oversight

The HUD Phoenix Field Office's Procedures for Monitoring the Nogales Housing Authority Were Not Adequate

Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-07-13.

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

                                                                  Issue Date
                                                                               July 13, 2009
                                                                  Audit Report Number
                                                                           2009-LA-0001




TO:         K.J. Brockington, Director, Los Angeles Office of Public Housing, 9DPH



FROM:       Joan S. Hobbs, Regional Inspector General for Audit, Region IX, 9DGA


SUBJECT: The HUD Phoenix Field Office’s Procedures for Monitoring the Nogales
         Housing Authority Were Not Adequate

                                    HIGHLIGHTS

 What We Audited and Why

      We audited the U.S. Department of Housing and Urban Development’s (HUD) Office of
      Public Housing field office in Phoenix, Arizona (Public Housing). The objective of the
      audit was to determine whether Public Housing’s procedures for monitoring the Nogales
      Housing Authority (Authority) were effective. The audit was started because Public
      Housing performed several monitoring reviews at the Authority; however, there were
      indications that some of the problems found had not been corrected. Further, Public
      Housing staff indicated that the Authority may have used HUD funds for ineligible
      pension fund expenses.


 What We Found

      Public Housing did not always identify and/or properly address significant deficiencies at
      the Authority. This condition occurred because Public Housing’s monitoring and follow-
      up procedures were not thorough enough to (1) ensure that deficiencies at the Authority
      were identified and corrected and (2) determine whether the problems found were
      isolated incidents or systemic deficiencies. Also, Public Housing did not always apply
      the correct standards when performing its reviews. As a result, problems with the
      Authority’s Section 8 and public housing programs persisted for years without
      appropriate corrective actions.
     Based upon our review of 14 Section 8 tenant files at the Authority, we identified
     unsupported or ineligible housing assistance payments totaling $98,170. Additionally,
     Public Housing failed to appropriately address the Authority’s use of HUD funds for
     questionable pension fund expenses totaling $171,601.


What We Recommend

     We recommend that the Director of the HUD Los Angeles Office of Public Housing
     require the Phoenix field office to implement procedures to improve its monitoring and
     follow-up processes. We also recommend that the Director require the Authority to
     support or reimburse $93,578 in unsupported housing assistance payments and $4,592 in
     ineligible housing assistance payments. Finally, we recommend that the Director review
     the Authority’s questionable pension plan costs totaling $171,601, and require the
     Authority to reimburse its program if appropriate.

     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 discussed out audit findings with Public Housing officials during the audit and
     provided the draft report on May 12, 2009. We held an exit conference on May 29, 2009.
     The field office generally disagreed with our audit recommendations.

     The complete text of the auditee’s response, along with our evaluation of that response, is
     in appendix B of this report.




                                              2
                             TABLE OF CONTENTS

Background and Objective                                                         4

Results of Audit
        Finding 1: Public Housing’s Monitoring Process Did Not Always Identify   6
                   and/or Properly Address Problems at the Authority

Scope and Methodology                                                            16

Internal Controls                                                                17

Appendixes

   A.   Schedule of Questioned Costs                                             18
   B.   Auditee Comments and OIG’s Evaluation                                    19
   C.   Schedule of Deficiencies Found in 21 Tenant Files                        33
   D.   Criteria                                                                 36




                                              3
                      BACKGROUND AND OBJECTIVE

The U.S. Department of Housing and Urban Development’s (HUD) Office of Public Housing is
responsible for overseeing HUD’s public housing and Section 8 programs. This role includes
providing technical assistance and training as well as performing several types of on-site
monitoring reviews of the public housing authorities (housing authorities) that HUD contracts
with to administer these programs. The Office of Public Housing uses a risk assessment process
to identify and analyze the relative risk that each housing authority represents and to develop
priorities for its monitoring.

The Nogales Housing Authority (Authority) is one of twenty-four housing authorities within the
jurisdiction of the Phoenix Office of Public Housing (Public Housing) field office. The
Authority currently administers approximately 226 public housing units and 192 Section 8
vouchers with the following funding amounts:

                                    Fiscal Year    Fiscal Year
                                    2007           2008
                  Operating subsidy $      524,784 $      591,702
                  Capital funds      $     365,398 $      361,459
                  Vouchers           $     696,073 $      813,473
                  Totals             $ 1,586,255 $ 1,766,634

In July 2006, Public Housing performed a Section Eight Management Assessment Program
(Section 8 assessment) confirmatory review to verify the Authority’s self-certification and
ratings under this program. A Section 8 assessment measures the performance of the housing
authorities that administer the Housing Choice Voucher program in 14 key areas. For housing
authorities that are assigned an overall rating of “troubled” under the Section 8 assessment, HUD
must perform an on-site assessment of the housing authority, issue a report of its findings, and
ensure that the housing authority implements corrective actions to address the deficiencies found.
For housing authorities with less than 250 assisted units, HUD may elect not to perform an on-
site review only if it determines that an on-site review is unnecessary to determine the needs of
the housing authority and the actions required to address the program deficiencies. The
Authority received a “troubled” Section 8 assessment rating for its fiscal years 2006 and 2007.

In May 2007, Public Housing performed both a limited management review and another Section
8 assessment confirmatory review. The limited management review assessed whether the
Authority managed its public housing and Section 8 programs in compliance with statutory,
regulatory, and other administrative requirements. Public Housing’s management review of the
Authority covered the areas of governance, organization and staffing, financial management,
procurement, program management, property maintenance, resident services, capital funds,
exigent health and safety repair requirements, security, and management information systems.



                                                4
In January and May of 2008, Public Housing performed technical assistance visits to provide
guidance and assess the Authority’s progress in implementing corrective actions required as a
result of the reviews performed in 2007. In June 2008, Public Housing performed another
Section 8 assessment confirmatory review.

The objective of the audit was to determine whether Public Housing’s procedures for monitoring
the Authority were effective.




                                               5
                                RESULTS OF AUDIT

Finding 1: Public Housing’s Monitoring Process Did Not Always
           Identify and/or Properly Address Problems at the Authority
Public Housing did not always identify and/or properly address significant deficiencies at the
Authority. This condition occurred because Public Housing’s monitoring and follow-up
procedures were not thorough enough to (1) ensure that deficiencies at the Authority were
identified and corrected and (2) determine whether the problems found were isolated incidents or
systemic deficiencies. Also, Public Housing did not always apply the correct standards when
performing its reviews. As a result, problems with the Authority’s Section 8 and public housing
programs persisted for years without appropriate corrective actions. Based upon our review of
14 Section 8 tenant files at the Authority, we identified unsupported or ineligible housing
assistance payments totaling $98,170. Additionally, Public Housing failed to appropriately
address the Authority’s use of HUD funds for questionable pension payments totaling $171,601.



 Public Housing Did Not
 Identify Significant
 Program Deficiencies



       Public Housing did not identify and/or address some problems at the Authority during its
       monitoring performed in 2006, 2007, and 2008 and during technical assistance visits
       performed in January and May 2008.

           Public Housing Did Not Report the Authority’s Failure to Support Tenant Eligibility
           Based upon Criminal Background and Prior Eviction History Checks

              HUD regulations required the Authority to deny eligibility for three years (from
              the date of eviction) if a household member had been evicted from federally
              assisted housing for drug-related criminal activity. Eligibility must also be denied
              to those with a lifetime registration requirement under a state sex offender
              registration program. Further, the Authority’s administrative plan included
              additional eligibility criteria related to tenants’ criminal history that could prohibit
              a potential tenant from participation in the program. The Authority must perform
              background checks necessary to determine whether any household member is
              ineligible based upon his or her criminal or tenant eviction history.




                                                 6
   Public Housing’s monitoring reviews did not report that the Authority failed to
   maintain documentation to support tenant eligibility based upon criminal
   background and prior eviction history checks. As part of its monitoring review
   performed in 2007, Public Housing instructed the Authority to destroy tenant
   background check documentation as required yet did not instruct it to retain
   records to evidence that the checks were performed and the results were
   acceptable. Of the seven public housing and fourteen Section 8 tenant files we
   reviewed, 19 files did not contain records that supported the performance of
   background checks. Without such records, any management or audit review of
   the tenant files could not determine that appropriate Authority staff properly
   established the tenants’ eligibility. A recent HUD Office of Inspector General
   (OIG) audit (City of Phoenix Housing Department – HUD OIG Audit report
   number 2008-LA-1011) of another housing authority under Public Housing’s
   jurisdiction found a similar problem. This finding indicated that Public Housing
   was not requiring housing authorities to maintain documentation supporting their
   evaluation of each tenant’s criminal and prior eviction history.

Public Housing Did Not Address the Authority’s Failure to Verify the Status of
Eligible Noncitizens as Required

   HUD’s regulations required the Authority to confirm the immigration status for
   applicants who were not citizens yet claimed to have an immigration status that
   allowed them to participate in HUD’s rental assistance programs. Primary
   verification of the immigration status for applicants should be conducted by the
   Authority through the U.S. Department of Homeland Security’s Systematic Alien
   Verification for Entitlements (Verification) system.

   The Authority did not use the Verification system to verify the status of eligible
   noncitizens as required. This problem was particularly significant for the
   Authority because it is located near the United States border with Mexico and
   may have a higher than average number of eligible noncitizen applicants.
   Authority staff stated that access to this system was interrupted in January or
   February 2007 and that, thereafter, they ceased verifying the immigration status of
   program applicants. Public Housing indicated that access to the Verification
   system for all housing authorities was interrupted for an extended period.
   However, Public Housing did not provide adequate guidance to housing
   authorities under its jurisdiction to address problems, which may have
   discouraged housing authorities from using the primary immigration status
   verification tool prescribed by HUD. As a result, the Authority and, apparently,
   other housing authorities did not properly establish the eligibility of program
   applicants that claimed to have an eligible immigration status. Public Housing
   managers indicated that they did not receive guidance from HUD headquarters
   regarding procedures for addressing housing authorities’ problems with the
   Verification system.



                                    7
Public Housing Failed to Note That the Authority Lacked a System to Ensure
Correction of Deficiencies Found during Public Housing Inspections

   In accordance with HUD requirements, the Authority must inspect each Public
   Housing unit annually and ensure that necessary repairs are completed.

   The Authority did not follow up to ensure that a work order was created for public
   housing inspection findings that were not considered an emergency. Authority
   staff stated that a repair work order was only created if the tenant called the
   Authority office to report the problem. Authority staff also noted that in some
   cases, tenants did not call the Authority and the needed repairs were not
   performed.

   Public Housing’s 2007 limited management review found the Authority did not
   have proper written policies for its maintenance operations, yet the review did not
   address the Authority’s failure to implement procedures to ensure work orders
   were created for needed repairs identified during Public Housing inspections.
   Public Housing closed its finding regarding the Authority’s maintenance policy
   and did not require the Authority to change its procedures for creating work
   orders.

Public Housing’s Monitoring Did Not Disclose the Authority’s Failure to Maintain
Adequate Controls (Separation of Duties) over Rental Receipts

   Federal regulations require that housing authorities establish adequate internal
   controls for cash, real and personal property, and other assets. Such controls
   generally include adequate separation of duties, supervision of employees, and
   review of critical documents.

   The Authority did not have internal controls over rental payments received from
   public housing program tenants. Payments from public housing tenants were
   received, recorded, and deposited by the same individual. Further, the Authority
   did not perform supervisory oversight or testing of the rental receipts process to
   ensure that all payments were properly recorded and deposited. However, our
   audit did not include testing of public housing rental receipts; therefore, we did
   not identify related improper transactions.

   Public Housing’s 2007 limited management review found that the Authority’s
   financial management policies were not in compliance with HUD requirements.
   In response, the authority submitted revised internal control procedures for cash
   management/internal controls including a rent collection policy. However, the
   Authority’s revised policies did not include adequate control procedures over
   rental receipts.




                                    8
Public Housing’s Follow-
up Did Not Always Ensure
That Corrective Actions
Were Implemented

    Public Housing’s follow-up process did not ensure that corrective actions were
    implemented to address some of the problems found during its monitoring reviews
    performed during 2006 through 2008. For example,

           The 2006 Section 8 assessment review did not require the Authority to submit a
           corrective action plan. Public Housing did not follow up to ensure that corrective
           actions were implemented to address the Authority’s Section 8 assessment
           troubled status.

           The 2007 Section 8 assessment confirmatory and limited management reviews
           found that deficiencies at the Authority continued. Public Housing required the
           Authority to submit a corrective action plan as a result of these reviews, and the
           Authority implemented procedures to address some of the problems. However,
           Public Housing closed out its findings despite some remaining uncorrected issues.

           The 2008 technical assistance visits and Section 8 assessment confirmatory
           review failed to identify problems that persisted at the Authority and failed to
           ensure that previously required corrective actions were implemented.

Problems Persisted at the
Authority after Public
Housing’s Monitoring
Reviews

    Specifically, Public Housing identified the following issues through its oversight of the
    Authority yet our audit, which included some of the same files reviewed by Public
    Housing officials, determined that corrective actions were not effectively implemented.

        The Authority Routinely Accepted Pay Stubs and Self-Certifications as Verification
        of Tenant Income and Did Not Sufficiently Document Efforts to Obtain Third-Party
        Verification

           HUD regulations require that housing authorities establish procedures to verify
           that income data used for tenant eligibility reviews are complete and accurate.
           The procedures should include obtaining and documenting third-party verification
           of a tenant’s reported family income or an explanation for why third-party
           verification was not available.

           The Authority routinely used documents provided by tenants such as pay stubs
           and written statements in lieu of third-party verification without providing a
           sufficient explanation and documentation as required. Authority staff indicated
                                             9
   that between 50 and 60 percent of mailed tenant employment verifications were
   not returned. The unreturned verification could have been an indication that the
   employment information provided by the tenant was not valid.

   Public Housing failed to follow up to ensure that this deficiency was corrected.
   Its 2006 review did not include a corrective action plan to address this deficiency.
   Its monitoring reviews performed in 2007 resulted in a corrective action plan that
   required the Authority to resolve this problem; however, notes from Public
   Housing’s technical assistance visit performed in May 2008 indicated that the
   problem was still unresolved. This review found that in two of the five tenant
   files reviewed, the Authority relied upon income information provided by the
   tenant rather than a third party as required. Our review of these same files found
   that they also did not contain a justification for the lack of third-party verification.
   Further, in 2008 Public Housing’s Section 8 assessment confirmatory review
   included a review of the same two sample files noted above, yet the review failed
   to identify the lack of third-party verification and resulted in no corrective actions.

The Authority Did Not Ensure That Section 8 Leases Met HUD Requirements

   In accordance with HUD regulations, housing authorities must ensure that all
   leases under the Section 8 program include HUD’s prescribed tenancy addendum
   (addendum). The addendum sets forth the tenancy requirements for the program
   and the composition of the household as approved by the housing authority. The
   owner must sign the lease and addendum with the prospective tenant, and the
   tenant has the right to enforce the addendum against the owner. The terms of the
   addendum prevail over other provisions of the lease. Housing authorities are
   required to maintain a copy of the lease, including the addendum, for at least three
   years after the lease term.

   The Authority did not ensure that the addendum was included in Section 8
   program leases as required. Authority staff stated that they were not aware that
   the addendum was required to be included as part of the lease and did not enforce
   this requirement.

   Public Housing’s 2007 monitoring review found that the Authority failed to
   include HUD’s tenancy addendum as part of Section 8 program leases. This
   review resulted in a corrective action plan that required the Authority to begin
   enforcing the addendum requirement. Public Housing closed its finding in this
   area but our review determined that the Authority had not implemented
   procedures to correct the problem. Further, Public Housing officials stated that
   they did not enforce the tenancy addendum or lease documentation requirements
   for housing authorities within their jurisdiction because they were not aware that
   housing authorities were required to maintain a copy of Section 8 program leases.




                                     10
Authority Records Failed to Document That Emergency Inspection Issues Were
Corrected within 24 Hours for Section 8 Units

   HUD requires housing authorities to inspect each assisted unit before the initial
   term of the lease, at least annually, and at other times as needed to determine
   whether the unit meets HUD’s housing quality standards. The Authority must not
   make housing assistance payments for units that fail to meet housing quality
   standards unless the owner corrects the defect within the period specified by the
   housing authority and the housing authority verifies the correction. If a defect is
   life threatening, the owner must correct it within 24 hours.

   The Authority did not have procedures to clearly identify and track emergency
   repair items to ensure that owners completed repairs within 24 hours as required.
   Notification letters used by the Authority to communicate needed repair items to
   the unit owner did not indicate which items, if any, were considered emergency
   items that required correction within 24 hours.

   Public Housing’s 2007 Section 8 assessment confirmatory review identified this
   issue as a problem and included a corrective action plan requiring the Authority to
   implement a tracking log to document life-threatening inspection items and
   repairs. Public Housing closed out the finding yet failed to ensure that the
   corrective action was implemented. Public Housing’s monitoring performed in
   2008 failed to determine whether the Authority tracked emergency repair items or
   had a consistent process for ensuring that these items were resolved within 24
   hours.

The Authority Did Not Have Adequate Supervisory Oversight of the Tenant File
Review Process

   In accordance with its annual contributions contract with HUD and associated
   requirements for the administration of federal awards, the Authority is required to
   implement adequate management controls to ensure that it properly administers
   its rental assistance programs. This requirement includes ensuring that tenant
   files are processed in accordance with HUD requirements.

   The Authority management’s quality control reviews of Section 8 and public
   housing tenant file processing were performed infrequently and were not
   effective. The Authority’s management oversight of its staff was limited to the
   few Section 8 assessment program file reviews that were performed. For
   example, no Section 8 program quality control reviews were performed during the
   period February 2007 through July 2007. Also, no reviews were performed from
   March 2008 through at least September 2008. With regard to public housing
   tenant files, the executive director stated that he had only reviewed approximately
   eight files during the prior year and had no documentation to support these
   reviews. The executive director noted that he had not had time to focus on

                                    11
   reviewing the files and that he needed additional training on how to perform the
   reviews.

   The infrequently performed supervisory reviews were also not effective. We
   reviewed the Authority’s most recent nine Section 8 assessment tenant file quality
   control reviews and a nonstatistical random sample of 12 tenant files (including
   five Section 8 files and seven public housing program files). We identified
   processing errors in each of these files that were not identified through the
   Authority’s quality control reviews. This result indicated that additional
   supervisory oversight was necessary at the Authority to ensure that tenant file
   reviews are performed in accordance with HUD requirements. Based upon our
   review of the 14 Section 8 tenant files at the Authority, we identified unsupported
   or ineligible housing assistance payments totaling $98,170. See appendix C for a
   schedule of these deficiencies.

   Although Public Housing identified problems with the Authority’s oversight of
   tenant file reviews, it did not adequately follow up to ensure the deficiency was
   corrected. Specifically, Public Housing’s 2006 review did not include a
   corrective action plan to address this deficiency. Public Housing’s 2007
   monitoring reviews resulted in corrective action items that required the Authority
   to implement quality control procedures for tenant file reviews including the
   establishment of supervisory oversight and documentation for Section 8
   assessment reviews performed. However, Public Housing’s 2008 Section 8
   assessment review failed to identify and/or properly address significant tenant file
   review errors that we found, including: lack of third-party verification, incorrect
   tenant income and rent calculations, missing HUD tenancy addendums, ineligible
   units used to determine rent reasonableness, and other issues. These issues should
   have been identified and should have alerted Public Housing staff that (1)
   corrective actions required as part of the prior year monitoring were not properly
   implemented and (2) the Authority did not have effective supervisory oversight
   and quality control regarding tenant file processing.

The Authority Used HUD Funds for Questionable Employee Pension Fund Expenses

   Public Housing was aware of questionable payments made by the Authority in
   2005 to the City of Nogales pension fund yet failed to ensure that the issue was
   resolved. According to the Authority’s executive director, the former Public
   Housing program center coordinator notified the Authority that HUD attorneys
   were considering the matter, but the Authority did not receive further
   communication. Public Housing staff stated that they were aware of the
   questionable payments but had not addressed the matter because it was considered
   outside the scope of their recent monitoring reviews.

   The questionable pension payments occurred after the City of Nogales took over
   the Authority. From 1968 to 1995, the Authority did not have a pension plan for
   its employees. From 1995 through 2001, before the City took over the Authority,
                                    12
            the Authority had its own pension plan. Under this plan, Authority employees
            received less than employees covered by the City of Nogales pension plan. In
            2001, the City of Nogales assumed control over the Authority, and all Authority
            employees became employees of the City. In 2005, after requests were made by
            at least one Authority employee, the City determined that it would use HUD
            program funds to retroactively “buy in” authority employees to the City’s pension
            plan from the employee’s initial hire date with the Authority (including periods in
            which the Authority had its own pension plan and periods in which it had no
            pension plan). The total amount paid on behalf of the eight involved employees
            was $171,601.

            Although, in general, pension expenses are allowable, the payments in this case
            were made retroactively (back to 1968) based upon newly established policies.
            Therefore, the eligibility of these payments was questionable, and Public Housing
            should have addressed the issue.

Public Housing’s Monitoring
and Follow-up Procedures
Were Not Adequate

     The problems at the Authority continued despite HUD’s monitoring efforts because
     Public Housing’s procedures for performing its monitoring reviews and follow-ups did
     not always apply the correct program standards and were insufficiently thorough to (1)
     ensure that deficiencies at the Authority were identified and corrected and (2) determine
     whether the problems found were isolated incidents or systemic deficiencies. For
     example, the Public Housing management and staff misapplied HUD’s standards when
     they did not require housing authorities to maintain a copy of Section 8 leases and did not
     require the HUD prescribed tenancy addendum to be incorporated into the lease as long
     as it is included as part of the housing assistance payment contract. This practice was not
     consistent with HUD’s regulations which require that housing authorities’ maintain a
     copy of the lease and ensure that the HUD prescribed addendum is included. Similarly,
     Public Housing’s standards for housing authorities’ verification of tenant income allowed
     for routine acceptance of tenant provided documents without documentation showing
     third party verification was not available. This practice was not consistent with the
     standards prescribed within HUD’s regulations, HUD’s program guidance on this matter,
     or the Authority’s own Section 8 administrative plan.

     Public Housing’s 2008 Section 8 assessment confirmatory review included an
     examination of Section 8 tenant files, yet these reviews were not thorough enough to
     identify the significant file processing errors that were found during our audit. Further,
     the tenant file reviews performed during the technical assistance visits and Section 8
     assessment confirmatory reviews only included files that the Authority had previously
     selected and reviewed. Accordingly, these files may not have been an accurate
     representation of the Authority’s tenant file review process.

                                              13
   Public Housing’s technical assistance visit performed in May 2008 included a review of
   five sample tenant files and disclosed at least one instance in which the Authority did not
   properly verify tenant income and an instance in which the Authority did not ensure that
   inspection issues were properly resolved. Also Public Housing’s Section 8 assessment
   confirmatory review identified an emergency repair item that was not completed within
   24 hours as required and was not identified as an emergency item on the associated letter
   sent to the landlord. These problems were similar to those identified during prior
   monitoring reviews, yet Public Housing did not expand its 2008 review to assess the
   extent of these problems or determine whether there was a continuing (systemic) problem
   with the Authority’s process for performing income verifications and resolving
   emergency repair items. Finally, Public Housing did not address the cause of the
   Authority’s tenant file review errors, which included inadequate training and
   inexperience of the Authority’s supervisory reviewer who performed the quality control
   reviews.


Conclusion


   Public Housing’s procedures for monitoring housing authorities needs improvement. It
   failed to issue a report of its 2006 monitoring review findings and did not enforce timely
   corrective actions as a result of this review. Accordingly, problems persisted, and Public
   Housing’s 2007 monitoring efforts identified significant deficiencies at the Authority.
   However, Public Housing did not ensure that corrective actions were implemented in
   response to some of its findings. The monitoring and assistance efforts performed in
   2008 also did not identify and/or properly address deficiencies that persisted at the
   Authority. As a result, problems at the Authority continued for years without being
   corrected, and the Authority incurred unsupported and ineligible housing assistance
   payments. This condition occurred because Public Housing did not always apply the
   correct program standards and its procedures for performing monitoring and follow-up
   were not thorough enough to ensure that problems were identified and appropriate
   corrective actions were implemented.


Recommendations


   We recommend that the Director of the Los Angeles Office of Public Housing require the
   Phoenix Office of Public Housing to

      1A. Implement procedures to ensure that monitoring findings are fully resolved and
          corrective actions are implemented. These procedures should include an
          assessment of the housing authority’s capacity to implement its planned
          corrective actions.



                                           14
   1B. Implement procedures to ensure that housing authorities within its jurisdiction
       document their review of criminal and prior eviction history checks.

   1C. Begin enforcing HUD’s requirement for immigration status verifications and
       provide guidance to housing authorities regarding proper procedures for
       performing such verification when the U. S. Department of Homeland
       Security’s Verification system is not available. This process should include
       procedures for verifying the status of all eligible noncitizens that may not have
       been properly verified in the past due to complications with the Verification
       system.

   1D. Implement procedures to enforce HUD’s tenancy addendum requirement for
       Section 8 unit leases.

   1E. Determine the eligibility of the Authority’s questionable pension plan costs
       totaling $171,601 and require the Authority to reimburse HUD for these costs if
       appropriate.

We also recommend that the Director of the Los Angeles Office of Public Housing
require the Phoenix Office of Public Housing to require the Authority to

   1F.   Establish and implement procedures to ensure correction of deficiencies found
         during public housing inspections.

   1G. Establish and implement internal controls over rental payments received from
       public housing program tenants.

   1H. Support or reimburse HUD for ineligible housing assistance payments totaling
       $4,592.

   1I.   Support or reimburse HUD for unsupported housing assistance payments
         totaling $93,578.

   1J.   Establish and implement procedures for the Section 8 program to clearly
         identify and track emergency repair items to ensure that they are corrected
         within 24 hours as required.

   1K. Establish and implement adequate controls and procedures to ensure that tenant
       eligibility and assistance payment amounts are properly determined. This
       process should include additional training for Authority staff and supervisors
       that perform quality control reviews as well as procedures for routine
       supervisory oversight of staff that perform tenant file reviews.




                                       15
                        SCOPE AND METHODOLOGY

We performed our audit work at the Authority offices in Nogales, Arizona, and Public Housing
from August 2008 through May 2009. The audit generally covered the period from July 2006
through June 2008. To accomplish our audit objective, we

           Reviewed HUD regulations, notices, and handbooks and the Code of Federal
           Regulations;
           Interviewed appropriate HUD officials from Public Housing;
           Interviewed Authority personnel including Section 8 and public housing program
           administration staff;
           Reviewed records maintained by HUD pertaining to the Authority including recent
           monitoring review reports;
           Reviewed the Authority’s single audit reports for the fiscal years 2006 and 2007;
           Reviewed the Authority’s annual plan; and
           Reviewed the Authority’s most recent nine Section 8 assessment tenant file quality
           control reviews and a nonstatistical random sample of 12 tenant files (including five
           Section 8 files and seven public housing program files)

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 objectives are achieved:

       Effectiveness and efficiency of operations,
       Reliability of financial reporting, and
       Compliance with applicable laws and regulations.

Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. 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:

              Administration of the Section 8 and public housing programs’ oversight and
               monitoring including controls to ensure that housing authorities comply with
               HUD’s program requirements.

       We assessed the relevant controls identified above.

       A significant weakness exists if internal controls do not provide reasonable assurance that
       the process for planning, organizing, directing, and controlling program operations will meet
       the organization’s objectives.



 Significant Weaknesses

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

              Public Housing’s monitoring process did not always identify and/or properly
              address problems at the Authority.




                                                17
                                   APPENDIXES

Appendix A

                 SCHEDULE OF QUESTIONED COSTS

                 Recommendation          Ineligible 1/     Unsupported
                     number                                    2/
                        1E                $171,601
                        1H                  $4,592
                        1I                                    $93,578


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.




                                             18
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1


Comment 2




Comment 3




                         19
Comment 4




Comment 5




            20
Comment 6




Comment 7




            21
Comment 8




Comment 9




            22
Comment 10




Comment 11




             23
24
                                  OIG Evaluation of Auditee Comments

Comment 1          HUD’s Los Angeles Office of Public Housing HUD stated the audit report
                   erroneously “cited” The Phoenix Office of Public Housing (Public Housing) for
                   “not reviewing public housing tenant files”.

                   We agree that Public Housing may not have performed any review of the
                   Authority’s public housing tenant files; however, the audit report did not cite this
                   as a specific deficiency. The audit found that Public Housing did not always
                   identify and/or properly address significant deficiencies at the Authority and
                   attributed this deficiency in part to Public Housing’s failure to determine whether
                   the problems it did find were isolated incidents or systemic deficiencies. In fact,
                   many of the issues the audit identified with the Authority’s Section 8 Program--
                   such as failure to properly perform and document income verification efforts,
                   failure to obtain verifications from the U.S. Department of Homeland Security’s
                   SAVE1 system, and failure to document reviews of criminal background checks--
                   apply to both the Section 8 and Public Housing programs. Moreover, the policies
                   that the Authority applied were similar for both programs. If Public Housing had
                   properly addressed the problems identified as systemic process issues at the
                   Authority, the problems should have been corrected for both programs. We
                   further note that the same individual at the Authority oversaw both programs and
                   the procedures being applied were nearly identical.

Comment 2 HUD’s response stated that the discrepancies it identified as part of its 2006
          review were issued as part of the Limited Management Review performed in
          2007.

                   HUD’s response confirms that Public Housing did not issue a report regarding
                   problems that existed at the time of the 2006 review until after a subsequent
                   review was performed the following year which found that problems had not been
                   corrected. Public Housing’s 2006 Section 8 assessment review was performed
                   July 24-27, 2006 and no related findings were issued to the Authority until
                   September 14, 2007, over one year later. Thus, Public Housing was aware of
                   significant problems at the Authority at the time of its monitoring in 2006 and
                   should have followed up to ensure timely corrective actions were implemented.
                   HUD’s response indicated it was acceptable to wait for over a year to enforce a
                   corrective action plan. This approach underscores our conclusion that
                   improvements are needed to ensure that Public Housing’s monitoring findings are
                   fully resolved and corrective actions are implemented in a timely manner.

Comment 3          HUD’s response noted that Public Housing’s reviews resulted in some findings
                   and that a corrective action plan was required as part of its 2007 review. HUD
                   stated that Public Housing also considered the deficiencies identified during the
                   2007 review during the technical assistance visits performed in 2008. HUD also

1
    Systemic Alien Verification for Entitlements (SAVE) system
                                                        25
            noted that some findings from the Limited Management Review have not been
            closed.

            As noted in the audit report, Public Housing’s monitoring process, including its
            technical assistance visits performed in 2008, did not ensure that previously
            identified deficiencies were corrected. The specific deficiencies are outlined
            within the audit report.

            HUD’s response noted that findings from its 2007 review remain open and, at the
            exit conference meeting with OIG in May 2009, Public Housing also indicated
            that the finding regarding the Authority’s process for determining adjusted tenant
            income was among the findings that remained open. The fact that findings from
            Public Housing’s 2007 review related to the Authority’s procedures for
            determining tenant income (a cornerstone of the public housing program’s
            integrity) remained unresolved over two years after the review was performed
            (and over a year since the last technical assistance visit was performed) reinforces
            our conclusion that improvements are needed to ensure that Public Housing’s
            monitoring findings are fully resolved and corrective actions are implemented in a
            timely manner. Furthermore, although HUD did not provide any detail on why
            the findings remain open, we question whether Public Housing was actively
            addressing the corrective actions at the time of our audit. For example, at the time
            we met with HUD for an entrance conference on August 28, 2008, Public
            Housing management and staff indicated that there were no open findings other
            than issues related to obtaining copies of Board meeting minutes and an updated
            procurement policy. Also, at that time, the Authority itself stated it was only
            aware of these two remaining open findings. Accordingly, the Authority was
            apparently unaware of any open findings regarding its process for determining
            tenant income, and was not actively addressing its performance in this area.

Comment 4   HUD’s response indicated the Authority’s procedures for criminal background
            checks are deemed sufficient. HUD noted that the Authority uses the Lindsey
            software system to run the criminal background reports and this system generates
            a list of inquiries “which is provided upon request”.

            We disagree. During the audit, OIG requested that the Authority provide
            documentation to support the performance of criminal background checks and the
            Authority indicated they did not have anything to support this. Also, as noted in
            the audit report, 19 of the 21 files reviewed by OIG did not contain records that
            supported the performance of background checks. Without documentation to
            support the Authority’s review of criminal background reports, any management
            or audit review could not determine whether appropriate Authority staff reviewed
            the report and found that the results were acceptable prior to entering into the
            housing assistance contract.




                                             26
Comment 5          HUD stated the Authority is unable to access the SAVE system, and therefore
                   Public Housing has instructed the Authority to maintain copies of the immigration
                   documents provided by the prospective tenant. HUD also stated “the NHA
                   [Authority] has continually attempted to obtain access to the SAVE system…”.

                   As noted in the audit report, Public Housing did not properly address the
                   Authority’s failure to use this system to verify the documents submitted by the
                   prospective tenant. According to Authority staff, they had not used SAVE to
                   verify immigration status as required since February 2007 (over two years ago).
                   While HUD’s response claims the Authority has continually attempted to obtain
                   access to the SAVE system, our review did not support this assertion. For
                   example, when asked about what action had been taken to address the lack of
                   access to the SAVE system, Authority staff indicated only that they attempted to
                   call the SAVE system administrator yet found they had an incorrect telephone
                   number. Furthermore, according to discussions with officials at the Department
                   of Homeland Security (Homeland Security) which operates the SAVE system,
                   there have been no prolonged system outages and access problems for individual
                   users can usually be resolved within a few days. Also Homeland Security
                   officials indicated that users could perform immigration status verifications using
                   a manual form if access to the automated system is interrupted. Finally, officials
                   at one other housing authority within the Phoenix Field Office jurisdiction stated
                   that they have had no problems accessing the SAVE system.

                   HUD’s response states Public Housing advised the NHA to “maintain copies of
                   required immigration status documentation in the files”. We agree that the PHA
                   must require persons claiming eligible immigration status to present appropriate
                   immigration documents; however, the PHA is also required to verify this
                   documentation through the Department of Homeland Security. As stated in the
                   Housing Choice Voucher Guidebook “The PHA must conduct primary
                   verification of eligible immigration status through the INS automated system2,
                   Systematic Alien Verification for Entitlements (SAVE). The audit found the
                   Authority did not perform this verification which is required in addition to
                   obtaining immigration documentation from the prospective tenant.

                   Public Housing should begin enforcing HUD’s requirement for immigration
                   status verifications and provide guidance to housing authorities regarding proper
                   procedures for performing such verification if they cannot access the SAVE
                   system.




2
    The SAVE system is now administered by the Department of Homeland Security
                                                      27
Comment 6   HUD stated the housing assistance payment contract includes a certification by
            the owner that the lease will contain the tenancy addendum and noted that the
            housing assistance contract includes the tenancy addendum. HUD also stated its
            2007 review included a finding that the Authority’s leases lacked the tenancy
            addendum provisions.

            HUD’s response reinforces the fact that Public Housing did not always apply the
            correct standards when performing reviews and that it did not ensure some of its
            monitoring review findings were corrected. Public Housing’s 2007 review cited
            the Authority’s failure to include the tenancy addendum as part of its Section 8
            leases, yet HUD’s response now asserts that it need not enforce this requirement
            because the “owner’s certification” in the housing assistance payment contract
            states the addendum will be included in the lease. In fact, Public Housing staff
            indicated that landlords were generally not using the Addendum, so in effect,
            HUD’s position is that a certification it knows to be false is sufficient to satisfy
            the regulatory requirement that the lease contain the addendum.

            As noted in the audit report HUD did not require the Authority to implement
            corrective actions to address this deficiency that was noted as part of its 2007
            review. HUD’s response cited requirements for the housing assistance payment
            contract yet failed to acknowledge the following specific regulatory requirements
            for Section 8 leases which clearly require that housing authorities (PHAs) ensure
            the tenancy addendum is included in both the housing assistance payment (HAP)
            contract and the lease.
                      24 CFR 982.162 requires that “the PHA must use program contracts and
                      other forms required by HUD headquarters, including …the tenancy
                      addendum required by HUD (which is included both in the HAP
                      contract and in the lease between the owner and the tenant)”.
                      24 CFR 982.305 (a)(3) requires that “the PHA may not give approval for
                      the family of the assisted tenancy, or execute a HAP contract, until the
                      PHA has determined that …the lease includes the tenancy addendum.”

            During recent discussions with OIG, Public Housing staff acknowledged the
            tenancy addendum requirements were not being enforced and stated they were
            unable to enforce these requirements for Section 8 leases because there was no
            regulatory requirement that PHA’s maintain a copy of the lease. This is incorrect.
            24 CFR 982.158 requires that during the term of each assisted lease, and for at
            least three years thereafter, the PHA must keep a copy of the executed lease.

            HUD should implement procedures to enforce HUD’s existing tenancy addendum
            requirement for Section 8 unit leases.




                                             28
Comment 7   HUD’s response states it will request a legal opinion to address the Authority’s
            questionable pension fund expenses.

            HUD’s response indicates agreement with OIG’s recommendation to determine
            the eligibility of these costs. We will concur with this proposed management
            decision once an acceptable target date has been established.

Comment 8   HUD’s response states the Authority’s procedures for inspections included
            procedures to generate work orders after inspections and that Public Housing
            found the Authority’s procedures acceptable.

            At the time of OIG’s audit, Authority staff stated the Authority did not follow up
            to ensure that a work order was created for public housing inspection findings that
            were not considered an emergency. Authority staff stated that a repair work order
            was only created for these items if the tenant called the Authority office to report
            the problem. Authority staff further explained that in some cases, tenants did not
            call the Authority and the needed repairs were not performed. Also Authority
            staff stated some tenants complained to the authority and questioned why the
            inspections were even completed since the related repairs were not performed.

            Public Housing’s 2007 limited management review found the Authority did not
            have proper written policies for its maintenance operations, yet the review did not
            address the Authority’s failure to implement procedures to ensure work orders
            were created for needed repairs identified during Public Housing inspections.
            Public Housing closed its finding regarding the Authority’s maintenance policy
            and did not require the Authority to implement appropriate procedures for
            creating work orders based upon inspection results.

            HUD’s response states Public Housing’s review performed in April 2009 found
            this deficiency has been corrected at the Authority. Accordingly, Public Housing
            can provide support for the corrective action as part of the Management Decision
            for Recommendation 1F.

Comment 9   HUD’s response asserts that it was not responsible for discovering the Authority’s
            failure to implement controls over rental receipts because it did not conduct a
            “Financial Review” until after OIG’s audit in May 2009. HUD’s response also
            appears to indicate the Authority’s supervisory oversight of the rental receipt
            process will be addressed as a deficiency in Public Housing’s report for its May
            2009 review.

            As noted in the audit report, at the time of our audit Public Housing had not
            identified this issue during its oversight of the Authority. This is a very basic yet
            significant control that could have been addressed by reviewing the Authority’s
            policy for rental receipts and internal controls or by asking the Authority what
            their procedures for rent collections were. In fact, the letter Public Housing sent
            to the Authority in preparation for the 2007 management review documents that
                                              29
             Public Housing requested “Cash management/internal control policy/procedures”
             indicating this area was, or was intended to be, a part of the management review.
             Also, Public Housing’s report for the 2007 management review found “the NHAs
             financial management Policies are not in compliance with current HUD
             regulations or requirements”. The Authority provided revised cash management,
             internal control and rent collection policies to Public Housing in response to the
             2007 review. The revised policies did not include procedures for proper
             separation of duties, yet this deficiency was not addressed.

             HUD should require the Authority to establish and implement proper internal
             controls over the rental payments it receives from public housing program tenants.

Comment 10 HUD’s response states Public Housing recently reviewed some Authority files (in
           April 2009) and found the Authority was “in compliance” with requirements for
           emergency repairs. HUD’s response also notes that Public Housing’s review of
           emergency repair procedures only covered indicator 6 (HQS enforcement) of the
           SEMAP self assessment.

             As stated in the audit report, Public Housing’s 2007 SEMAP review identified
             this issue as a problem for Section 8 inspections. Public Housings review
             included a corrective action requiring the Authority to “develop a tracking system
             log that documents 24 hour life-threatening repairs…”. Public Housing closed
             out this finding but did not ensure that the corrective action was fully
             implemented. For example, Public Housing’s monitoring performed in 2008
             evaluated this area again and included a review of the letters used by the
             Authority to support its enforcement of housing quality standards. However, the
             review did not determine whether the Authority properly tracked emergency
             repair items or had a consistent process for ensuring that these items were
             resolved within 24 hours. As stated in the audit report, notification letters used by
             the Authority to communicate needed repair items to the unit owner (and to
             support the Authority’s enforcement of Section 8 housing quality standards), did
             not indicate which items, if any, were considered emergency items that required
             correction within 24 hours.

             HUD should require the Authority to establish and implement procedures to
             clearly identify and track emergency repair items to ensure that they are corrected
             within 24 hours as required.

Comment 11 HUD’s response indicates it has reviewed the Authority’s procedures for
           verifying tenant income and that the Audit report recommendation to implement
           adequate controls and procedures over tenant eligibility and HAP amount
           determinations is not needed.

             HUD’s response further demonstrates the point made in the audit report that
             Public Housing did not apply the correct standards when performing its reviews.
             Public Housing’s continued failure to recognize deficient income verification
                                              30
practices represents a significant internal control weakness within the Department
that could result in substantial program abuse if not corrected immediately. For
example, at the Authority, we found 10 of the 21 sample files reviewed during the
audit did not contain proper income verification documentation. Nevertheless,
Public Housing has not required effective corrective action and further has opined
that the audit report recommendation to correct the Authority’s procedures is not
necessary. HUD’s response refers to verification methods which can be used if
third party verification is not available yet fails to acknowledge HUD’s
requirement that the Authority document why third party verification was not
available. Public Housing was allowing the Authority to use tenant provided
documents without any requirement that the Authority properly document why it
was necessary to use these less reliable forms of verification. This practice is not
in compliance with HUD’s program requirements and guidance on this matter
which are very clear. For example,

       24 CFR 982.516(a) requires that PHAs must document within the Section
       8 tenant file third-party verification or why third-party verification was not
       available.

       24 CFR 960.259 requires that PHAs must obtain and document third party
       verification of factors affecting the determination of adjusted income for
       Public Housing applicants including reported family income, or must
       document in the file why third party verification was not available.

       These regulatory requirements are explained further in Public Housing
       Notice 2004-01 which was issued after it was found substantial number of
       housing assistance program participants were not accurately reporting
       their income. It states “PHAs should begin with the highest level of
       verification methods. The use of lower level verification methods will
       place a higher burden on the PHA to justify its use of that particular
       verification method rather than a higher level of verification methods.”
       This notice provides specific examples of proper and improper procedures
       for documenting the unavailability of third party verification. The
       example of improper documentation was precisely consistent with the
       procedures in place at the Authority, while the example of proper
       documentation specified the following information should be documented:
       a detailed account of when third party verification attempts were made,
       where requests were sent, what type of verification was requested, who the
       Authority staff spoke to, and what the contacted party said. Without such
       documentation Authority supervisors, HUD, the OIG or any other party
       reviewing the Authority’s compliance can have no assurance that third
       party verification was pursued as required.

       The requirements for third party verification are also explained in Section
       5-6 of HUD’s Housing Choice Voucher Guidebook which indicates
       proper verification of income and other factors is intended to be a through
                                 31
       attempt to verify the information taking “a significant amount of time and
       attention”. The guidebook further states “When the preferred verification
       form is not successful and staff resort to the second or third alternative,
       staff must record in the tenant file efforts to obtain preferred forms of
       verification and the reason an alternative method was used.” The
       Guidebook also states, “if third party verification is not received in a
       timely fashion, the PHA should choose an acceptable alternate form of
       verification and document the effort made by the PHA to obtain third
       party verification.”

       The requirements for third party verification are also explained within the
       Authority’s PHA plan with which it is required to comply under its
       Annual Contributions Contract with HUD. Section 7-6 of the Authority’s
       PHA plan states “the NHA will make a minimum of two attempts, one of
       which may be oral, to obtain third-party verification. A record of each
       attempt to contact the third-party source (including no-answer calls) and
       all contacts with the source will be documented in the file.” Regarding
       third-party oral verification the plan states “NHA staff will record in the
       family’s file the name and title of the person contacted, the date and time
       of the conversation (or attempt), the telephone number used, and the facts
       provided.

As noted in the audit report, the Authority routinely used documents provided by
tenants such as pay stubs and written statements in lieu of third-party verification
without providing a sufficient explanation and documentation as required. Public
Housing failed to follow up to ensure that this deficiency was corrected.

HUD’s response notes that housing authorities can now use the Enterprise Income
Verification system (EIV) in lieu of traditional third party verification. We note
that EIV is not currently available for tenants entering the program for the first
time and in these cases, traditional third party verification will still be required.
Also, the 10 files reviewed by OIG that were found to lack proper income
verification documentation did not contain EIV verification documentation.

HUD should require the Authority to establish and implement adequate controls
and procedures to ensure that tenant eligibility and assistance payment amounts
are properly determined. Additionally, Public Housing should implement
procedures to ensure that corrective actions are implemented for all housing
authorities that fail to document efforts to obtain third party verification and why
such efforts were unsuccessful.




                                 32
Appendix C

       SCHEDULE OF DEFICIENCIES FOUND IN 21 FILES

Section 8 tenant files (14)
                                        Total
Sample       Ineligible   Unsupported   Assistance
Number        Amount        Amount      Payments     Findings               Finding Notes
                                                                 (findings applicable to review
   1     $                $     3,133   $    3,133     A, H      effective July 18, 2008).
                                                                 Used paystubs as verification of
                                                                 income without explanation of why
                                                                 third- party verification could not
                                                                 be obtained (findings applicable to
   2     $                $    12,431   $   12,431   A, D, H     review effective April 1, 2008).
                                                                 (findings applicable to review
   3     $                $     7,528   $    7,528     A, H      effective July 1, 2008).
                                                                 Claimed "full time student"
                                                                 dependant without supporting
                                                                 documentation (findings applicable
                                                                 to review effective July 1, 2007 &
   4     $                $     3,480   $    3,480    A, H, I    July 1, 2008).
                                                                 Income not verified, missing release
                                                                 of information, no lease (findings
                                                                 applicable to review effective March
   5     $                $    17,157   $   17,157   D, H, M     1, 2008).
                                                                 Rent amount incorrect on HAP
                                                                 contract, incorrect utility allowance,
                                                     A, B, E,    (findings applicable to review
   6     $        1,104   $     3,526   $    4,630      H        effective December 3, 2007).
                                                                 No third-party verification for
                                                                 income (child support) (findings
                                                                 applicable to reviews effective
                                                                 August 27, November 1, and
   7     $                $    10,658   $   10,658   A, D, H     December 1, 2007).
                                                                 No third-party verification for
                                                                 income, incorrect utility allowance,
                                                                 missing statement of non-
                                                     A,D, E, H   contention (findings applicable to
   8     $                $     1,189   $    1,189     J, N      review effective January 7, 2008).
                                                                 Income not verified, no
                                                                 documentation of Verification
                                                     A, D, H,    system report, (findings applicable
   9     $                $     4,368   $    4,368      L        to review effective March 1, 2008).
                                                     A, E, H,    Incorrect utility allowance, no Rent
  10     $                $     5,776   $    5,776    O, P       Reasonableness Certificate, no re-
                                            33
                                                                               inspection on “Failed” inspection.
                                                                               (findings applicable to review
                                                                               effective March 1, 2008)
                                                                               Incorrect income calculation,
                                                                               Income not verified (findings
                                                                   A, C, D,    applicable to review effective
    11         $      1,364    $         5,020    $      6,384        H        November 2, 2007).
                                                                               No documentation of Verification
                                                                               system report, (findings applicable
                                                                   A, H, L,    to review effective February 13,
    12         $               $       11,858     $     11,858        N,       2008).
                                                                               No documentation of Verification
                                                                               system report, income not verified,
                                                                   A, D, L,    (findings applicable to review
    13         $               $         3,174    $      3,174        N        effective November 2, 2007).
                                                                               Incorrect income calculated
                                                                   A, C, H,    (findings applicable to review
    14         $      2,124    $         4,280    $      6,404        N        effective March 1, 2008).
  Total        $ 4,592 $ 93,578 $98,170

* HAP = housing assistance payment
** 50058 = Form HUD 50058, a module of the Public and Indian Housing Information Center system that collects,
stores, and generates reports on families who participate in public housing or Section 8 rental subsidy programs




                                                       34
Public housing tenant files (seven)
Sample
number    Findings                                Finding notes
                       No background check documentation, missing 2008 annual
                       recertification and inspection, missing statement of
                       noncontention, no asset verification (tenant shows as joint owner
                       of property) (findings applicable to review effective August 1,
   1      A, F, J, K   2007).
                       No background check documentation (findings applicable to
   2          A        review effective June 26, 2008).
                       No third-party verification of income or child support, missing
                       statement of noncontention (findings applicable to review
   3         D, J      effective April 14, 2008).
                       No background check documentation, incorrect income
                       calculation, no third-party verification of income (5/1/08 only),
                       missing inspection report (4/1/07 only) (findings applicable to
   4       A, C, D     review effective March 1, 2007, April 1, 2007, and May 1, 2008).
                       No background check documentation, missing statement of
                       noncontention (findings applicable to reviews effective May 1,
   5         A, J      2007, and June 1, 2008).
                       No background check documentation, no documentation of
                       Verification system report, no third-party verification of income
   6        A, D, L    (findings applicable to review effective July 25, 2008).
                       No background check documentation, no documentation of
                       Verification system report (findings applicable to review effective
   7         A, L      August 10, 2007).


                          Legend                          S8       PH
A - No Background or eviction verification performed      13        6
B – Incorrect rent amount                                  1        0
C – Incorrect income calculation                           2        1
D – Income not properly verified                           7        3
E – Incorrect utility allowance                            3        0
F – No recertification documentation                       0        1
G – No issues noted                                        0        0
H – No lease and/or tenancy addendum                      13        0
I – No exemption documentation                             1        0
J – No noncontention statement                             1        3
K – No asset verification                                  0        1
L – No Systematic Alien Verification for Entitlement
Report (SAVE)                                              3        2
M – Missing release of information form                    1        0
N – HAP & Lease dates do not run concurrently              4        0
0 – No Rent Reasonableness                                 1        0
P – No re-inspection on “Failed” Inspection                1        0




                                                    35
Appendix D

                                          CRITERIA


24 CFR (Code of Federal Regulations) 982.516(a): The authority must conduct a reexamination
of family income and composition at least annually and document in the tenant file third-party
verification or why third-party verification was not available.

24 CFR 5.240(c): The responsible entity must verify the accuracy of the income information
received from the family and change the amount of the total tenant payment as appropriate,
based on such information.

24 CFR 982.158(a): 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.

24 CFR 982.308(b)(2): The Section 8 lease must include HUD’s prescribed tenancy addendum.

24 CFR 982.158(e)(1): Housing Authorities must maintain a copy of the executed lease for
Section 8 units during the term of the lease and for at least 3 years thereafter.

24 CFR 982.553: The Authority is required to deny eligibility for three years (from the date of
eviction) if a household member had been evicted from federally assisted housing for drug-
related criminal activity. Eligibility must also be denied to those with a lifetime registration
requirement under a state sex offender registration program.

The Authority’s administrative plan includes eligibility criteria related to tenants’ criminal
history that could prohibit a potential tenant’s eligibility for participation in the program.




                                                 36