oversight

Housing Authority of the City of Terre Haute, IN, Did Not Materially Operate Its Programs According to HUD's Requirements and Did Not Effectively Operate Its Section 8 Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-09-29.

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

                                                                 Issue Date
                                                                         September 29, 2010
                                                                  
                                                                 Audit Report Number
                                                                         2010-CH-1013




TO:         Shawn Sweet, Director of Public Housing Hub, 5DPH
            Craig T. Clemmensen, Director of Departmental Enforcement Center, CACB


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

SUBJECT: Housing Authority of the City of Terre Haute, IN, Did Not Materially Operate
           Its Programs According to HUD’s Requirements and Did Not Effectively
           Operate Its Section 8 Housing Choice Voucher Program

                                   HIGHLIGHTS

 What We Audited and Why

             We audited the Housing Authority of the City of Terre Haute’s (Authority)
             Section 8 Housing Choice Voucher program (program). The audit was part of the
             activities in our fiscal year 2010 annual audit plan. We selected the Authority
             based upon our analysis of risk factors relating to the housing agencies in Region
             V’s jurisdiction and our audits of the Authority’s nonprofit development
             activities, Public Housing Capital Fund program, and Turnkey III
             Homeownership program. Our objective was to determine whether the Authority
             administered its program in accordance with the U.S. Department of Housing and
             Urban Development’s (HUD) requirements and its program administrative plan.
             This is the second of two audit reports on the Authority’s Housing Choice
             Voucher program.

 What We Found

             As identified in this and our prior audits, the deficiencies in the Authority’s
             programs were significant and demonstrated a lack of effective program
             management. The Authority’s board of commissioners did not adequately
             exercise its responsibility to effectively manage the Authority. Its former
             executive director did not implement adequate controls over its operations. Its
         board and its former executive director did not follow HUD’s requirements or the
         Authority’s policies. As a result, HUD had no assurance that the programs
         managed by the Authority were and/or are managed effectively.

         The Authority failed to follow HUD’s and its own requirements regarding the
         Section 8 waiting list, paid housing assistance for the wrong payment standard
         and inappropriate housing, and created conflicts of interest regarding its for-profit
         and nonprofit entities. Households on the waiting list were forced to increase
         their waiting period before receiving assistance under the program; the Authority
         paid nearly $117,000 in housing assistance for units that were not allowed under
         HUD’s requirements; and there was no assurance that households lived in
         qualified housing, paid the appropriate rents, and were housed fairly and that
         applicants were properly screened.

         The Authority failed to operate its Family Self-Sufficiency program correctly and
         paid more than $58,000 in escrow payments to households contrary to Federal
         requirements. It failed to ensure that households sought and maintained suitable
         employment, completed final goals before graduating from the program, certified
         that they did not receive welfare assistance before graduating from the program,
         and were in good standing in the Section 8 program before issuing early escrow
         payments, and it lacked adequate supporting documentation.

         The Authority’s program administration regarding housing assistance payment
         calculations, documentation to support households’ eligibility for housing
         assistance, and its Section 8 project-based certificate contract was inadequate.
         The Authority incorrectly calculated households’ payments, resulting in more
         than $11,000 in overpayments and more than $600 in underpayments for the
         period February 2009 through May 2010. Based on our statistical sample, we
         estimate that over the next year, HUD will overpay more than $15,000 in housing
         assistance and utility allowances.

What We Recommend

         We recommend that the Director of HUD’s Cleveland Office of Public Housing
         require the Authority to (1) implement a detailed comprehensive plan to improve
         its programs, (2) reimburse its program more than $126,000 from non-Federal
         funds for the improper use of program funds, (3) reimburse its Family Self-
         Sufficiency program more than $58,000 from non-Federal funds for its improper
         use of funds, (4) provide support or reimburse its program nearly $8,900 from
         non-Federal funds for the unsupported housing assistance payments, and (5)
         implement adequate procedures and controls to address the findings cited in this
         audit report to prevent more than $15,000 in program funds from being spent on
         excessive housing assistance and utility allowances over the next year.

         We also recommend that the Director of HUD’s Cleveland Office of Public
         Housing, in conjunction with the Director of HUD’s Departmental Enforcement
         Center, take administrative action against the former executive director and

                                           2
           former board of commissioners for failing to administer the Authority according
           to HUD’s and its own requirements.

           For each recommendation without a management decision, please respond and
           provide status reports in accordance with HUD Handbook 2000.06, REV-3.
           Please furnish us copies of any correspondence issued because of the audit.

Auditee’s Response

           We provided our review results and supporting schedules to the Director of
           HUD’s Cleveland Office of Public Housing and the Authority’s executive director
           during the audit. We provided our discussion draft audit report to the Authority’s
           executive director, its board chairman, and HUD’s staff during the audit. We held
           an exit conference with the executive director on September 20, 2010.

           We asked the executive director to provide comments on our discussion draft
           audit report by September 23, 2010. The executive director provided written
           comments, dated September 22, 2010. The executive director generally agreed
           with our recommendations. The complete text of the written comments, along
           with our evaluation of those comments, can be found in appendix B of this report.




                                           3
                            TABLE OF CONTENTS

Background and Objective                                                             5

Results of Audit
      Finding 1: The Authority Was Not Operated According to HUD’s and Its
                 Requirements                                                        6

      Finding 2: The Authority Did Not Operate Its Program According to HUD’s and
                 Its Requirements                                                   11

      Finding 3: The Authority Failed To Adequately Manage Its Family Self-
                 Sufficiency Program                                                15

      Finding 4: The Authority Did Not Always Maintain Its Program Household
                 Files Adequately                                                   18

Scope and Methodology                                                               22

Internal Controls                                                                   24

Appendixes
   A. Schedule of Questioned Costs and Funds To Be Put to Better Use                26
   B. Auditee Comments and OIG’s Evaluation                                         27
   C. Federal Requirements and the Authority’s Program Administrative Plan          40




                                            4
                       BACKGROUND AND OBJECTIVE

The Housing Authority of the City of Terre Haute (Authority), IN, was established on April 28,
1960, as a municipal corporation under Section 36-7-18-4 of the Indiana Code to provide decent,
safe, and sanitary housing to low-income families under the United States Housing Act of 1937.
The Authority is governed by a seven-member board of commissioners appointed by the mayor
of Terre Haute to 4-year terms. The board governs the business, policies, and transactions of the
Authority. The executive director is appointed by the board and has overall responsibility for
carrying out the board’s policies and managing the Authority’s day-to-day operations. The
Authority’s books and records are located at 2001 North 19th Street, Terre Haute, IN. As of May
31, 2010, the Authority owned 868 low-rent public housing units in 6 projects, administered 890
Section 8 voucher units, and managed another 171 housing units for 2 nonprofit and 2 for-profit
entities.

This is the fifth of five planned audit reports on the Authority’s programs. The first audit report
(report #2009-CH-1011, issued on July 31, 2009) included three findings. The objectives of our
first audit were to determine whether the Authority diverted or pledged resources subject to its
annual contributions contract, other agreement, or regulation for the benefit of non-U.S.
Department of Housing and Urban Development (HUD) developments without specific HUD
approval. The second audit report (report #2009-CH-1017, issued on September 29, 2009)
included one finding. The objective of the second audit was to determine whether the Authority
followed HUD’s requirements regarding the administration of its Turnkey III Homeownership
program. The third audit report (report #2010-CH-1010, issued on July 27, 2010) included four
findings. The third audit’s objective was to determine whether the Authority (1) effectively
administered its Public Housing Capital Fund program and followed HUD’s and its requirements
and (2) had the capacity to administer its American Recovery and Reinvestment Act of 2009
(Recovery Act) Capital Fund program. The fourth audit report (report #2010-CH-1005, issued
on April 9, 2010) had one finding. The objective was to determine whether the Authority’s
Section 8 Housing Choice Voucher program (program) units met HUD’s housing quality
standards when the units passed the Authority’s previous inspections.

Our objective was to determine whether the Authority administered its program in accordance
with HUD’s requirements and its program administrative plan. Specifically, our objectives were
to determine whether the Authority (1) administered its HUD-funded programs in accordance
with Federal and its requirements; (2) administered its program waiting list, determined subsidy
standards, and followed conflict-of-interest provisions according to HUD’s requirements and its
administrative plan; (3) appropriately managed its Family Self-Sufficiency program according to
HUD’s requirements and its action plan; and (4) corrected deficiencies identified by HUD
pertaining to income analysis and subsidy determination. This is the second of two audit reports
on the Authority’s Housing Choice Voucher program.




                                                 5
                                RESULTS OF AUDIT

Finding 1: The Authority Was Not Operated According to HUD’s and
                          Its Requirements
The Authority’s former board of commissioners did not adequately exercise their responsibility
to effectively manage the Authority. The Authority’s former executive director also did not
implement adequate controls over its HUD-funded programs. Further, the Authority lacked
adequate controls over its operations. The Authority’s former board and former executive
director did not follow HUD’s or its own requirements. As a result, HUD lacked assurance that
the Authority’s resources were used to the maximum extent to benefit low- and moderate-income
tenants.


 The Authority’s Management
 Did Not Effectively Oversee
 Operations


              As identified in this and our prior audits (homeownership, nonprofit development,
              Public Housing Capital Fund program and Recovery Act, and Section 8 housing
              quality standards), the Authority (1) lacked documentation to support its use of
              Turnkey III program sales proceeds, (2) established inappropriate relationships
              with its nonprofit development corporation and then used its Federal resources to
              support the corporation, (3) mismanaged its Public Housing Capital Fund, (4)
              lacked capacity to adequately administer its Recovery Act funds, and (5) did not
              adequately manage its Section 8 Housing Choice Voucher program.

              Specifically, the Authority

                     Under the direction of the former executive director and former board of
                      commissioners, did not comply with HUD’s requirements regarding the
                      use of the Turnkey III program proceeds from the sale of its program
                      units. The Authority did not maintain documentation to determine
                      whether the sales proceeds were used in accordance with its approved
                      plan. The problem occurred because the Authority lacked adequate
                      procedures and controls to ensure that it complied with HUD’s
                      requirements and maintained accountability of program funds and related
                      expenses. Further, the Authority’s former board did not provide adequate
                      oversight and/or guidance regarding the Authority’s operations (see Office
                      of Inspector General (OIG) audit report #2010-CH-1010).

                     Allowed its former executive director to create a conflict-of-interest
                      relationship as the Authority’s executive director and resident agent for its
                      nonprofit developments. The problem occurred because the Authority’s


                                                6
                   former board of commissioners did not provide adequate oversight and
                   monitoring of its operations (see OIG audit report #2009-CH-1011).

                  Failed to comply with Federal requirements and/or its procurement policy.
                   Specifically, it did not (1) maintain records to support detailing significant
                   procurement histories and (2) ensure that its maintenance staff and/or
                   contractors were paid the appropriate Federal labor standards prevailing
                   wage rates under the Davis-Bacon Act. The problems occurred because
                   the former executive director disregarded Federal requirements (see OIG
                   audit report #2010-CH-1010).

                  Lacked capacity to adequately expend its Recovery Act funds. It did not
                   have (1) written policies and procedures governing the administration of
                   the funds and (2) staff knowledgeable of HUD’s and other Federal
                   procurement requirements. The problems occurred because the previous
                   board allowed the former executive director to control the Authority’s
                   financial and procurement activities without providing adequate oversight
                   (see OIG audit report #2010-CH-1010);

                  Did not adequately enforce HUD’s housing quality standards. Of the 55
                   program units statistically selected for inspection, 31 failed to meet
                   minimum housing quality standards, and 22 had material violations that
                   existed before the Authority’s previous inspections. The violations existed
                   because the Authority failed to exercise proper supervision and oversight
                   of its program unit inspections. It also lacked adequate procedures and
                   controls to ensure that its program units met HUD’s housing quality
                   standards (see OIG audit report #2010-CH-1005).

                  Failed to follow HUD’s and its own requirements regarding the Section 8
                   waiting list, paid housing assistance for the wrong payment standard and
                   inappropriate housing, and created conflicts of interest regarding its for-
                   profit and nonprofit entities. The Authority failed to operate its Family
                   Self-Sufficiency program according to HUD’s requirements and its family
                   self-sufficiency action plan. It also did not comply with HUD’s
                   requirements and its program administrative plan when issuing housing
                   assistance and utility allowance payments. The problems occurred
                   because the Authority lacked adequate procedures and controls to ensure
                   that the former executive director followed HUD’s requirements and its
                   administrative plan (see findings 2, 3, and 4 in this report).

Prior HUD Reviews Identified
Deficiencies

           HUD conducted an independent assessment of the Authority and issued its report
           on February 20, 2009. The assessment was conducted because the Authority’s
           most recent Public Housing Management Assessment program reporting rated the


                                             7
           Authority as a troubled agency. HUD is required to conduct an independent
           assessment of public housing authorities when they are determined to be troubled.

           HUD’s assessment team stated that the Authority needed to (1) review and
           possibly redefine its mission; (2) adjust its organizational structure; (3) implement
           complimenting policies, procedures, and practices; (4) put into place effective and
           accurate tracking systems; (5) accurately transmit data to HUD; and (6) create and
           implement prudent financial policies and procedures. The independent
           assessment required a memorandum of agreement between HUD and the
           Authority. HUD issued the memorandum to the Authority in April 2010, but it
           had not been executed as of September 2010.

           HUD completed a rental integrity monitoring review in July 2003. Thirty-two of
           the forty-eight files reviewed (67 percent) required corrective action. The
           findings included the (1) lack of written supporting documentation offering choice
           of rent in all files; (2) lack of third-party verification; (3) systemic issues in the
           calculation of earned income, pension, and/or public assistance; (4) failure to
           properly calculate the payment standard as based on bedroom size including
           households that were overhoused; (5) family case records reflecting a lack of
           quality control; (6) differences in calculated housing assistance payments and
           actual amounts reflected on the register; and (7) miscalculations in utility
           allowances that resulted in incorrect gross rents.

The Authority’s Management
Did Not Protect HUD’s Interest

           The Authority violated its contract with HUD when it provided $33,000 to its
           nonprofit to finance the preconstruction costs for the nonprofit’s housing units
           and failed to maintain complete and accurate books of record. It lacked adequate
           procedures and controls to ensure that it was accountable for funds and related
           expenses and that it complied with its contract with HUD.

           The Authority encumbered project assets when it obtained a $2.3 million
           construction loan to finance electrical system upgrades to support the installation
           of air conditioning units at its senior housing development, Dreiser Square. The
           loan agreement authorized Transamerica Public Finance to obtain a security
           interest in the Authority’s assets. Further, the Authority incurred interest
           expenses totaling more than $800,000 on the construction loan and did not obtain
           an energy audit before the upgrades.

           The Authority encumbered project assets when it obtained a promissory note for a
           $2 million revolving line of credit with First Financial Bank (bank) to finance its
           capital improvements. The note contained a setoff provision that allowed the
           bank to seize the Authority’s accounts with the bank if it defaulted on the note.
           The Authority also obligated Public Housing Capital Fund program funds before
           they were available to reimburse withdrawals from its line of credit. Further, it
           paid more than $129,000 in interest on the line of credit.

                                             8
The Authority’s Procedures
and Controls Had Weaknesses

             The weaknesses described above occurred because the Authority lacked adequate
             procedures and controls to ensure that it appropriately followed HUD’s and its
             requirements. The former executive director was aware of HUD’s regulations but
             chose not to follow them, instead operating the Authority his way. According to
             correspondence to the HUD field office, dated November 30, 2005, the former
             executive director stated he did not need any technical assistance from HUD
             because HUD’s staff did not possess any abilities in that area that he considered
             useful.

             The former board of commissioners lost control of the Authority to its former
             executive director. He intimidated, threatened, and denied training to the board of
             commissioners. When new commissioners were appointed and the former
             executive director was removed, the Authority began to correct the deficiencies.

Conclusion

             The deficiencies in the Authority’s programs were significant and demonstrated a
             lack of effective program management. HUD and the Authority should
             implement a detailed comprehensive plan to improve the Authority’s programs.
             The plan should include the submission of quarterly reports to HUD detailing the
             Authority’s progress in improving its procedures and controls regarding its
             programs in accordance with its plan. The quarterly reports should address but
             not be limited to the issues cited in our audit reports.

Recommendations

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

                1A. Implement a detailed comprehensive plan to improve the Authority’s
                    programs. The plan should include the submission of quarterly reports
                    to HUD detailing the Authority’s progress in improving its procedures
                    and controls regarding its programs in accordance with its plan. The
                    quarterly reports should address but not be limited to the issues cited in
                    our audit reports. If the Authority fails to show substantial improvement
                    within 1 year, further administrative actions should be taken by HUD to
                    include placing the Authority’s programs under a third-party
                    administrator or receivership.

             We also recommend that the Director of HUD’s Cleveland Office of Public
             Housing, in conjunction with the Director of HUD’s Departmental Enforcement
             Center,

                                              9
1B. Take administrative action against the former executive director and
    former board of commissioners for failing to administer the Authority
    according to HUD’s and its own requirements.




                           10
Finding 2: The Authority Did Not Operate Its Program According to
                    HUD’s and Its Requirements
The Authority failed to follow HUD’s and its own requirements regarding its (1) use of the
incorrect payment standard, (2) approval of ineligible housing, (3) program waiting list, and (4)
creation of conflicts of interest with its for-profit and nonprofit entities. The problem occurred
because the Authority’s board of commissioners did not provide adequate oversight and
monitoring of its operations. As a result, HUD and the Authority lacked assurance that the
former executive director performed his official duties in the interests of HUD, the Authority,
and program participants. Also, the Authority paid nearly $117,000 in housing assistance for
units that were not eligible under HUD’s requirements and for units not considered suitable for
the program.


 The Authority Used the
 Incorrect Payment Standard
 and Ineligible Housing

               The Authority inappropriately used the wrong payment standard for four units
               owned by the Authority’s nonprofit, Terre Haute Housing Authority
               Redevelopment Corporation. Without HUD approval, the former executive
               director authorized a 128 percent increase in the payment standard for four of its
               nonprofit’s units so the nonprofit could pay its mortgages. This increase in
               payment standard caused an increase in housing assistance payments by more
               than $200 per month. This action resulted in housing assistance overpayments of
               $30,795 between March 2006 and March 2009 when the Authority ended the
               practice.

               The Authority paid housing assistance for 10 units at the Light House Mission
               that did not meet the standards for a 1-bedroom unit. It failed to follow HUD’s
               regulations when it paid housing assistance for units the Authority determined to
               be one-bedroom units when the units did not have the proper requirements for a
               one-bedroom unit. The units’ kitchens did not contain a sink with hot and cold
               running water as required by HUD’s housing quality standards. The units that did
               not qualify for the program received $86,096 in housing assistance payments from
               December 1, 2003, through May 1, 2010.

 The Authority Inappropriately
 Managed the Section 8 Waiting
 List

               The Authority failed to follow HUD’s and its own requirements regarding its
               program waiting list. The Authority’s program waiting list was bypassed when
               the Authority allowed local area nonprofits and its own for-profit and nonprofit
               entities to fill its vacant program units with applicants that the owners selected.


                                                11
            The Authority allowed up to 251 units to be filled in this manner when the former
            executive director called them set-aside vouchers. However, HUD’s approval
            was not requested or given as required.

            According to the Authority’s records, the Authority allowed the bypassing of the
            waiting list from January 2003 to March 2008. It had a direct interest in 110 (43.8
            percent) of the 251 units. These units were the Authority’s for-profit and
            nonprofit entities for which the former executive director was also the resident
            agent. HUD’s regulations and the Authority’s administrative plan require that
            prospective households be selected from the program waiting list. The Authority
            discontinued this practice in March 2008 when the former executive director left
            the Authority.

            One of the property managers of the Authority’s entities was directed to treat the
            units as if he owned them. He filled the units with households found in the
            Authority’s public housing program and through churches, friends of program
            households, and the local police department’s referrals. He received no formal
            training, although he shared the same responsibilities as the Authority’s program
            managers other than inspecting the units. His duties included conducting the
            initial and annual certifications for households in the entities’ units.

The Authority Had a Conflict of
Interest With Its Subsidiaries

            The Authority had a conflict of interest with its for-profit and nonprofit entities.
            It inappropriately conducted inspections, certifications, and rent reasonableness
            determinations and bypassed the waiting list for the entities in which the
            Authority had a direct interest. The Authority’s former executive director
            selected the property managers for the entities. The Authority’s staff was
            unaware that it was a conflict of interest to conduct the inspections and rent
            reasonableness determinations for the entities’ units. Its program coordinator
            ensured that household certifications were taken over by the program department
            after the former executive director was removed by the board of commissioners.

            During our audit of the program, the Authority was made aware of the conflicts of
            interest and began the separation of duties for its staff. The Authority also
            executed contracts with a third party to inspect the entities’ units and conducted
            rent reasonableness determinations.

The Authority’s Procedures
and Controls Had Weaknesses

            The weaknesses described above occurred because the Authority lacked adequate
            procedures and controls to ensure that it appropriately followed HUD’s
            regulations and its administrative plan. The Authority’s former executive director
            failed to follow HUD’s requirements in managing the program’s waiting list when

                                             12
             he directed the bypassing of the list. The Authority’s current management did not
             know why the waiting list was bypassed.

             The former executive director had excessive building costs for the four units
             questioned and increased the payment standard to cover the mortgage costs. He
             determined that the units located at the Light House Mission would be considered
             one-bedroom units. Also, he was aware of HUD’s regulations but chose not to
             follow them, instead operating the Authority his way. According to
             correspondence to the HUD field office, dated November 30, 2005, the former
             executive director stated he did not need any technical assistance from HUD
             because HUD’s staff did not possess any abilities in that area that he considered
             useful.

Conclusion

             The Authority lacked adequate procedures and controls to ensure that its former
             executive director followed HUD’s requirements and its plan. HUD lacked
             assurance that the program was operated according to requirements. As a result
             of the Authority’s procedural and control weaknesses, households on the waiting
             list were forced to increase their waiting period before receiving assistance under
             the program and the Authority paid more than $30,500 in excessive housing
             assistance for four units and more than $86,000 in inappropriate housing
             assistance for units that did not meet HUD’s standards for a one-bedroom unit.
             Also, HUD had no assurance that households lived in qualified housing, paid
             appropriate rents, were housed fairly, and applicants were properly screened.

Recommendations

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

             2A. Reimburse its program $30,795 in housing assistance and utility allowance
                 payments from non-Federal funds for the inappropriately increased payment
                 standards for the units cited in this finding.

             2B. Reimburse its program $86,096 in housing assistance and utility allowance
                 payments from non-Federal funds for the 10 units that did not meet
                 standards for a one-bedroom unit.

             2C. Implement adequate procedures and controls regarding its payment
                 standards to ensure that the Authority and its executive director comply with
                 HUD’s regulations and its program administrative plan.

             2D. Implement adequate procedures and controls regarding its waiting list to
                 ensure that the Authority and its executive director comply with HUD’s
                 regulations and its program administrative plan.

                                              13
2E. Implement adequate procedures and controls to ensure that future conflicts
    of interest do not occur and that the Authority and its executive director
    comply with HUD’s regulations and its program administrative plan.




                               14
Finding 3: The Authority Failed To Adequately Manage Its Family
                      Self-Sufficiency Program
The Authority failed to operate its Family Self-Sufficiency program according to Federal
requirements and its family self-sufficiency action plan. This deficiency occurred because the
Authority lacked adequate procedures and controls regarding the program. As a result, it
inappropriately made more than $57,000 in final escrow payments and an additional $1,026 in
early escrow payments.


 The Authority Inappropriately
 Made More Than $58,000 in
 Escrow Payments


             The Authority failed to operate its Family Self-Sufficiency program according to
             Federal requirements and its family self-sufficiency action plan. We selected the
             files for 7 families that graduated from the program, statistically sampled 41
             program participants, and selected the files for 3 families during our survey phase
             that were not included in our sample. Of the files reviewed, 25 did not have a final
             goal of maintaining suitable employment, 12 did not have annual notifications of
             escrow accounts, and 1 did not have a signed contract of participation. HUD’s
             requirements state that a final goal must be maintaining suitable employment
             specific to that individual’s skills, education, and job training and the available job
             opportunities in the area. The Authority inappropriately paid $58,110 in escrow
             funds to participants of the program. Of these funds, $57,084 was issued to
             participants that failed to appropriately complete the program as follows:

                     Six files did not show that the final goals were completed,
                     Four files did not contain a written certificate from the head of household
                      stating that no family member had received welfare assistance in the past
                      12 months, and
                     One file contained the final goals, but did not have sufficient
                      documentation to determine whether the participant completed the
                      program although the family was listed as a program graduate and escrow
                      funds were paid to the family.

              The remaining funds ($1,026) were early escrow funds inappropriately issued for
              the households’ share of Section 8 rental payments owed to the Authority’s
              nonprofit properties. The contract of participation states that the household must
              comply with the terms of the lease. The lease requires the household to pay its
              portion of the rent.

              The Authority and HUD could not produce an approved program action plan as
              mandated by Federal requirements. Also, the Authority’s unapproved program
              action plan did not follow Federal requirements when it required participants to
              (1) purchase a home to complete the program; (2) not receive any Federal, State,

                                                15
             local, or other assistance until 2 years after graduating from the program; and (3)
             pay back the escrow funds received for graduation if they received any assistance
             up to 2 years after graduation. Also, the Authority failed to ensure that the most
             recent contract of participation, form HUD-52650, was used for participants. The
             Authority used the 1993 contract of participation that expired in July 2006.

The Authority’s Procedures
and Controls Had Weaknesses

             The weaknesses described above occurred because the Authority lacked adequate
             procedures and controls to ensure that it appropriately followed Federal
             regulations and its plan. Also, the Authority and HUD could not provide a HUD-
             approved plan as required by Federal requirements. The Authority’s former
             executive director began the Authority’s nonprofits and required the households
             in these units to be on the Section 8 program and the Family Self-Sufficiency
             program. When the former executive director left the Authority, it failed to make
             sufficient changes to its program until the former family self-sufficiency program
             coordinator left the Authority in February 2010.

             The Authority used the program to lease its nonprofits’ units. It moved families
             into the units, requiring the families to sign a document that required them to
             participate in the program or be evicted. Some participants were not aware of this
             requirement until after they moved into the units, forcing the Section 8
             participants to be on the program. HUD’s regulations at 24 CFR (Code of Federal
             Regulations) 984.103(2) state that the participating family means a family that
             elects to participate in the program.

             The issues in this finding were discussed with the Authority, and the Authority
             recognized the past failures and was working on correcting the current program to
             ensure that it follows HUD’s and its requirements. The Authority discontinued its
             practice of paying household rents, requiring households to purchase a home,
             requiring households to be on the program if they reside in the Authority-owned
             nonprofit units, and requiring households to leave the Section 8 program upon
             graduation from the program. During our file review, the Authority was in the
             process of revising the final goals so they meet the program requirements. Prior
             to the revision of the final goals, 47 of the 51 files reviewed did not contain the
             required final goal of maintaining suitable employment, 2 files did not contain the
             final goals, and 1 file had the final goal as maintaining suitable employment.

Conclusion

             The Authority improperly used funds from its Family Self-Sufficiency program
             when it failed to comply with Federal requirements. The Authority’s failure to
             maintain sufficient documentation made it difficult to determine whether the
             program met its goal of enabling households to become economically self-
             sufficient and increased the likelihood of inappropriate households receiving

                                             16
          payments. It also reduced the Authority’s ability to monitor and measure the
          effectiveness of the program. As a result of its noncompliance, the Authority
          inappropriately made more than $57,084 in final escrow payments and an
          additional $1,026 in early escrow payments.

Recommendations

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

          3A. Reimburse its Family Self-Sufficiency program $58,110 ($57,084 in final
              escrow payments and $1,026 in early escrow payments paid to participants)
              from non-Federal funds for escrow payments issued without a properly
              completed contract of participation and escrow payments for inappropriate
              early payments.

          3B. Correct its Family Self-Sufficiency action plan to provide low-income
              families with opportunities for education, job training, counseling, and other
              forms of social service assistance so they may obtain the education,
              employment, and business and social skills necessary to achieve self-
              sufficiency and obtain HUD approval of the action plan.

          3C. Review the files of current participants to ensure that all documentation is
              present and program requirements are met.

          3D. Implement adequate procedures and controls regarding its Family Self-
              Sufficiency program to ensure that it follows Federal regulations and its
              Family Self-Sufficiency action plan, to include ensuring that new
              participants are appropriately initiated into its program.




                                          17
Finding 4: The Authority Did Not Always Maintain Its Program
                    Household Files Accurately
The Authority did not comply with HUD’s requirements and its program administrative plan
when issuing housing assistance and utility allowance payments. It failed to consistently
compute payments accurately and maintain documentation to support all payments to program
owners and households. These deficiencies occurred because the Authority lacked adequate
procedures and controls to ensure that its calculations were accurate and that HUD’s
requirements and its plan were appropriately followed. As a result, it overpaid nearly $11,000
and underpaid more than $600 in housing assistance and utility allowances and was unable to
support nearly $8,900 in housing assistance and utility allowances paid. Based upon our
statistical sample, we estimate that over the next year, the Authority will overpay more than
$15,000 in housing assistance and utility allowances.


 The Authority Made Incorrect
 Housing Assistance and Utility
 Allowance Payments

              We statistically selected 45 household files from a universe of 945 households
              that received housing assistance payments during the period February through
              September 2009, using data-mining software. The 45 files were reviewed to
              determine whether the Authority accurately verified and calculated the income
              information received from households for their housing assistance and utility
              allowances for the period February 1, 2009, through May 31, 2010. Our review
              was limited to the information maintained by the Authority in its household files.

              According to HUD’s regulations at 24 CFR 5.240(c), public housing authorities
              must verify the accuracy of the income information received from program
              households and change the amount of the total household payment, household
              rent, or program housing assistance payment or terminate assistance, as
              appropriate, based on such information.

              The Authority’s miscalculations resulted in overpayments of $5,966 and
              underpayments of $648 in housing assistance and utility allowances. The
              Authority incorrectly calculated housing assistance and utility allowances for 15
              (33 percent) households in one or more certifications. The 15 files contained
              miscalculations of the households’ annual income and income deductions and the
              use of an incorrect utility reimbursement schedule and/or incorrect payment
              standard.

              Of the $5,966 in overpaid housing assistance and utility allowances, $3,143 (12
              households) was a result of the Authority’s calculation errors and $2,823 (3
              households) was a result of households’ underreporting their income to the
              Authority. However, the Authority’s files contained the correct income
              information for the three households. One file each contained a report from


                                               18
            HUD’s Enterprise Income Verification system, child support verification report,
            and third-party income verifications showing the correct income information.
            The $648 in underpaid housing assistance and utility allowances was a result of
            the Authority’s calculation errors.

            The 15 files contained the following errors:

                  15 had annual income calculation errors by the Authority for 1 or more
                   certifications,
                  4 had incorrect income adjustments for 1 or more certifications,
                  3 had unreported income by the households for 1 or more certifications,
                  1 had incorrect utility reimbursement calculations for 1 or more
                   certifications,
                  1 had incorrect payment standards for 1 or more certifications, and
                  1 had incorrect income verification for 1 or more certifications.

            The Authority received $614 in program administrative fees related to the 15
            households that were overpaid housing assistance and utility allowances for the
            period February 1, 2009, through May 31, 2010.

            The Authority failed to ensure that housing assistance payments were
            appropriately stopped for four deceased households, resulting in overpayments of
            $4,844. Housing assistance payments are required to be stopped the month after
            death. When the Authority learned of a household’s death, it also failed to collect
            the funds from the owners after erroneous payments were made. The housing
            assistance was paid from 1 to 11 months after the required time to stop payments.
            One identified overpayment was returned by the owner and was not included in
            our totals.

Household Files Lacked
Eligibility Documentation


            The Authority lacked documentation to support housing assistance and utility
            allowance payments totaling $8,893 for the period February 1, 2009, through May
            10, 2010. Of the 45 household files statistically selected for review, 5 files (11
            percent) were missing or contained incomplete or late documents as follows:

                  Five were missing a rent reasonableness determination for the leased unit,
                  Two were missing the lease,
                  One did not have the lease and housing assistance payments contract
                   executed within 60 days of each other,
                  One was missing a housing assistance payments contract, and
                  One was missing the original application.

            The five files did not include documentation required by HUD’s regulations and
            the Authority’s program administrative plan. Of the required documentation to


                                            19
             support housing assistance payments and utility allowances, the disclosure of
             information on lead-based paint and the original application were not a
             determining factor in the computation of the unsupported housing assistance
             payments cited in this audit report.

The Authority’s Procedures
and Controls Had Weaknesses

             The weaknesses regarding incorrect calculations, inappropriate payments, and
             missing documentation occurred because the Authority lacked adequate
             procedures and controls to ensure that it appropriately followed HUD’s
             regulations and its program plan. Although the Authority’s process for
             performing certifications gave its housing specialists discretion to review previous
             file documentation, it did not require them to do so. Therefore, if an error was
             made on a prior certification, that error could continue from one certification to
             the next. However, this was not the only cause for the incorrect calculations of
             housing assistance payments and utility allowances. Fifty-two errors were made
             in calculating household income for one or more certifications as a result of the
             failure to collect and complete the appropriate eligibility documentation.

             The Authority conducted peer reviews, and its supervisors conducted monitoring
             reviews of the certifications. The supervisory reviews were performed in the
             same manner as the certifications that the housing specialists performed. The
             Authority had four housing specialists that performed certifications and
             recertifications. Three housing specialists had attended formal training. Informal
             training was conducted by the Authority’s Section 8 coordinator. Although the
             Authority had external and internal training processes and performed monitoring
             reviews of the certifications, the certification errors occurred. Therefore,
             additional procedures and controls are needed to ensure full implementation of
             HUD’s regulations and the Authority’s program administrative plan.

Conclusion


             As a result of its procedural and control weaknesses described above, the
             Authority overpaid $10,810 and underpaid $648 in housing assistance and utility
             allowances and disbursed $8,893 in housing assistance and utility allowance
             payments without supporting documentation. If the Authority implements
             adequate procedures and controls regarding its housing assistance and utility
             allowances to ensure compliance with HUD’s regulations and its program plan,
             we estimate that more than $15,000 in payments will be accurately spent over the
             next year based on the error rate found in our sample. Our methodology for this
             estimate is explained in the Scope and Methodology section of this audit report.




                                              20
Recommendations

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

          4A. Reimburse its program $3,757 ($3,143 in housing assistance and utility
              allowance payments and $614 in associated administrative fees) from non-
              Federal funds for the overpayment of housing assistance and utility
              allowances cited in this finding.

          4B. Pursue collection of the $2,823 from the three households cited in this
              finding or reimburse its program the applicable amount from non-Federal
              funds for the overpaid housing assistance and utility allowances for
              unreported income.

          4C. Reimburse the appropriate households $648 for the underpayment of
              housing assistance and utility allowances cited in this finding.

          4D. Provide supporting documentation or reimburse its program $8,893 from
              non-Federal funds for the unsupported payments related to the five
              households cited in this finding.

          4E. Collect the $4,844 in overpaid housing assistance and utility allowances for
              the deceased households from the owners or reimburse its program the
              applicable amount from non-Federal funds for the overpayment of housing
              assistance and utility allowances.

          4F. Implement adequate procedures and controls regarding its housing
              assistance and utility allowance payments to ensure that it complies with
              HUD’s regulations and the Authority’s program administrative plan. By
              implementing adequate procedures and controls, the Authority should help
              to ensure that $15,177 in program funds is appropriately used for future
              payments.




                                         21
                         SCOPE AND METHODOLOGY

To accomplish our objective, we reviewed

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

                  The Authority’s program administrative plan, revised July 2007; family self-
                   sufficiency action plan; accounting records; annual audited financial statements
                   for 2007 and 2008; program household files; computerized databases; policies
                   and procedures; board meeting minutes for 2007, 2008, and 2009; organizational
                   chart; and program annual contributions contract.

                  HUD’s files for the Authority.

We also interviewed the Authority’s current employees, its former and current board members,
and HUD staff.

Finding 3

We selected 51 files for review. These files consisted of 7 households that graduated from the
Family Self-Sufficiency program, a statistical sample of 41 participants in the program, and 3
households during our survey phase that were not included in the sample. We statistically
selected 41of the Authority’s program household files from the 97 households that participated
in the program from February 1 through September 30, 2009, using data-mining software. Our
analysis was to determine whether the Authority appropriately maintained documentation and
supported participation and graduation in the program. Our sampling method was an
unrestricted variable with a 90 percent confidence level and precision level of plus or minus 10
percent.

Finding 4

We statistically selected 45 of the Authority’s program household files from the 945 households
that received housing assistance payments from February 1 through September 30, 2009, using
data-mining software. Our analysis was performed to ensure that the Authority improved its
household file maintenance and housing assistance payments calculations after HUD’s review of
the Authority in January 2009. The 45 household files were selected to determine whether the
Authority appropriately calculated the households’ housing assistance and utility allowance
payments and maintained documentation to support households’ program eligibility.

Our sampling method was an unrestricted variable with a 90 percent confidence level and
precision level of plus or minus 10 percent. Using variable sampling difference estimation
techniques with a 95 percent confidence level, the sample results support an estimate that the
Authority overpaid its program participants $15,177 during our audit period.




                                                22
Summary for difference values (population = 945; sample/size = 45)
Number of nonzero items 15                   Confidence level            95 percent
Mean                       $110.44           Lower limit                 $15,177
Standard deviation         $409              Point estimate              $93,527
Skewness                   2.95              Upper limit                 $171,876
Standard error (mean)      $58.09            t-score                     1.6794
Standard error (total)     $116,180

Unless the Authority implements adequate procedures and controls regarding the disbursement
of housing assistance and utility allowance payments to ensure compliance with HUD’s
regulations and its program administrative plan, we estimate that $15,177 in payments will be
misspent over the next year. This estimate is presented solely to demonstrate the annual amount
of program funds that could be put to better use for appropriate payments if the Authority
implements our recommendation. While these benefits could recur indefinitely, we were
conservative in our approach and only included the initial year in our estimate.

We performed our onsite audit work between April and June 2010 at the Authority’s office
located at 2001 North 19th Street, Terre Haute, IN. The audit covered the period October 1,
2008, through March 31, 2010, 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.




                                               23
                              INTERNAL CONTROLS

Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to

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

Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls 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 objective:

                     Effectiveness and efficiency of operations – Policies and procedures that
                      the audited entity has implemented to provide reasonable assurance that a
                      program meets its objectives, while considering cost-effectiveness and
                      efficiency.

                     Reliability of financial reporting – Policies and procedures that management
                      has implemented to provide reasonable assurance regarding the reliability of
                      financial reporting and the preparation of financial statements in accordance
                      with generally accepted accounting principles.

                     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 deficiency in internal control exists when the design or operation of a control
               does not allow management or employees, in the normal course of performing
               their assigned functions, the reasonable opportunity to prevent, detect, or correct
               (1) impairments to effectiveness or efficiency of operations, (2) misstatements in
               financial or performance information, or (3) violations of laws and regulations on
               a timely basis.




                                                24
Significant Deficiencies

             Based on our review, we believe that the following items are significant deficiencies:

                   The Authority substantially lacked adequate procedures and controls to
                    ensure that it properly managed the operations of its programs (see
                    findings 1, 2, 3, and 4).

                   The Authority lacked adequate procedures and controls to ensure that it
                    operated its Section 8 Housing Choice Voucher program according to
                    HUD’s requirements and its administrative plan (see findings 2, 3, and 4).




                                              25
                                   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/
                  2A                 $30,795
                  2B                  86,096
                  3A                  58,110
                  4A                   3,757
                  4B                   2,823
                  4C                                                          $648
                  4D                                     $8,893
                  4E                    4,844
                  4F                                                        15,177
                 Totals             $186,425             $8,893            $15,825


1/   Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
     that the auditor believes are not allowable by law; contract; or Federal, State, or local
     policies or regulations.

2/   Unsupported costs are those costs charged to a HUD-financed or HUD-insured program
     or activity when we cannot determine eligibility at the time of the audit. Unsupported
     costs require a decision by HUD program officials. This decision, in addition to
     obtaining supporting documentation, might involve a legal interpretation or clarification
     of departmental policies and procedures.

3/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an Office of Inspector General (OIG) recommendation is
     implemented. These amounts include reductions in outlays, deobligation of funds,
     withdrawal of interest, costs not incurred by implementing recommended improvements,
     avoidance of unnecessary expenditures noted in preaward reviews, and any other savings
     that are specifically identified. In this instance, if the Authority implements our
     recommendation, it will cease to incur program costs for the overpayment and/or
     underpayment of housing assistance and, instead, will expend those funds in accordance
     with HUD’s requirements and/or the Authority’s program administrative plan. Once the
     Authority successfully improves its controls, this will be a recurring benefit. Our
     estimate reflects only the initial year of this benefit.



                                             26
Appendix B

        AUDITEE COMMENTS AND OIG’s EVALUATION

Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 2




                         27
Ref to OIG Evaluation   Auditee Comments




Comment 3




Comment 4




                         28
Ref to OIG Evaluation   Auditee Comments




                         29
Ref to OIG Evaluation   Auditee Comments




Comment 5




                         30
Ref to OIG Evaluation   Auditee Comments




Comment 6




Comment 7




                         31
Ref to OIG Evaluation   Auditee Comments




Comment 8




Comment 9




Comment 10




                         32
Ref to OIG Evaluation   Auditee Comments




Comment 11




Comment 12




                         33
Ref to OIG Evaluation   Auditee Comments




Comment 13




Comment 14




                         34
Ref to OIG Evaluation   Auditee Comments




Comment 15




Comment 16




Comment 17




                         35
Ref to OIG Evaluation   Auditee Comments




Comment 18




Comment 19




                         36
Ref to OIG Evaluation        Auditee Comments




                        37
                         OIG Evaluation of Auditee Comments

Comment 1   The audit was expanded as necessary to include a summarization of the previous
            audits and this audit. This measure was taken to identify the overall performance
            of the Authority in an effort to protect its households and to ensure that the
            Authority develops and follows through with an overall improvement plan. We
            identified multiple programs with deficiencies, and this finding will assist in
            protecting the Authority’s households in the event that the Authority fails to make
            the necessary improvements.

Comment 2   We adjusted finding 1 to reflect that only the former board of commissioners and
            the former executive director were responsible. The Authority is responsible for
            the appropriate expenditure of Federal funds according to HUD’s requirement to
            ensure that its households receive its programs’ intended benefits. When Federal
            funds are not expended appropriately, HUD has a responsibility to ensure that its
            programs are reimbursed. Our recommendations state that the Authority should
            reimburse its programs from non-Federal funds so the funds can be used in the
            manner intended by HUD’s and the Authority’s requirements.

Comment 3   The memorandum of agreement is only for the Authority’s public housing
            program, and our recommendation is not limited only to this program.

Comment 4   We acknowledge the Authority’s actions and improvements to date. It appears
            that the Authority may already have most or all of a detailed comprehensive plan
            for the improvement of its programs. Along with this plan, the quarterly plans
            should assist HUD in determining the Authority’s improvements.

Comment 5   HUD will make the final decision on the appropriate administration action(s) to
            take.

Comment 6   The Authority’s households would have received its program benefits even if the
            payment standards had not been inappropriately increased. The excess
            expenditure of housing assistance payments may have prevented other eligible
            households from receiving federally funded housing assistance. It was the
            properties’ owner that incorrectly benefitted from the increased payments as a
            result of the Authority’s actions. A repayment plan can be negotiated with HUD
            to assist in alleviating the financial impact to the Authority.

Comment 7   Program participants were housed inappropriately in these units, and the Federal
            funds expended for these units were not eligible. The reimbursement of these
            funds to its program returns the funds to the program where they can be used to
            increase the Authority’s resources for assisting low-income families in obtaining
            affordable housing. As mentioned above, a repayment plan can be negotiated
            with HUD to assist in alleviating the financial impact on the Authority.

Comment 8   The Authority adopted its new program administrative plan in December 2008,
            but program violations continued. It is evident that adequate procedures and
            controls must be implemented.


                                            38
Comment 9     We agree that the Authority’s December 2008 administrative plan includes the
              appropriate waiting list requirements. However, HUD will need to determine
              whether the Authority has implemented adequate procedures and controls to
              ensure compliance with HUD’s and the Authority’s requirements.

Comment 10 HUD will make the appropriate determination as to whether the Authority has
           adequately addressed its conflict-of-interest requirements.

Comment 11 Participants graduated from its program without completing the contract of
           participation, which denied them the intended purpose of attaining skills to assist
           in maintaining self-sufficiency.

Comment 12 We acknowledge the Authority’s swift action in submitting an action plan to
           HUD for approval. Once an action plan is approved by HUD, this
           recommendation can be closed.

Comment 13 The Authority did not provide documentation to support that reviews were
           completed. Therefore, HUD will review the documentation and make a
           determination on the disposition of the recommendation.

Comment 14 The Authority overpaid housing assistance due to calculation errors. The
           overpayments were made in violation of program requirements and must be
           repaid to the program.

Comment 15 If the Authority is unwilling to pursue the collection of the overpayments from the
           three households, it must reimburse its program from non-Federal funds.

Comment 16 No supporting documentation was provided to show that the Authority
           reimbursed the appropriate households. Therefore, HUD will review the
           documentation and make a determination on the disposition of the
           recommendation.

Comment 17 If the Authority provides the appropriate documentation to HUD, no repayment of
           funds will be required.

Comment 18 The Authority should provide the supporting documentation to HUD. HUD’s
           regulations state that the voucher can be transferred to another family member,
           but this transfer must be accomplished at the time the head of household is
           identified as being deceased. If it is not transferred, the voucher issued to the
           deceased member is inappropriately funded, and those funds must be returned.

Comment 19 As previously mentioned, a repayment plan can be negotiated with HUD to assist
           in alleviating the financial impact on the Authority.




                                              39
Appendix C

       FEDERAL REQUIREMENTS AND THE AUTHORITY’S
             PROGRAM ADMINISTRATIVE PLAN

Finding 1

Federal regulations at 2 CFR 2424.10 state that HUD adopted, as HUD’s policies, procedures,
and requirements for nonprocurement debarment and suspension, the Federal regulations at 2
CFR Part 180.

HUD’s regulations at 24 CFR 24.1 state that the policies, procedures, and requirements at 2 CFR
Part 2424 permit HUD to take administrative sanctions against employees of recipients under
HUD assistance agreements that violate HUD’s requirements. The sanctions include debarment,
suspension, or limited denial of participation and are authorized by 2 CFR 180.800, 2 CFR
180.700, or 2 CFR 2424.1110, respectively. HUD may impose administrative sanctions based
upon the following conditions:

      Failure to honor contractual obligations or to proceed in accordance with contract
       specifications or HUD regulations (limited denial of participation);

      Violation of any law, regulation, or procedure relating to the application for financial
       assistance, insurance, or guarantee or to the performance of obligations incurred pursuant
       to a grant of financial assistance or pursuant to a conditional or final commitment to
       insure or guarantee (limited denial of participation);

      Violation of the terms of a public agreement or transaction so serious as to affect the
       integrity of an agency program, such as a history of failure to perform or unsatisfactory
       performance of one or more public agreements or transactions (debarment); or

      Any other cause so serious or compelling in nature that it affects the present
       responsibility of a person (debarment).

Finding 2

HUD’s regulations at 24 CFR 982.202(a) state that a housing authority may admit an applicant
for participation in the program either as a special admission or as a waiting list admission.
HUD’s regulations at 24 CFR 982.204(a) state that except for special admissions, participants
must be selected from the authority’s waiting list.

HUD’s regulations at 24 CFR 982.401(c)(2)(ii) state that the dwelling must have a kitchen sink
in proper operating condition, with a sink trap and hot and cold running water. The sink must
drain into an approvable public or private system.




                                                40
HUD’s regulations at 24 CFR 982.503(a) state that for each fair market rent area, a housing
authority must establish payment standard amounts for each “unit size.” Unit size is measured
by the number of bedrooms.

HUD’s regulations at 24 CFR 982.503(a)(3) state that a housing authority’s voucher payment
standard schedule shall establish a single payment standard amount for each unit size. For each
unit size, the authority may establish a single payment standard amount for the whole fair market
rent area or may establish a separate payment standard amount for each designated part of the
fair market rent area.

HUD’s regulations at 24 CFR 982.503(b) state that a housing authority may establish the
payment standard amount for a unit size at any level between 90 and 110 percent of the
published fair market rent for that size unit.

HUD’s regulations at 24 CFR 982.503(b)(2) state that a housing authority must request HUD
approval to establish a payment standard amount that is higher or lower than the basic range.
HUD has sole discretion to grant or deny approval of a higher or lower payment standard
amount.

HUD’s regulations at 24 CFR 982.161(a) state that a housing authority may not enter into any
contract or arrangement in connection with the household-based programs in which any of the
following classes of persons has an interest, direct or indirect, during the tenure or 1 year after:
(1) any present or former member or officer of the authority and (2) any employee of the
authority who formulates policy or influences decisions with respect to the programs.

HUD’s regulations at 24 CFR 982.161(b) state that any member of the classes described in
paragraph (a) of this section must disclose his or her interest or prospective interest to the
authority and HUD.

Chapter 16(II)(B) of the Authority’s administrative plan states that unit-by-unit exceptions to the
Authority's payment standards generally are not permitted. However, an exception may be made
as a reasonable accommodation for a family that includes a person with disabilities.

Finding 3

HUD’s regulations at 24 CFR 984.102 state that under the Family Self-Sufficiency program,
low-income households are provided opportunities for education, job training, counseling, and
other forms of social service assistance so they may obtain the education, employment, and
business and social skills necessary to achieve self-sufficiency.

HUD’s regulations at 24 CFR 984.103 state that the contract of participation includes all
individual training and service plans entered into between the public housing authority and all
members of the household who will participate in the Family Self-Sufficiency program and
which plans are attached to the contract of participation as exhibits.

HUD regulations at 24 CFR 984.201 state that the authority must have a HUD-approved action
plan that complies with the requirements of this section before the authority implements a Family
Self-Sufficiency program, whether the program is a mandatory or voluntary program.


                                                  41
HUD’s regulations at 24 CFR 984.303(b)(4) state the head of the Family Self-Sufficiency
program family shall be required under the contract of participation to seek and maintain suitable
employment during the term of the contract and any extension thereof.

HUD’s regulations at 24 CFR 984.303(f) state that modifications to the contract of participation
may be modified in writing with respect to the training and service plans, and 24 CFR
984.303(c)(1) requires that no member of the family self-sufficiency household be a recipient of
welfare assistance.

HUD’s regulations at 24 CFR 984.305(c)(2) state that to issue disbursements before completion
of the program, the authority must determine that the family self-sufficiency household has
fulfilled certain interim goals established in the contract of participation and needs a portion of
the family self-sufficiency account for purposes consistent with the contract of participation.

United States Code, Title 42, chapter 8, subchapter I, subsection 1437u(a), states the purpose of
the Family Self-Sufficiency program established under this section is to promote the
development of local strategies to coordinate use of public housing and assistance under the
certificate and voucher programs under section 1437f of this title with public and private
resources to enable eligible households to achieve economic self-sufficiency.

Finding 4

HUD’s regulations at 24 CFR 5.508(c) state that the responsible entity must verify the accuracy
of the income information received from the family and change the amount of the total
household payment, household rent, or program housing assistance payment or terminate
assistance, as appropriate, based on such information.

HUD’s regulations at 24 CFR 982.153 state that the public housing authority must comply with
the consolidated annual contributions contract, the application, HUD regulations and other
requirements, and its program administrative plan.

HUD’s regulations at 24 CFR 982.158(a) state that the public housing authority must maintain
complete and accurate accounts and other records for the program in accordance with HUD
requirements in a manner that permits a speedy and effective audit. The authority must prepare a
unit inspection report. During the term of each assisted lease and for at least 3 years thereafter,
the authority must keep (1) a copy of the executed lease, (2) the housing assistance payments
contract, and (3) the application from the family. The authority must keep the following records
for at least 3 years: records that provide income, racial, ethnic, gender, and disability status data
on program applicants and participants; unit inspection reports; lead-based paint records as
required by part 35, subpart B, of this title; records to document the basis for authority
determination that rent to owner is a reasonable rent (initially and during the term of a contract);
and other records specified by HUD.

HUD’s regulations at 24 CFR 982.305(a) state that the public housing authority may not give
approval for the family of the assisted tenancy or approve a housing assistance contract until the
authority has determined that the following meet program requirements: the unit is eligible, the
unit has been inspected by the housing authority and passes HUD’s housing quality standards,
and the rent to the owner is reasonable.


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HUD’s regulations at 24 CFR 982.305(b)(1) state that before the beginning of the initial term of
the lease for a unit, the owner and the household must have executed the lease (including the
HUD-prescribed tenancy addendum) and the lead-based paint disclosure as required in section
35.92(b) of this title.

HUD’s regulations at 24 CFR 982.305(c) state that when a housing assistance payments contract
is executed, the public housing authority must use its best efforts to execute the housing
assistance payments contract before the beginning of the lease term. The housing assistance
payments contract must be executed no later than 60 calendar days from the beginning of the
lease term. The public housing authority may not make any housing assistance payments to the
owner until the housing assistance payments contract has been executed. Any housing assistance
payments contract executed after the 60-day period is void, and the public housing authority may
not make any housing assistance payments to the owner.

HUD’s regulations at 24 CFR 982.311(d)(1) state that if the family moves out of the unit, the
public housing authority may not make any housing assistance payments to the owner for any
month after the month when the family moves out. The owner may keep the housing assistance
payment for the month when the family moves out of the unit.

HUD’s regulations at 24 CFR 982.451(a)(2) state that the term of the housing assistance
payments contract is the same as the term of the lease.

HUD’s regulations at 24 CFR 982.505(b)(4) state that if the payment standard amount is
increased during the term of the contract, the increased payment standard shall be used to
calculate the monthly housing assistance payment for the family beginning at the effective date
of the family’s first regular reexamination on or after the effective date of the increase in the
payment standard amount.

HUD’s regulations at 24 CFR 982.516(a)(1) require the public housing authority to conduct a
reexamination of family income and composition at least annually. The public housing authority
must obtain and document in the client file third-party verification of the following factors or
must document in the client file why third-party verification was not available: (i) reported
family annual income, (ii) the value of assets, (iii) expenses related to deductions from annual
income, and (iv) other factors that affect the determination of adjusted income. At any time, the
public housing authority may conduct an interim reexamination of family income and
composition. Interim examinations must be conducted in accordance with policies in the public
housing authority’s administrative plan.

HUD’s regulations at 24 CFR 982.54(a) state that the public housing authority must administer
the program in accordance with its administrative plan.




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