Issue Date July 10, 2009 Audit Report Number 2009-PH-1009 TO: William D. Tamburrino, Director, Baltimore Public Housing Program Hub, 3BPH FROM: John P. Buck, Regional Inspector General for Audit, Philadelphia Region, 3AGA SUBJECT: The Richmond Redevelopment and Housing Authority, Richmond, Virginia, Did Not Adequately Administer Its Housing Assistance Payments for Its Section 8 Housing Choice Voucher Program HIGHLIGHTS What We Audited and Why We audited the Richmond Redevelopment and Housing Authority’s (Authority) administration of its housing assistance payments for its Section 8 Housing Choice Voucher program as part of our fiscal year 2009 audit plan. This is the last of three reports to be issued on the Authority’s program. The audit objective addressed in this report was to determine whether the Authority adequately maintained documentation to support housing assistance payments and accurately calculated them. What We Found The Authority did not properly maintain documentation to support housing assistance payments and did not always accurately calculate housing assistance payments for its Section 8 Housing Choice Voucher program. We identified deficiencies in 29 of the 31 files reviewed. The Authority did not maintain complete documents required by the U.S. Department of Housing and Urban Development (HUD) and its own administrative plan, resulting in unsupported housing assistance payments of $70,248. It also inaccurately calculated housing assistance payments, resulting in $18,559 in overpayments and $5,452 in underpayments. What We Recommend We recommend that the Director of HUD’s Office of Public Housing, Baltimore hub, require the Authority to correct the errors in the tenant files identified by the audit, provide documentation to support housing assistance payments totaling $70,248 or reimburse its program for the payments that it cannot support, reimburse its leased housing program $18,559 for the housing assistance and utility allowance overpayments, and reimburse applicable tenants $5,452 for the housing assistance and utility allowance underpayments. 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 the audit results with the Authority throughout the audit and at an exit conference on June 19, 2009. The Authority provided written comments to the report on June 29, 2009. The Authority generally agreed with the report. The complete text of the Authority’s response, along with our evaluation of that response, can be found in appendix B of this report. 2 TABLE OF CONTENTS Background and Objective 4 Results of Audit Finding: The Authority Did Not Adequately Administer Its Section 8 Housing 5 Assistance Payments in Accordance with HUD Requirements Scope and Methodology 9 Internal Controls 10 Appendixes A. Schedule of Questioned Costs and Funds to Be Put to Better Use 12 B. Auditee Comments and OIG’s Evaluation 13 C. Results of Tenant File Reviews 19 D. Housing Assistance Payment Errors 20 3 BACKGROUND AND OBJECTIVE The Richmond Redevelopment and Housing Authority (Authority) was established in 1940 to provide and preserve quality affordable housing and promote self-sufficiency, homeownership, and independence for all housing residents. A seven-member board of commissioners governs the Authority. The Authority’s current chief executive officer is Anthony Scott. Its main administrative office is located at 901 Chamberlayne Parkway in Richmond, Virginia. Under the Section 8 Housing Choice Voucher program, the Authority makes rental assistance payments to landlords on behalf of eligible low-income families. The U.S. Department of Housing and Urban Development (HUD) compensates the Authority for the cost of administering the program through administrative fees. HUD authorized the Authority to provide leased housing assistance payments for 3,191 eligible households. HUD authorized the Authority the following financial assistance for housing choice vouchers: Amount Authority fiscal year Annual budget authority disbursed 2007 $18,991,134 $18,991,134 2008 $16,637,641 $16,637,641 Total $35,628,775 $35,628,775 The audit objective was to determine whether the Authority properly maintained documentation to support housing assistance payments and accurately calculated them. 4 RESULTS OF AUDIT Finding: The Authority Did Not Adequately Administer Its Section 8 Housing Assistance Payments in Accordance with HUD Requirements The Authority did not properly maintain documentation to support housing assistance payments and did not always accurately calculate housing assistance payments in compliance with HUD requirements. This condition occurred because the Authority experienced high staff turnover and did not perform required quality control reviews to ensure that it followed HUD requirements. As a result, it was unable to support $70,248 in housing assistance payments and improperly overpaid $18,559 and underpaid $5,452 in housing assistance and utility allowances. The Authority Lacked Proper Documentation in Its Tenant Files and $70,248 in Payments Were Unsupported The Authority lacked proper documentation to support housing assistance payments totaling $70,248 for the period September 2006 through August 2008. Our review of 31 tenant files showed that 29 files had at least one of the following deficiencies: 15 files did not contain evidence that recertifications were completed on time; Five files did not contain evidence of proper selection from the waiting list; Four files did not have proper income verification; Three files did not have a completed citizenship declaration form (HUD Form 214) for the occupants; Three files did not have an Authorization for the Release of Information/Privacy Act Notice (HUD Form 9886); Three files did not have evidence of a rent reasonableness review; Two files did not have a completed request for tenancy approval; Two files did not contain documentation to verify the name, sex, date of birth, disability, and relationship to the head of household; 5 One file did not contain a zero-income certification; One file did not contain a lead-based paint certification; One file was not provided for review; and One file did not contain Social Security documentation. The files reviewed did not include complete documentation required by HUD and were not consistent with HUD requirements and the Authority’s administrative plan. Although the majority of the deficiencies were in essence documentation issues, there were instances in which the lack of documentation was material and resulted in the Authority’s making unsupported housing assistance payments of $70,248. We conservatively determined that the Authority made unsupported payments of $26,840 for three files for which a rent reasonableness review was not performed, $22,523 for five files for which an annual recertification was not performed, $11,000 for one file that the Authority did not provide to us, and $9,885 for one file for which the Authority did not obtain the Social Security documentation. Appendix C of this report shows the detailed results of our tenant file reviews. The Authority Incorrectly Calculated Housing Assistance Payments The Authority incorrectly calculated housing assistance, resulting in overpayments of $18,559 and underpayments of $5,452 for the period September 2006 through August 2008. To determine whether the Authority correctly calculated the housing assistance, we reviewed 73 annual reexaminations from 31 tenant files. The Authority incorrectly calculated housing assistance payments in 19 of the 31 files reviewed. The Authority made these errors because it did not Properly calculate income, payment standards, and deductions (11 files); Properly calculate the utility allowance for one or more certifications (five files); and Properly calculate deductions from the annual income (three files). 6 Appendix D of this report shows the housing assistance and utility allowance payment errors that resulted from the Authority’s incorrect calculations. The Authority Experienced High Staff Turnover and Lacked Adequate Procedures and Controls The Authority’s high turnover of staff and lack of quality control procedures contributed significantly to the errors found in nearly every file. The Authority Experienced High Staff Turnover The Authority experienced a significant turnover of personnel from September 2006 to March 2009. Specifically, the Authority lost 11 employees including nine housing specialists and two housing supervisors. Thus, reexaminations were not completed annually as required by HUD and the Authority’s administrative plan. The Authority has taken action to help alleviate this problem by hiring a contractor to assist it in performing the outstanding reexaminations. The Authority Did Not Perform Required Quality Control Reviews of Its Staff or Contractor The Authority did not perform quality control reviews as required by HUD and its administrative plan. Its administrative plan states that an Authority supervisor or a qualified person other than the person who performed the work will perform supervisory quality control reviews. For fiscal year 2008, the Authority completed only 15 of 36 required quality control reviews. Further, the administrative plan states that before initial certification and at the completion of all reexaminations, the Authority should perform quality control file reviews of 50 percent of all files to detect program abuse and fraud. The program manager stated that the reviews had not been performed because she did not have enough staff and the Authority was concentrating on completing the reexaminations. Conclusion The Authority did not adequately administer its leased housing assistance program. As a result, it disbursed $70,248 in housing assistance payments without proper documentation and incorrectly calculated housing assistance payments, resulting in $18,559 in overpayments and $5,452 in underpayments. The Authority needs to implement adequate controls and procedures to improve its administration of the program and ensure that it complies with HUD requirements and its administrative plan. 7 Recommendations We recommend that the Director of HUD’s Office of Public Housing, Baltimore hub, require the Authority to 1A. Correct the errors in the tenant files identified by the audit. 1B. Provide documentation to support housing assistance payments totaling $70,248 or reimburse its program from nonfederal funds for the payments it cannot support. 1C. Reimburse its program $18,559 from nonfederal funds for the overpayment of housing assistance and utility allowances. 1D. Reimburse the applicable tenants $5,452 for the underpayment of housing assistance and utility allowances. 1E. Perform and document quality control reviews as required by its administrative plan. 1F. Develop and implement procedures to ensure that housing assistance payments are correctly calculated and supported with the required documentation. 8 SCOPE AND METHODOLOGY To accomplish our objective, we reviewed Applicable laws; regulations; the Authority’s administrative plan, effective July 1, 2005; HUD’s program requirements at 24 CFR [Code of Federal Regulations] Parts 5, 35, and 982; HUD’s Public and Indian Housing Notices 2004-01 and 2004-18; and HUD’s Housing Choice Voucher Guidebook 7420.10G. The Authority’s accounting records, annual audited financial statements for 2005 through 2007, tenant files, computerized databases including housing assistance payment register and HUD-50058 (Family Report) data, policies and procedures, board meeting minutes from September 2005 to May 2007, organizational chart, and program annual contributions contract. HUD’s monitoring reports for the Authority. We also interviewed the Authority’s employees and HUD staff. To achieve our audit objective, we relied in part on computer-processed data in the Authority’s database. Although we did not perform a detailed assessment of the reliability of the data, we did perform a minimal level of testing and found the data to be adequate for our purposes. We statistically selected 82 of the tenants who received housing assistance payments during our audit period using a variable statistical sampling method developed by our computer audit specialist. The sampling criteria used a variable sampling methodology with a 90 percent confidence level and 10 percent precision. Our universe included 2,840 families that received more than $29 million in housing assistance payments. We only reviewed 31 of the 82 tenants because of time constraints and the recurring errors found in 29 of the 31 files reviewed. We performed our on-site audit work from October 2008 through April 2009 at the Authority’s Section 8 office located at 918 Chamberlayne Parkway, Richmond, Virginia. The audit covered the period September 2006 through August 2008 but was expanded when necessary to include other periods. We conducted the audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objective. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective. 9 INTERNAL CONTROLS Internal control is an integral component of an organization’s management that provides reasonable assurance that the following controls are achieved: Program operations, Relevance and reliability of information, Compliance with applicable laws and regulations, and Safeguarding of assets and resources. Internal controls relate to management’s plans, methods, and procedures used to meet its mission, goals, and objectives. They include the processes and procedures for planning, organizing, directing, and controlling program operations as well as the systems for measuring, reporting, and monitoring program performance. Relevant Internal Controls We determined that the following internal controls were relevant to our audit objective: Program operations – Policies and procedures that management has implemented to reasonably ensure that a program meets its objectives. Validity and reliability of data – Policies and procedures that management has implemented to reasonably ensure that valid and reliable data are obtained, maintained, and fairly disclosed in reports. Compliance with laws and regulations – Policies and procedures that management has implemented to reasonably ensure that resource use is consistent with laws and regulations. We assessed the relevant controls identified above. A significant weakness exists if management controls do not provide reasonable assurance that the process for planning, organizing, directing, and controlling program operations will meet the organization’s objectives. Significant Weakness Based on our review, we believe that the following item is a significant weakness: 10 The Authority did not establish and implement adequate controls to ensure that housing assistance payments were accurate and properly supported. 11 APPENDIXES Appendix A SCHEDULE OF QUESTIONED COSTS AND FUNDS TO BE PUT TO BETTER USE Recommendation Funds to be put number Ineligible 1/ Unsupported 2/ to better use 3/ 1B $70,248 1C $18,559 1D $5,452 1/ Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity that the auditor believes are not allowable by law; contract; or federal, state, or local policies or regulations. 2/ Unsupported costs are those costs charged to a HUD-financed or HUD-insured program or activity when we cannot determine eligibility at the time of the audit. Unsupported costs require a decision by HUD program officials. This decision, in addition to obtaining supporting documentation, might involve a legal interpretation or clarification of departmental policies and procedures. 3/ Recommendations that funds be put to better use are estimates of amounts that could be used more efficiently if an Office of Inspector General (OIG) recommendation is implemented. These amounts include reductions in outlays, deobligation of funds, withdrawal of interest, costs not incurred by implementing recommended improvements, avoidance of unnecessary expenditures noted in preaward reviews, and any other savings that are specifically identified. The funds to be put to better use in this report represent funds that tenants overpaid due to the Authority’s calculation errors. 12 Appendix B AUDITEE COMMENTS AND OIG’S EVALUATION Ref to OIG Evaluation Auditee Comments 13 Comment 1 14 Comment 2 Comment 3 15 Comment 4 16 Comment 5 Comment 6 17 OIG Evaluation of Auditee Comments Comment 1 We reviewed the additional documentation the Authority provided after the exit conference and made revisions to the audit report as appropriate. Comment 2 Based on an updated housing assistance payment register and other documentation the Authority provided after the exit conference, we updated the report to show the unsupported amount as $444. Comment 3 The documentation provided does show that the recertifications were performed; however the documentation provided does not provide evidence indicating that the tenant was properly selected from the waiting lists, nor verify the Social Security numbers for the household. Code of Federal Regulations 982.204 states that tenants must be selected from the waiting list and Code of Federal Regulations 982.551 also states that tenants must provide documentation to verify Social Security numbers. Comment 4 For recertifications 2006 through 2008, the child support income was not always annualized as suggested by the Authority. Thus, the income used in determining the housing assistance payments was incorrect which resulted in an overstatement of housing assistance payments. Furthermore, the documentation provided did not provide evidence supporting that a rent reasonableness review was performed as required. Comment 5 According to Code of Federal Regulations 982, annual income is all amounts anticipated to be received during a 12-month period. The documentation provided by the Authority indicates the tenant would be receiving unemployment for a maximum benefit period of 18 weeks. Thus, the Authority should not have annualized the income. Comment 6 We did not take exception with the housing assistance payments due to errors. However, the tenant file reviewed did not provide evidence of a rent reasonableness review. The additional documentation provided by the Authority does not provide evidence to support that a rent reasonableness review was performed as required by HUD regulations. 18 9 8 7 6 5 4 3 2 1 31 30 29 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 Tenant Totals 1 X Authority did not provide file Recertification not completed X X X X X X X X X X X X X X X 14 on time Appendix C 5 X X X X X Recertification not performed Lead-based paint certificate 1 X not present Incorrect housing assistance X X X X X X X X X X X X X X X X X X X 19 payments No evidence of proper selection 5 X X X X X from the waiting list Missing rent reasonableness 3 X X X review 4 X X X X Improper income verification Missing Authorization for 19 3 X X X Release of Information/Privacy Act Notice - HUD 9886 Missing citizenship declaration 3 X X X - Form 214 Missing Social Security 1 X documentation Missing documentation (birth certificate) to verify the name, 2 X X sex, date of birth, disability, and relationship to the head of RESULTS OF TENANT FILE REVIEWS household Missing request for Tenancy 2 X X Approval - HUD 52517 Missing zero-income 1 X certification Unsupported housing assistance $70,248 $10,098 $5,122 $1,896 $11,000 $9,354 $5,707 $9,885 $12,867 $3,875 $444 Appendix D HOUSING ASSISTANCE PAYMENT ERRORS Housing Housing Utility Utility Total Total assistance assistance allowance allowance underpay- overpay- underpay- overpay- underpay- overpay- Tenant ments ments ments ments ments ments 2 $365 $365 4 $309 $309 7 $172 $172 8 $550 $550 9 $201 $201 11 $373 $373 13 $2,686 $2,686 14 $725 $725 15 $1,852 $1,852 16 $427 $198 $625 18 $5,718 $5,718 19 $305 $305 20 $4,632 $4,632 22 $132 $132 24 $81 $81 26 $639 $1,776 $460 $1,776 $1,099 27 $396 $396 28 $726 $726 31 $1,288 $1,288 Totals $3,478 $18,099 $1,974 $460 $5,452 $18,559 To avoid double counting, we did not report questioned costs as both ineligible payments and unsupported costs. 20
The Richmond Redevelopment & Housing Authority, Richmond, Virginia, Did Not Adequately Administer Its Housing Assistance Payments for Its Section 8 Housing Choice Voucher Program
Published by the Department of Housing and Urban Development, Office of Inspector General on 2009-07-10.
Below is a raw (and likely hideous) rendition of the original report. (PDF)