Issue Date
October 17, 2008
Audit Report Number
2009-LA-1001
TO: Stephen Schneller, Director, Office of Public and Indian Housing, Region IX,
9APH
FROM: Joan S. Hobbs, Regional Inspector General for Audit, Region IX, 9DGA
SUBJECT: The Housing Authority of the County of Marin, San Rafael, California, Did Not
Correctly Calculate Tenant Rents in the Public Housing Program
HIGHLIGHTS
What We Audited and Why
We audited the Housing Authority of the County of Marin’s (Authority) Section 8 funds
transfer and public housing program (program) tenant rent calculations. We initiated this
review because of issues identified during a recent U.S. Department of Housing and
Urban Development (HUD), Office of Inspector General (OIG), review of a hotline
complaint. Our objectives were to determine (1) whether the transfer of Section 8
operating reserve funds to the public housing program in fiscal year 2006 was made in
compliance with HUD regulations and (2) whether the Authority calculated public
housing tenant rents in accordance with HUD requirements.
What We Found
The Authority’s transfer of Section 8 operating reserve funds to the public housing
program in fiscal year 2006 was made using pre-2004 funds. Therefore, the transfer was
made in compliance with HUD regulations.
The Authority’s program administration regarding tenant rent calculation was inadequate.
The Authority incorrectly calculated tenant payments. Of the 71 files reviewed, the
Authority incorrectly calculated tenant rents for 35 (49 percent) of the households.
From January through December 2007, it overcharged program residents $3,811 and
undercharged program residents $25,638 in tenant rents.
What We Recommend
We recommend that the Director of HUD’s San Francisco Office of Public and Indian
Housing require the Authority to reimburse its program residents $3,811 for overcharged
tenant rents, establish and implement procedures and controls to ensure that tenant rents
are calculated in accordance with HUD requirements, and provide appropriate training to
Authority staff to ensure that they understand how to calculate tenant rents correctly.
These procedures and controls should help prevent tenant rent miscalculations in the
future.
For each recommendation without a management decision, please respond and provide
status reports in accordance with HUD Handbook 2000.06, REV-3. Please furnish us
copies of any correspondence or directives issued because of the audit.
Auditee’s Response
We provided the Authority a discussion draft report on September 26, 2008, and held an
exit conference with the Authority’s officials on October 2, 2008. The Authority
provided written comments on October 14, 2008, and generally agreed with our findings.
The complete text of the auditee’s response, along with our evaluation of that response,
can be found in appendix B of this report.
2
TABLE OF CONTENTS
Background and Objectives 4
Results of Audit
Finding 1: Public Housing Tenant Rent Calculations Were Not Accurate 5
Scope and Methodology 9
Internal Controls 10
Appendixes
A. Schedule of Funds to Be Put to Better Use 12
B. Auditee Comments and OIG’s Evaluation 13
C. Criteria 15
D. Tenant Rent Calculation Errors 19
3
BACKGROUND AND OBJECTIVES
The Housing Authority of the County of Marin (Authority) was established by the Marin County
Board of Supervisors in January 1942 under state enabling legislation to provide decent, safe,
and sanitary housing for low- and moderate-income people. The Authority is governed by a
seven-member board of commissioners, of which five members are also members of the Marin
County Board of Supervisors and the remaining two members are tenant commissioners
appointed by the Board of Supervisors.
The Authority administers a low-rent public housing program (program) and a Section 8
Housing Choice Voucher program, both funded by the U.S. Department of Housing and Urban
Development (HUD). The Authority owns and operates one housing project with 294 units for
families and five housing projects with 200 units, collectively, for the elderly and disabled.
Our objectives were to determine (1) whether the transfer of Section 8 operating reserve funds to
the public housing program in fiscal year 2006 was made in compliance with HUD regulations
and (2) whether the Authority calculated public housing tenant rents in accordance with HUD
requirements.
4
RESULTS OF AUDIT
Finding 1: Public Housing Tenant Rent Calculations Were Not Accurate
The Authority did not always compute public housing tenant rents accurately. It incorrectly
calculated public housing tenant rents because it lacked adequate procedures and controls to
ensure the Authority followed HUD regulations and its Admissions and Continued Occupancy
Policy. In addition, the staff did not have the proper tenant rent calculation training. As a result,
it overcharged program residents $3,811 and undercharged program residents $25,638 in tenant
rents.
The Authority Miscalculated
Public Housing Tenant Rents
From the Authority’s 517 active program households during any part of our audit period
from January 1 through December 31, 2007, we randomly selected 71 tenant files by
using data mining software. We reviewed the documentation in the tenant files to
determine whether the Authority accurately calculated tenant rents for the period January
1 through December 31, 2007. Our review included examining the information
maintained by the Authority in its tenant files and conducting third-party income
verification when necessary. Although HUD’s regulations at 24 CFR [Code of Federal
Regulations] 5.240(c) require public housing agencies to verify the accuracy of the
income information received from program households and change the amount of tenant
rent or terminate assistance, as appropriate, this was not always done accurately or
consistently.
The Authority’s miscalculations resulted in overcharges of $3,811 and undercharges of
$25,638 in tenant rents. The Authority incorrectly calculated tenant rents for 35 (49
percent) households in one or more of the move-in, annual, or interim certifications. The
35 files contained the following errors:
35 had annual income calculation errors for one or more certifications,
20 had inadequate verifications of annual income for one or more certifications,
19 had verification documents older than 90 days or 120 days for move-in
certifications and annual recertifications, respectively,
15 had unverified or incorrect allowances for annual income for one or more
certifications,
5
Six had unreported income by the tenant that went undetected for one or more
certifications,
Five had reported changes in income or family composition but no corresponding
interim recertifications,
One had an incorrect flat rent that was lower than the income-based rent and the
unit’s flat rent,
One had no supporting documentation for one certification, and
One had a household member who was also a public housing resident at another
public housing agency.
Details of the errors found for each of our sample items are found in appendix D. The
following are examples of the types of errors found:
The Authority miscalculated the annual income for one household in all four
certifications during the 12-month audit period. In one certification, for instance,
the Authority miscalculated annual income by taking the year-to-date wages that
covered more than six months and multiplying by two. As a result, it
overestimated annual income and overcharged the tenant $175 per month. In
another certification, the Authority miscalculated annual income by using an
outdated Social Security benefit amount, not counting Supplemental Security
Income, and underestimating employment income. Consequently, it
undercharged the tenant $353 per month.
The Authority miscalculated the annual income for another tenant by giving the
elderly/disabled allowance and medical allowance when the tenant was ineligible.
The Authority also did not detect the unreported employment income when
HUD’s Enterprise Income Verification system and the third-party verification
showed that the employment had started since the previous certification. These
errors resulted in an undercharge of $2,031 in tenant rent during the 12-month
audit period.
6
The Authority Did Not Have
Adequate Procedures and
Controls and Employee’s Did
Not Have Proper Training
The Authority lacked adequate procedures and controls to ensure that it appropriately
followed HUD’s regulations and its Admissions and Continued Occupancy Policy.
Although the program managers approved each certification, our interview with the
program managers revealed that their quality control review process was not sufficient to
ensure that the tenant rents were calculated in accordance with HUD requirements and
the Authority’s policies. For instance, the program managers relied on the program
applicants to report their income at admission because the Authority did not have a
procedure for requesting information from the State Employment Development
Department to detect unreported income when applicants were admitted to the program.
The weakness regarding incorrect calculations occurred because the Authority’s housing
eligibility workers and program managers did not receive the proper training for
calculating program tenant rents.
Conclusion
The Authority lacked assurance that tenant rents were properly determined for its
program residents since it overcharged $3,811 and undercharged $25,638 in tenant rents.
The Authority could have put these funds to better use if proper procedures and controls
were in place to ensure the accuracy of tenant rent calculations.
7
Recommendations
We recommend that the Director of HUD’s San Francisco Office of Public and Indian
Housing require the Authority to
1A. Reimburse the tenants $3,811 from non-current year operating funds for
the overcharged tenant rents cited in this finding.
1B. Establish and implement adequate procedures and controls to ensure that
its tenant rent calculations comply with HUD’s regulations and its
Admissions and Continued Occupancy Policy.
1C. Provide appropriate training to its housing eligibility workers and program
managers to ensure that they understand how to calculate program tenant
rents correctly.
We also recommend that HUD’s San Francisco Office of Public and Indian Housing
1D. Perform a review of the Authority’s tenant files within six months after the
issuance of this audit report to ensure that tenant rents are calculated in
accordance with HUD requirements and the Authority’s Admissions and
Continued Occupancy Policy.
8
SCOPE AND METHODOLOGY
We performed our on-site audit work at the Authority, located in San Rafael, California, from
February through July 2008. Our audit generally covered the Section 8 operating reserve funds
transfer that occurred in the Authority’s fiscal year 2006 and the public housing tenant rent
calculations that affected the period January 1 through December 31, 2007. We expanded our
scope when necessary. Our objectives were to determine (1) whether the transfer of Section 8
operating reserve funds to the public housing program in fiscal year 2006 was made in
compliance with HUD regulations and (2) whether the Authority calculated public housing
tenant rents in accordance with HUD requirements.
To accomplish our objectives, we
Reviewed applicable laws; regulations; HUD program requirements at 24 CFR
[Code of Federal Regulations] Parts 5, 960, and 982; HUD’s Public and Indian
Housing Notices 2004-7, 2005-1, 2006-3, 2006-5, 2007-14, and 2008-15; and
HUD’s Public Housing Occupancy Guidebook.
Reviewed the Authority’s Admissions and Continued Occupancy Policy, accounting
records, program rent roll for 2007, and tenant files.
Interviewed the Authority’s employees and HUD staff.
Conducted employment verifications with employers.
Assessed the reliability of the data from the Authority’s public housing management
information system to ensure that the data were sufficiently reliable to use as a basis
for our audit conclusions.
Randomly sampled public housing tenant files to determine whether the Authority
had controls in place to ensure that tenant rents were calculated in accordance with
HUD requirements.
We performed our audit in accordance with generally accepted government auditing standards.
9
INTERNAL CONTROLS
Internal control is an integral component of an organization’s management that provides
reasonable assurance that the following objectives are being achieved:
Effectiveness and efficiency of operations,
Reliability of financial reporting,
Compliance with applicable laws and regulations, and
Safeguarding resources.
Internal controls relate to management’s plans, methods, and procedures used to meet its
mission, goals, and objectives. Internal controls include the processes and procedures for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance.
Relevant Internal Controls
We determined the following internal controls were relevant to our objectives:
Policies and procedures that management has implemented to reasonably
ensure that household incomes and allowances are verified to determine
program tenant rents.
Policies and procedures that management has implemented to reasonably
ensure that program tenant rents are calculated in accordance with applicable
laws and regulations.
We assessed the relevant controls identified above.
A significant weakness exists if management controls do not provide reasonable
assurance that the process for planning, organizing, directing, and controlling program
operations will meet the organization’s objectives.
10
Significant Weaknesses
Based on our review, we believe the following item is a significant weakness:
The Authority lacked adequate procedures and controls to ensure compliance
with HUD’s requirements and/or its Admissions and Continued Occupancy
Policy regarding verification of income and allowances and calculation of
program tenant rents (see finding 1).
11
APPENDIXES
Appendix A
SCHEDULE OF FUNDS TO BE PUT TO BETTER USE
Recommendation number Funds to be put to better use 1/
1A $3,811
1/ Recommendations that funds be put to better use are estimates of amounts that could be
used more efficiently if an Office of Inspector General (OIG) recommendation is
implemented. This includes reductions in outlays, deobligation of funds, withdrawal of
interest subsidy costs not incurred by implementing recommended improvements,
avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
which are specifically identified. In this instance, if the Authority implements our
recommendations it will cease overcharging and undercharging program residents for
rent.
12
Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1
13
OIG Evaluation of Auditee Comments
Comment 1 The title of the report has been reworded. The change is reflected in the final
audit report.
14
Appendix C
CRITERIA
HUD’s regulations at 24 CFR [Code of Federal Regulations] 5.240(c) state that the public
housing agency must verify the accuracy of the income information received from the family and
change the amount of the total tenant payment, tenant rent…or terminate assistance, as
appropriate, based on such information.
HUD’s regulations at 24 CFR 960.257(a) provide that for families who pay an income-based
rent, the public housing agency must conduct a reexamination of family income and composition
at least annually and must make appropriate adjustments in the rent after consultation with the
family and upon verification of the information.
HUD’s regulations at 24 CFR 960.257(b) state that a family may request an interim
reexamination of family income or composition because of any changes since the last
determination. The public housing agency must make the interim reexamination within a
reasonable time after the family request. The public housing agency must adopt policies
prescribing when and under what conditions the family must report a change in family income
and composition.
HUD’s regulations at 24 CFR 960.257(c) require the public housing agency to adopt admission
and occupancy policies concerning conduct of annual and interim reexaminations in accordance
with this section and shall conduct reexaminations in accordance with such policies.
HUD’s regulations at 24 CFR 960.259(c)(1) require the public housing agency to obtain and
document in the family file third-party verification of the following factors, or must document in
the file why third-party verification was not available: (1) reported family annual income, (2) the
value of assets, (3) expenses related to deductions from annual income, and (4) other factors that
affect the determination of adjusted income or income-based rent.
HUD’s Public Housing Occupancy Guidebook
Chapter 1.2 requires public housing agencies to verify that an applicant qualifies as a
person with a disability before permitting the applicant to move into housing designated
for persons with disabilities or granting the $400 rent calculation deduction, disability
expense allowance, or deduction for unreimbursed medical expenses.
Chapter 10.1 states that annual income includes all amounts, monetary and nonmonetary,
that go to or on behalf of the family head or spouse or to any other family member or are
anticipated to be received from a source outside the family in the 12 months following
admission or the effective date of the annual reexamination. Annual income includes
amounts derived from assets to which any member of the family has access that are not
specifically excluded by federal regulations.
15
Chapter 12.5 states that when families report zero income and have no income excluded
for rent computation, public housing agencies have an obligation to pursue verification of
income that reflects the family’s lifestyle. One method is to examine the family’s
circumstances every 60 to 90 days until the family has a stable income.
The Authority’s Admissions and Continued Occupancy Policy
Pages 6-1 through 6-4 state that if neither the third-party verification nor the third-party
oral verification is available or the information has not been verified by a third party
within 15 business days of the initial request, the Authority must note in the file the
attempts to obtain the third-party verification from the source provider. The Authority
can then use documents provided by the family as the primary source if the documents
provide complete information. The policy specifies that for applicants, verifications may
not be more than 90 days old at the time of a unit offer. For tenants, verifications are
valid for 120 days from the date of receipt.
Pages 6-1 through 6-4 and page 6-7 require the Authority to verify employment income
by obtaining six to eight consecutive paycheck stubs or earning statements or not less
than three months of stubs.
Pages 6-10 through 6-11 stipulate that when a family claims to have little (less than
$3,600 per year) or no income over a substantial period, the Authority must determine the
source of income when the family’s regular expenses conflict with their claim of zero
income. If the resident has a car, a telephone, cable television, or Internet services;
smokes; or has other evidence of some form of income, the resident should be asked
about the source of income supporting cash expenditures when zero income is reported.
Families claiming to have no income will be required to execute verification forms to
determine that forms of income, such as unemployment benefits, Aid to Families with
Dependent Children, Supplemental Security Income, etc., are not being received by the
household. The Authority will request information from the State Employment
Development Department. The family is required to complete a monthly declaration of
zero income. The family is required to complete a quarterly interim recertification, and
the Authority can visit the unit to determine the likelihood of the zero income report.
Pages 6-19 through 6-21 specify that the medical expense deduction is permitted only for
households in which the head or spouse is at least 62 years of age or disabled (elderly or
disabled households).
Page 6-24 requires that verification of disability be receipt of Supplemental Security
Income or Social Security Administration disability payments…or verified by an
appropriate diagnostician such as physician, psychiatrist, psychologist, therapist,
16
rehabilitation specialist, or licensed social worker, using HUD language as the
verification format.
Pages 10-1 through 10-5, Verification of Information, state: “All information, which
affects the family’s continued eligibility for the program, and the family’s Total Tenant
Payment (TTP) will be verified in accordance with the verification procedures and
guidelines described in this Policy. Verifications used for recertification must be less
than 90 days old. All verifications will be placed in the file that has been established for
the family.”
Pages 10-9 through 10-10 state:
Standard for Timely Report of Changes
The Authority requires that families report interim changes to the Authority within 10
days of when the change occurs. Any information, document, or signature needed from
the family to verify the change must be provided within 10 days of the change.
If the change is not reported within the required time period, or if the family fails to
provide signatures, certifications, or documentation (in the time period requested by the
Authority), it will be considered untimely reporting.
Procedures When the Change Is Reported in a Timely Manner
Tenant’s rent is payable in advance and due on the first of each month. Any decrease in
income that affects the tenant’s rental portion must be of a 30-day duration before the
tenant is eligible to request a rental adjustment. Any changes in income that result in a
decrease will be effective the month following the end of that 30-day waiting period.
The Authority will notify the family of any changes in tenant rent to be effective
according to the following guidelines:
Increases in the Tenant Rent are effective on the first of the month following at least 30
days’ notice.
Decreases in the Tenant Rent are effective the first of the month following the month in
which the change is reported, as long as the change was reported prior to the 25th of that
month and is of at least 30-days duration.
Procedure When the Change Is Not Reported by the Tenant in a Timely Manner
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 it would have been
effective had it been reported on a timely basis. The family will be liable for any
underpaid rent and may be required to sign a Repayment Agreement or make a lump sum
payment.
17
Decrease in Tenant Rent will be effective on the first of the month following completion
of processing by the Authority and not retroactively.
Procedures When the Change Is Not Processed by the Authority in a Timely Manner
If the Authority is the cause of delaying the change in a resident’s rent and that change
would have resulted in a decrease in rent, the Authority will credit the resident’s rent. If
the change would have resulted in an increase in the resident’s rent, the Authority will
make the increase effective 30 days following notice to the resident of the increase.
18
Appendix D
TENANT RENT CALCULATION ERRORS
Error type
Outdated verification
Tenant in two public
housing households
Unreported income
Income verification
Recertification not
Incorrect flat rent
Annual income
No support for
recertification
not detected
documents
verification
calculation
processed
Allowance
Tenant rent Tenant rent
Sample # overcharge undercharge
2 $0 ($92) x
4 0 (582) x x x x
5 0 (225) x x
9 0 (2,031) x x x x x
13 264 0 x x x
16 242 0 x
24 768 0 x x x x
25 0 (15) x x
28 0 (55) x x x x
32 0 (300) x x x
35 243 0 x x
36 9 0 x x
37 0 (56) x x
39 0 (8) x
40 0 (522) x x x
43 0 (2,050) x x
47 0 (297) x x
48 0 (2,139) x x
49 881 0 x
50 0 (1,669) x x x x x
53 0 (690) x x x
54 0 (1,006) x x x
55 0 (800) x x
58 126 0 x x
59 0 (1,427) x x x x
60 0 (31) x x x
63 0 (816) x x x
64 0 (330) x x x x x
65 0 (864) x x
84 1,269 0 x x x x x x
90 0 (3,544) x x x x
97 0 (6,070) x x x x x
103* 0 0 x x x
105 9 0 x
110 0 (1) x x
111 0 (18) x x x x
Totals $3,811 ($25,638) 35 20 19 15 6 5 1 1 1
19
* We were unable to calculate an accurate total tenant payment to determine the tenant rent
overcharge/undercharge for this household because the Authority refused to process the tenant’s
interim recertification requests, which resulted in the lack of income verification to determine the
correct annual income.
20
The Housing Authority of the County of Marin, San Rafael, CA, Did not Correctly Calculate Renant Rents in the Public Housing Program
Published by the Department of Housing and Urban Development, Office of Inspector General on 2008-10-17.
Below is a raw (and likely hideous) rendition of the original report. (PDF)