willing to rent decent, safe, and sanitary units to families in the
             program. If the Authority implements adequate procedures and controls
             regarding its initial inspections, its timeliness of initial inspections should
             improve. This improvement will assist in reducing the financial hardships on
             tenants and landlords participating in the program along with a possible increase
             in landlord participation.
Recommendation



                                              13
We recommend that the Director of HUD’s Cleveland Office of Public Housing
ensure the Authority

3A.   Fully and successfully implements its procedures and controls regarding
      the initial inspection process to ensure that it complies with HUD’s
      requirements.




                              14
                        SCOPE AND METHODOLOGY

To accomplish our objective, we reviewed

   •   Applicable laws, regulations, HUD’s program requirements at 24 CFR Part 982, and HUD’s
       Housing Choice Voucher Guidebook 7420.10.

   •   The Authority’s accounting records; annual audited financial statements for fiscal years
       2005, 2006, and 2007; program administrative plans, effective April 2006, April 2007, and
       April 2008; program household files; computerized databases; policies and procedures;
       program annual contributions contracts; board meeting minutes for calendar years 2006,
       2007, and 2008; and organizational chart.

   •   HUD’s files for the Authority.

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

Finding 1

We selected 100 percent of the Authority’s households between January 1, 2007, and December
31, 2008. From the 10,903 tenants, we determined that 32 households were overhoused using
data mining software. Unless the Authority implements adequate procedures and controls
regarding initial inspections, we estimate that $25,224 in payments will be misspent over the
next year. From the 32 overhoused households, we determined that the households that were
overhoused at the end of our audit period could recur indefinitely; however, we were
conservative in our approach and included only the initial year in our estimate.

Finding 2

Using data mining software, we statistically selected 129 of the Authority’s program household
files from the 929 households that were identified as having zero income from January 1, 2007,
through December 31, 2008. The 129 household files were selected to determine whether the
Authority determined whether households appropriately reported zero income.

Our sampling method was an unrestricted variable sample with a 95 percent confidence level and
precision level of plus or minus 10 percent. Using variable sampling difference estimation
techniques with a 95 percent confidence level, the sample results support an estimate that the
Authority failed to appropriately determine whether a household correctly reported zero income
in 163 households with an error rate of plus or minus 6 percent. We used the last 12 months of
housing assistance overpayments determined in our sample to project funds that could be put to
better use.

Unless the Authority implements adequate procedures and controls regarding households
reporting zero income to ensure compliance with HUD’s regulations and its program
administrative plan, we estimate that $11,024 in payments will be misspent over the next year.
This estimate is presented solely to demonstrate the annual amount of program funds that could

                                               15
be put to better use for appropriate payments if the Authority implements our recommendation.
While these benefits could recur indefinitely, we were conservative in our approach and only
included the initial year in our estimate.

Finding 3

We statistically selected 67 of the Authority’s program household files from the 4,174
households that had initial inspections conducted from January 1, 2007, through December 31,
2008, using data mining software. Our analysis used only the first inspection whether that
inspection passed or failed. The 67 household files were selected to determine whether the
Authority conducted timely initial inspections after the receipt of a request for tenancy approval.

Our sampling method was an unrestricted variable sample with a 90 percent confidence level and
precision level of plus or minus 10 percent. Using variable sampling difference estimation
techniques with a 90 percent confidence level, the sample results support an estimate that the
Authority failed to conduct initial inspections for 686 households within 15 days with an error
rate of plus or minus 7.4 percent.

We performed our on-site audit work in June 2009 at the Authority’s office located at 1044 West
Liberty Road, Cincinnati, Ohio. The audit covered the period January 1, 2007, through March
31, 2009, but was expanded when necessary to include other periods.

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.




                                                16
                              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:

              •       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 an organization’s objectives.




                                               17
Significant Weakness

           Based on our review, we believe that the following item is a significant weakness:

           •   The Authority lacked adequate procedures and controls to ensure compliance
               with HUD’s requirements regarding tenants being overhoused, zero-income
               households, and implementing timely initial inspections (see findings 1, 2, and
               3).

Separate Communication of a
Minor Deficiency

           We informed the Authority’s executive director and the Director of HUD’s
           Cleveland Office of Public Housing of a minor deficiency through a
           memorandum, dated September 14, 2009.




                                            18
                                   APPENDIXES

Appendix A

              SCHEDULE OF QUESTIONED COSTS
             AND FUNDS TO BE PUT TO BETTER USE

                    Recommendation                        Funds to be put
                        number            Ineligible 1/    to better use 2/
                           1A                $100,073
                           1B                                     $25,224
                           2A                    36,395
                           2B                                      11,024
                          Totals             $136,468             $36,248


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/   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 this instance, if the Authority implements
     recommendations 1B and 2B, it will ensure that program funds are spent according to
     federal requirements. Once the Authority successfully improves its controls, this will be
     a recurring benefit. Our estimate reflects only the initial year of this benefit.




                                            19
Appendix B

        AUDITEE COMMENTS AND OIG’s EVALUATION

Ref to OIG Evaluation   Auditee Comments




Comment 1




                         20
Ref to OIG Evaluation   Auditee Comments




Comment 2




Comment 3


Comment 4




                         21
Ref to OIG Evaluation   Auditee Comments




Comment 5




                         22
Ref to OIG Evaluation   Auditee Comments




Comment 6




Comment 7




Comment 8




                         23
Ref to OIG Evaluation   Auditee Comments




Comment 9




Comment 10




Comment 11




                         24
Ref to OIG Evaluation   Auditee Comments




Comment 12




Comment 13




                         25
                          OIG Evaluation of Auditee Comments

Comment 1    The Authority provided documentation to support that five households were
             eligible for a larger unit. As a result, we adjusted Recommendation 1A.

Comment 2    The Authority did not provide documentation to support any adjustment for this
             household. We suggest the Authority and HUD conduct a thorough review of this
             household file to include the household members.

Comment 3    We agree with the Authority’s response that a retroactive adjustment is not always
             warranted from reviewing the information in HUD’s system.

Comment 4    The Authority disagrees with our assessment that it did not effectively use HUD’s
             system. However, it admits that it did not follow its administrative plan for
             reexaminations of its zero-income households. We did adjust Recommendation
             2A based upon the documentation submitted by the Authority.

Comment 5    We adjusted the days late in the table for inspection numbers 143899 and 137901
             from 77 days to 52 days, and 8 days to 2 days, respectively. For inspection
             number 147115, the household received assistance and the inspection was
             performed using the original request. If the request was cancelled, a new request
             should have been issued.

Comment 6    The sample results support an error rate of 16.4 percent plus or minus 7.4 percent.
             Therefore, the error rate ranges from 9 percent to 23.8 percent.

Comment 7    We commend the Authority’s continued efforts to improve its program
             operations.

Comment 8    The Authority disagrees with the finding but stated on page 1 of its response that
             it made excess housing assistance payments of $92,512 for 31 families. As
             described in Comment 1 above, we adjusted Recommendation 1A. As we
             previously discussed with the Authority, its proposal for repayment should be
             detailed in its audit resolution correspondence with HUD.

Comment 9    The actions taken, in process, and proposed by the Authority, if fully
             implemented, should improve its program operations.

Comment 10 We commend the Authority for its proactive measures in pursuing the repayment
           of incorrectly paid housing assistance payments.

Comment 11 See Comment 9.




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Comment 12 The Authority should fully implement the recommendation. For any households
           that have left the Authority’s program, it can discuss the disposition of these
           households with HUD.

Comment 13 See Comment 9.




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Appendix C

        FEDERAL REQUIREMENTS AND THE AUTHORITY’S
              PROGRAM ADMINISTRATIVE PLAN

Finding 1
HUD’s regulations at 24 CFR 982.402, subsidy standards, state: (a)(1) the public housing
authority must establish subsidy standards that determine the number of bedrooms needed for
families of different sizes and compositions; (2) for each family, the public housing authority
determines the appropriate number of bedrooms under the public housing authority subsidy
standards (family unit size); and (3) the family unit size number is entered on the voucher issued
to the family. The public housing authority issues the family a voucher for the family unit size
when a family is selected for participation in the program. (b) The following requirements apply
when the public housing authority determines family unit size under the public housing authority
subsidy standards:

   1.    the subsidy standards must provide for the smallest number of bedrooms needed to
         house a family without overcrowding,
   2.    the subsidy standards must be consistent with space requirements under the housing
         quality standards (See 982.401(d)),
   3.    the subsidy standards must be applied consistently for all families of like size and
         composition,
   4.    a child who is temporarily away from the home because of placement in foster care is
         considered a member of the family in determining the family unit size,
   5.    a family that consists of a pregnant woman (with no other persons) must be treated as a
         two-person family,
   6.    any live-in aide (approved by the public housing authority to reside in the unit to care
         for a family member who is disabled or is at least 50 years of age) must be counted in
         determining the family unit size,
   7.    unless a live-in-aide resides with the family, the family unit size for any family
         consisting of a single person must be either a zero or one-bedroom unit, as determined
         under the public housing authority subsidy standards,
   8.    in determining family unit size for a particular family, the public housing authority may
         grant an exception to its established subsidy standards if the public housing authority
         determines that the exception is justified by the age, sex, health, handicap, or
         relationship of family members or other personal circumstances. (For a single person
         other than a disabled or elderly person or remaining family member, such public
         housing authority exception may not override the limitation in paragraph (b)(7) of this
         section).

(c) The family unit size as determined for a family under the public housing authority subsidy
standard is used to determine the maximum rent subsidy for a family assisted in the voucher
program. For a voucher tenancy, the public housing authority establishes payment standards by
number of bedrooms. The payment standard for a family shall be the lower of:

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      1. The payment standard amount for the family unit size; or
      2. The payment standard amount for the unit size of the unit rented by the family.
      3. Voucher program. For a voucher tenancy, the public housing authority establishes
         payment standards by number of bedrooms. The payment standards for the family
         must be the lower of:
           i. The payment standards for the family unit size; or
          ii. The payment standard for the unit size rented by the family.

(d)(1) The family may lease an otherwise acceptable dwelling unit with fewer bedrooms than the
family unit size. However, the dwelling unit must meet the applicable housing quality standards
space requirements. (2) The family may lease an otherwise acceptable dwelling unit with more
bedrooms than the family unit size.

Finding 2
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 public housing
authority’s policies on the matter for which the public housing authority has discretion to
establish local policies. The public housing authority must administer the program in accordance
with its administrative plan.

HUD’s regulations at 24 CFR 5.240(c) state that public housing authorities must verify the
accuracy of the income information received from program households 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 982.153 state that the public housing authority must comply with
the consolidated annual contributions contract, the application, HUD regulations and other
requirements, and its program administrative plan.

HUD’s regulations at 24 CFR 982.152(d) state that HUD is permitted to reduce or offset any
Section 8 administrative fees paid to a public housing authority if it fails to perform its
administrative responsibilities adequately.

HUD’s regulations at 24 CFR 982.516(d)(1) state that the public housing authority must adopt
policies prescribing how to determine the effective date of a change in the housing assistance
payment resulting from an interim redetermination.

HUD’s regulations at 24 CFR 982.526(f) state 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 authority may conduct
more frequent interim reviews for families reporting no income.

The Authority’s administrative plan states:
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Chapter 5, page 10. Zero Income Status. Families claiming to have no income will be required
to execute verification forms to determine that forms of income such as unemployment benefits,
Temporary Assistance for Needy Families, Supplemental Security Income, are not being
received by the household.

Chapter 8, page 10. Minimum Income. There is no minimum income requirement. Families
who report zero-income are required to undergo an interim recertification every 60 days.
Families that report zero-income will be required to provide information regarding their means
of basic subsistence, such as food, utilities, and transportation.

Chapter 12, page 5. Rent Adjustments. Program participants are required to report all changes
in family composition or income within ten business days of the occurrence. Changes must be
reported in writing using the Report of Change Form available in the Housing Choice Voucher
department. Failure to report within ten business days may result in a retroactive rent increase,
but not a retroactive credit or rent reduction.

Chapter 12, page 7. Zero-Income Families/Minimum Rent Payers. Unless the family has
income that is excluded for rent computation, families reporting zero-income or other income
that results in minimum rent will have their circumstances examined every 60 days until they
have stable income. Persons claiming zero-income or paying minimum rent will also be asked to
complete a family expense form. The form will ask residents to estimate how much they spend
on telephone, cable TV, food, clothing, transportation, health care, child care, debts, and
household items. Residents will then be asked how they pay for these items.

Chapter 12, page 7. Failure to Report Accurate Information. If it is found the resident has
misrepresented or failed to report to their Housing Specialist the facts upon which his/her rent is
based, including errors or omissions by the Authority, so that the rent being paid is less than
what should have been charged, then the increase in rent will be made retroactive. Failure to
report accurate information is also grounds for termination in accordance with the Authority’s
administrative plan.

Chapter 12, page 11. Timely Reporting of Changes in Income. If the family does not report the
change as described under Timely Reporting, the family will have caused an unreasonable delay
in the interim reexamination processing and the following guidelines will apply: Increase in
Tenant Rent will be effective retroactive to the date is would have been effective had it been
reported on a timely basis. The family will be liable for any overpaid housing assistance and
may be required to sign a Repayment Agreement.




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