oversight

The Lake Metropolitan Housing Authority, Painesville, OH, Needs To Improve Its Administration of Its Section 8 Housing Choice Voucher Progr

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-09-30.

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

                                                                 Issue Date
                                                                         September 30, 2010
                                                                 
                                                                 Audit Report Number
                                                                         2010-CH-1015




TO:         Shawn Sweet, Director of Public Housing Hub, 5DPH


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

SUBJECT: The Lake Metropolitan Housing Authority, Painesville, OH, Needs To Improve
           Its Administration of Its Section 8 Housing Choice Voucher Program

                                   HIGHLIGHTS

 What We Audited and Why

             We audited the Lake Metropolitan Housing Authority’s (Authority) Section 8
             Housing Choice Voucher program (program). The Authority was selected for
             audit based upon a congressional request from the Honorable Steven C.
             LaTourette. 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 and
             policies. The objective includes determining whether the Authority followed its
             procurement policy when obtaining contracted services for its program,
             adequately monitored zero-income households, and adequately administered its
             family self-sufficiency program. This is the third of three audit reports on the
             Authority’s program.

 What We Found

             The Authority’s program administration regarding its program procurement and
             zero-income households was inadequate, but it generally complied with the
             family self-sufficiency program requirements. It failed to follow its procurement
             and ethical policies regarding possible conflicts of interest when obtaining
             contracted services for its program. We identified deficiencies in all 13
             contractual agreements reviewed. As a result, full and open competition was
           hindered, and the Authority paid more than $64,000 in unsupported contract
           expenses and more than $3,000 in inappropriate contract expenses.

           Further, the Authority failed to comply with its program administrative plan
           regarding zero-income household reviews. Of the 58 zero-income households
           reviewed, 29 had either excluded or unreported income that affected their housing
           assistance payments. As a result, the Authority overpaid housing assistance and
           utility allowances totaling more than $36,000 for households that were required to
           meet their rental obligations. It generally complied with the family self-
           sufficiency program requirements. However, of the 32 participants with escrow
           balances reviewed, 20 contained errors in one or more of the escrow credit
           applications, resulting in more than $14,000 in escrow credit overpayments and
           more than $3,000 in escrow credit underpayments.

What We Recommend

           We recommend that the Director of HUD’s Cleveland Office of Public Housing
           require the Authority to (1) provide documentation or reimburse its program more
           than $64,000 from non-Federal funds for the unsupported payments cited in this
           audit report; (2) reimburse its program from non-Federal funds for the improper
           use of more than $68,000 in program funds; and (3) implement adequate
           procedures and controls to address the findings cited in this audit report to prevent
           more than $19,000 in program funds from being spent on excessive escrow
           credits, housing assistance and utility allowance payments, and contract
           payments.

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

Auditee’s Response

           We provided our audit 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 also provided our discussion draft audit report to the Authority’s
           executive director, its board chairperson, and HUD’s staff during the audit. We
           held an exit conference with the executive director on September 24, 2010.

           We asked the executive director to provide written comments on our discussion
           draft audit report by September 25, 2010. The executive director provided written
           comments, dated September 24, 2010. The Authority disagreed with finding 1,
           but generally agreed with findings 2 and 3. The complete text of the written
           comments, except for 1,208 pages of documentation that were not necessary to
           understand the Authority’s comments, along with our evaluation of that response,
           can be found in appendix B of this report. We provided the Director of HUD’s


                                             2
Cleveland Office of Public Housing with a complete copy of the Authority’s
written comments plus the 1,208 pages of documentation.




                                3
                            TABLE OF CONTENTS

Background and Objective                                                          5

Results of Audit
      Finding 1: The Authority Failed To Follow Procurement Requirements for
                 Contracted Services for Its Program                              6

      Finding 2: Controls Over Zero-Income Households Had Weaknesses             13

      Finding 3: The Authority Generally Complied with Family Self-Sufficiency
                 Program Requirements                                            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 Authority’s Policies                              57




                                            4
                       BACKGROUND AND OBJECTIVE

The Lake Metropolitan Housing Authority (Authority) was created in October 1965 pursuant to
Section 3735.01 of the Ohio Revised Code to provide safe and sanitary housing to low-income
families. In 1977, the Authority began administering Federal housing programs, beginning with
the Section 8 rental housing assistance program. The Authority’s jurisdiction was expanded to
include all of Lake County, OH, in 1982. The Authority is a political subdivision of the State of
Ohio and is governed by a seven-member board of commissioners appointed for 5-year terms by
local elected officials. The Authority’s executive director is appointed by the board of
commissioners and is responsible for coordinating established policy and carrying out the
Authority’s day-to-day operations.

The Authority administers its Section 8 Housing Choice Voucher program (program) funded by
the U.S. Department of Housing and Urban Development (HUD). It provides assistance to low-
and moderate-income individuals seeking decent, safe, and sanitary housing by subsidizing rents
with owners of existing private housing. As of May 1, 2010, the Authority had 1,389 units under
contract with annual housing assistance payments totaling more than $9 million in program
funds.

The Authority certified to troubled status on its Section Eight Management Assessment Program
rating for the fiscal year ending June 30, 2008. As a result, HUD conducted an on-site review in
February 2009 to determine why the Authority was in noncompliance with program performance
requirements. HUD and the Authority executed a corrective action plan, effective February
2009, to correct the deficiencies cited in the confirmatory review. This audit addressed areas that
were not covered by the corrective action plan.

The congressional request involved complaints against the Authority regarding the following
issues: (1) conflicts of interest between its program staff and its program participants; (2) failure
of its board of commissioners to address declarations made against its staff; (3) its hiring
practices; (4) failure to enforce tenant and landlord fraud; (5) its procurement practices; (6) its
board of commissioners changing Federal regulations; (7) its inspection procedures; and (8) its
rent reasonableness procedures. These complaints involved both the Authority’s program and its
Public Housing program. Because we concluded that the majority of the complaints involved the
Authority’s program, this is where we focused our reviews. Our audit review and audit report
number 2009-CH-1012 addressed complaints 1, 2, 3, 4, and 6. Our audit review and audit report
number 2010-CH-1001 addressed complaints 3, 7, and 8. And this audit review and audit report
addressed complaints 3, 4, and 5. Based upon our reviews, we did not identify any reportable
conditions for complaints 1, 2, and 6.

Our objective was to determine whether the Authority administered its program in accordance
with HUD’s requirements to include determining whether the Authority (1) obtained program
services in accordance with its procurement policy, (2) monitored zero-income households in
accordance with its program administrative plan, and (3) operated its family self-sufficiency
program in accordance with HUD regulations. This is the third of three reports on the
Authority’s program (see report number 2009-CH-1012, issued on August 14, 2009, and report
number 2010-CH-1001, issued on October 28, 2009).



                                                 5
                                       RESULTS OF AUDIT

Finding 1: The Authority Failed To Follow Procurement Requirements
               for Contracted Services for Its Program
The Authority failed to follow its procurement requirements when obtaining contracted services
for the administration of its program. This deficiency occurred because the Authority lacked
adequate procedures and controls to ensure that its procurement and ethical policies regarding
possible conflicts of interest were followed. Further, it did not have an adequate contract
administration system. As a result, the Authority hindered full and open competition, paid more
than $64,000 in unsupported contract expenses, and paid more than $3,000 in improper contract
expenses.



    The Authority Did Not Use the
    Proper Method of Procurement

                  The Authority entered into 13 contractual agreements that related to its program
                  between July 1, 2007, and February 28, 2010. We reviewed the procurement
                  process for the 13 agreements to determine whether the Authority obtained the
                  contracted services in accordance with its procurement and ethical policies. We
                  identified deficiencies with the Authority’s method of procurement, scope of
                  services requested, method of soliciting bids, evaluation of bids, and contract type
                  determination.

                  The Authority’s procurement policy defines various methods of procurement,
                  depending upon the purchase price and the type of services requested. The
                  Authority failed to use the proper method of procurement for 8 of the 11
                  procurement transactions reviewed, which resulted in the 13 agreements, contrary
                  to section III, paragraphs B, D, and E, of its procurement policy (see appendix C
                  in this audit report, finding 1). For instance, the large purchases method of
                  procurement should have been used for request for proposal 2009-11 since this
                  was an umbrella request that listed services for (1) the family self-sufficiency
                  grant submission, (2) technical assistance with the program’s operations, and (3)
                  technical assistance with the housing quality standards inspection process.

1
  Section III.B of the Authority’s procurement policy, dated November 2004, states the following regarding the large
purchases method of procurement: “For purchases in excess of $25,000, the sealed bids procedure set forth in
section III.C. will be adhered to after public advertisement, and the board of commissioners’ approval will be
required for contract award. The award shall be made to the lowest responsive and responsible bidder unless
justified in writing based on price and other specified factors, such as for architect-engineer and other professional
services contracts. If non-price factors are used, they shall be specified in the bidding documents. The names,
addresses, and/or telephone numbers of the offerors and persons contracted, and the date and amount of each
quotation shall be recorded and maintained as a public record.” Section III.C states that for professional services
contracts, sealed bidding should not be used. Section III.D states that competitive proposals are the preferred
method for contracting for professional services.


                                                          6
             Further, the work orders issued as of April 2010 totaled more than $40,000.
             However, the Authority did not follow its procurement policy, which required
             publicizing the upcoming procurement (e.g., advertising in local newspapers or
             trade journals), preparing both an independent cost estimate and a technical
             evaluation plan for analyzing proposals received, and preparing and issuing the
             request for proposals to the respondents to the public notice and those on its
             mailing list for competitive proposals (i.e., purchases more than $25,000).

Deficiencies in the Scope of
Services Requested


             The scope of services requested by the Authority was not in accordance with
             section VI, paragraph A, of its procurement policy (see appendix C of this audit
             report, finding 1) for 2 of the 11 procurement transactions reviewed due to their
             detailed, duplicative, and/or unnecessary nature. The level of detail in the scope
             of services requested for these two procurement transactions did not promote
             competition because it did not allow the bidders to explain how their products and
             services would meet the Authority’s needs. Therefore, the bidders’ response to
             the request for proposals tended to almost exactly mirror the requested scope of
             services, aside from minor details.

             For 6 of the 11 procurement transactions, the Authority’s files did not contain a
             written description of the requested scope of services because the services were
             sole-sourced and the specifications were outlined in the contractual agreement.
             However, a review of all contracted services indicated that the Authority obtained
             duplicative services in the following areas: Section Eight Management
             Assessment Program and quality control reviews; file organization, third-party
             tracking and verifications; wait list management; file corrections required by
             various auditing entities; training; and housing quality standards inspections. We
             acknowledge that some of the duplicative services were appropriate but not all.

Deficiencies with the Bid
Solicitation Process


             The Authority failed to use the proper method of soliciting bids for 11 of the 13
             contractual agreements in accordance with (1) section II, paragraph B; section III,
             paragraph B; section IV, paragraph C; and section VI, paragraphs A and B, of its
             procurement policy; (2) board resolution 24-2009; and (3) its ethical policy (see
             appendix C of this audit report, finding 1). For example, a contract was sole-
             sourced to the program manager of the Parma Public Housing Authority in
             October 2008 to provide technical assistance with processing and organizing files,
             third-party tracking, sending out verifications, opening the waiting list, pulling
             applicants from the waiting list, and office organization. The Authority sole-
             sourced contracts to this program manager again in January 2009 to open the
             waiting list and in May 2009 to process and organize files. However, the
             Authority’s procurement policy, dated November 2004, stated that small


                                              7
purchases below $2,500 “must be distributed equitably among qualified sources.
If practicable, a quotation shall be solicited from other than the previous source
before placing a repeat order.”

The Authority’s executive director had a prior business relationship with the
following contractors that were awarded program contracts:

      Bids were solicited from CGI for 6 of the 13 contractual agreements
       reviewed, and CGI was awarded 5 contracts totaling $78,352, in which
       $51,291 had been paid as of April 2010. The executive director was a
       previous manager for CGI in its Government Services Division. In
       approximately 15 months during his employment at CGI, the executive
       director had provided assistance to approximately four public housing
       agencies, including the Parma Public Housing Authority. Further, the
       executive director served as the housing quality standards supervisor and
       section 8 director during the same period that CGI provided consultant
       services to the Akron Metropolitan Housing Authority.

      Bids were solicited from the program manager of the Parma Public
       Housing Authority for 5 of the 13 contractual agreements reviewed, and
       this contractor was awarded 4 contracts totaling $23,020, in which $7,175
       had been paid as of April 2010. The Authority’s executive director
       worked with this contractor while managing the Parma Housing Authority
       assignment during his employment with CGI. The Authority did not
       ensure that the contractor had the ability to provide the requested services
       before awarding the contracts, contrary to section IV, paragraph A of its
       procurement policy (see appendix C of this audit report, finding 1). As a
       result, the Authority received and paid for indecipherable information
       from this contractor.

      Bids were solicited from Advantageous Consulting for 2 of the 13
       contractual agreements reviewed, and this contractor was awarded both
       contracts totaling $7,275, in which the entire amount had been paid as of
       April 2010. The Authority’s executive director worked at the Akron
       Metropolitan Housing Authority during the same period as this contractor
       and served as the contractor’s manager.

The Authority’s executive director disclosed on his conflict-of-interest statement
for the Authority, dated October 29, 2009, that he (1) previously worked at CGI,
(2) worked as a consultant with the program manager at the Parma Public
Housing Authority, and (3) worked at the Akron Metropolitan Housing Authority
with Advantageous Consulting. However, the Authority was unable to provide
documentation to support the full disclosure of information before the awarding
of these contracts. The executive director said that the Authority generally
solicited bids from three area contractors because these were the companies that
were local to the Authority, especially since the services that were sought were for
such a unique program. He also said that due to the tumultuous state of the
Authority and the extenuating circumstances, the Authority solicited bids from


                                 8
            contractors with which it was familiar and which it presumed had a lower cost.
            This was a limitation used by the Authority, although section VI, paragraph B, of
            its procurement policy indicates that geographic restriction limitations should be
            avoided and that firms shall not be precluded from qualifying during the
            solicitation period. As a result, firms were precluded from bidding on the
            Authority’s contracted services.

Deficiencies with the Process of
Evaluating Bids and/or
Awarding Contracts


            The Authority failed to evaluate bids or provide an adequate rationale for
            awarding contracts in accordance with section II, paragraph B, and section III,
            paragraph F, of its procurement policy for 12 of the 13 contractual agreements
            reviewed due to the following: the bid opening occurred before the submission
            deadline for one request for proposal, the scoring criteria were vague and generic
            for two requests for proposals, and the Authority did not use the scoring criteria
            for another request for proposal. Further, the Authority’s executive director said
            that he participated in the contract awards for the 12 contractual agreements,
            although HUD’s regulations and the Authority’s ethical policy regarding possible
            conflicts of interest prohibited this conduct (see appendix C of this audit report,
            finding 1). HUD’s regulations at at 24 CFR (Code of Federal Regulations)
            982.161 state that neither the Authority nor any of its contractors or
            subcontractors may enter into any contract or arrangement in connection with the
            tenant-based programs in which any of the following classes of persons has any
            interest, direct or indirect, during tenure or for one year thereafter: (1) any present
            or former member or officer of the Authority and (2) any employee of the
            Authority, or any contractor, subcontractor or agent of the Authority, who
            formulates policy or who influences decisions with respect to the programs. The
            ethical policy states that an employee is prohibited from authorizing, voting on, or
            otherwise using the authority or influence of the office to secure approval of a
            public contract in which the official, a family member, or a business associate has
            an interest. Employees are prohibited from having an interest in a public contract
            with their public entity or an agency with which they are connected, even if they
            do not participate in the issuance of the contract. The exemptions indicated in the
            ethical policy did not apply in these cases because the contracted services were
            obtainable elsewhere. We identified (1) other potential bidders that could have
            provided the contracted services that the Authority received and (2) Web sites that
            would have allowed the Authority to advertise its requests for proposals and other
            requested services to gain full and open competition.

Contract Type Deficiencies


            The Authority failed to (1) identify the contract type for 7 of the 13 contractual
            agreements reviewed, (2) maintain written documentation that no other contract
            was suitable for 5 time-and-materials contractual agreements, and (3) include a


                                              9
           ceiling price that the contractor exceeds at its own risk for one time-and-materials
           contractual agreement in accordance with section V, paragraphs A and C, of its
           procurement policy (see appendix C of this audit report, finding 1). Further, the
           Authority failed to maintain written contract modifications for one contractual
           agreement in accordance with section II, paragraph B, of its procurement policy.

           We did not identify indications that the Authority’s executive director personally
           benefitted from awarding these contractual services to his former employer and
           business associates. However, based upon the deficiencies discussed above
           regarding the method of procurement, scope of services requested, method of
           soliciting bids, evaluation of bids, and contract type determination, an appearance
           of a conflict of interest existed. These deficiencies resulted in unsupported
           contract expenses totaling $64,264, improper contract expenses totaling $3,652,
           and misallocated contract expenses totaling $431.

The Authority’s Procedures
and Controls Had Weaknesses


           The noncompliance occurred because the Authority lacked adequate procedures
           and controls to ensure that its procurement and ethical policies were followed.
           The Authority failed to engage in an annual planning process to ensure efficient
           and economical purchasing for all 13 contractual agreements reviewed in
           accordance with section II, paragraph B, of its procurement policy. Its executive
           director said that the technical assistance and consultant services were obtained
           because shortly after coming aboard, he realized that the Authority was in or
           headed into troubled status and at risk of being taken into receivership by HUD.
           He said that the Authority was in an emergency or crisis mode that could not have
           been planned for and because of this position; he had to determine what would
           give the Authority the most benefit for the dollar. Therefore, he wanted to obtain
           an independent assessment of the Authority’s condition. He also realized soon
           after coming to the Authority that the program administrative plan was outdated
           and in need of revision.

           The Authority’s executive director said that consultants were also brought in
           when the Authority experienced a change in program managers to assist in the
           transition period and to assist the managers in meeting their responsibilities.
           During our audit period, the Authority had three full-time program managers and
           one interim program manager, and the executive director took on the
           responsibilities of this role between managers. Further, since the Authority did
           not have enough staff to address the audit findings identified in our prior audits
           (report numbers 2009-CH-1012 and 2010-CH-1001) while still performing its
           day-to-day job responsibilities, contractors were acquired to handle these
           additional responsibilities.

           The executive director said that there was no official delegation of powers
           regarding the contracting officer position, as described in section II, paragraph A
           of the Authority’s procurement policy (see appendix C of this audit report, finding


                                            10
1). He further stated that because the former assistant director and the
administrative office manager were sent to procurement training, this indicated
the intent to have these employees involved in the procurement process. The
executive director said that he was involved in all of the procurement transactions
due to the limited knowledge and understanding of his staff. As indicated in the
procurement policy, part of the executive director’s job responsibilities is to
oversee the procurement process (see appendix C of this audit report, finding 1).

In addition, the Authority did not perform adequate contract management of its
contracted services in accordance with section II, paragraph B, and section V,
paragraph D, of its procurement policy as follows:

      It failed to inspect the work performed by its contractors before payment
       was made for 8 of the 13 contractual agreements. We identified
       discrepancies in the quality control universes that were pulled by two
       contractors and identified indecipherable information that was provided to
       the Authority by another contractor.

      It improperly allocated expenses to both the Section 8 and its Public
       Housing programs.

      It allowed both CGI and Advantageous Consulting to provide technical
       assistance for its program and then evaluate their own procedures and
       guidance by performing quarterly and year-end Section Eight
       Management Assessment Program reviews.

      It obtained and paid for services that were not included in a contract
       agreement and did not ensure that all of the services that were indicated in
       the contract agreement were provided for another contractor.

      It allowed work to be performed without written approval via work orders
       or board resolutions for another contractual agreement with CGI.

      It continued its contractual agreement with one contractor, although our
       prior audit (report number 2010-CH-1001) identified discrepancies in the
       contractor’s quality control inspections.

During the course of our audit, the Authority took the following measures to
improve its procurement process:

      In February 2010, the Authority revised its procurement policy, and

      In February 2010, the Authority established procedures to review
       contractors’ invoices and acknowledge that all receipts were present
       before payment was made.




                                11
                      In August 2010, the Authority’s executive director and administrative
                       office manager received procurement training.

                      In September 2010, the Authority appointed a contracting officer.

             We did not review procurement transactions since the Authority implemented its
             new procedures in February 2010 because it did not obtain additional contracted
             services for its program before our audit fieldwork was completed in May 2010.
             Therefore, we did not determine whether the new procedures had lessened the
             Authority’s weaknesses.

Conclusion

             As a result of the weaknesses in its procedures and controls, the Authority (1)
             hindered full and open competition; (2) paid $3,652 in inappropriate expenses due
             to the improper allocation of costs, duplicate payments, and use of the incorrect
             hourly rate for services provided; (3) paid $64,264 in unsupported expenses for
             the contracted services that were obtained without following its procurement
             policy; (4) improperly allocated $431 in expenses to its Public Housing program;
             and (5) risked expending excessive program funds by not requiring a ceiling price
             on all time-and-material contracts.

Recommendations

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

             1A.       Reimburse its program $3,652 from non-Federal funds for the ineligible
                       expenses cited in this finding.

             1B.       Provide documentation to support the reasonableness of the expenses or
                       reimburse its program $64,264 from non-Federal funds for the
                       unsupported costs cited in this finding.

             1C.       Reimburse its Public Housing program $431 due to the improper
                       allocation of expenses.

             1D.       Evaluate the effectiveness of its procurement policy that was adopted in
                       February 2010 and make any adjustments, if applicable.

             1E.       Implement an adequate contract administration system to ensure that
                       contracts are awarded in accordance with the Authority’s procurement
                       policy and that contractors perform in accordance with their contracts.

             1F.       Ensure that its board of commissioners enforces the Authority’s
                       procurement policy and provides proper oversight.


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Finding 2: Controls over Zero-Income Households Had Weaknesses
The Authority did not effectively use HUD’s Enterprise Income Verification system (system) or
other verification methods to determine that reported zero-income households had unreported
income. These conditions occurred because the Authority lacked adequate procedures and
controls to perform appropriate income verification. As a result, it overpaid housing assistance
and utility allowances totaling more than $36,000 for households that were required to meet their
rental obligations. Further, we estimate that the Authority will overpay nearly $12,000 in
housing assistance and utility allowances over the next year.



 Reported Income Was Not
 Accurately Calculated

              We performed a 100 percent review of the 58 households that were reported in the
              Authority’s PHA-Web software program as having zero income as of November
              19, 2009. The 58 household files were reviewed to determine whether the
              households had income during the period July 1, 2007, through February 28,
              2010, and other periods as necessary. We reviewed the files to determine whether
              the Authority was aware of any income identified and appropriately incorporated
              the income into the households’ subsidy determination. Our review was limited
              to the information maintained in the household files and HUD’s system. We only
              reviewed the examination periods in which the households were reported as
              having zero income.

              Of the 58 households reviewed, 29 (50 percent) had either excluded or unreported
              income that affected their housing assistance payments. Therefore, the Authority
              provided excessive housing assistance and utility allowance payments for the 29
              households. Three of the households had both excluded and unreported income.
              The housing assistance and utility allowance payment errors identified during this
              review do not overlap the errors identified in audit report number 2009-CH-1012.

              The Authority failed to determine income and/or perform interim examinations
              for 15 of the 58 households that reported zero income. It was aware of the
              increases in income that were reported by the 15 households but it failed to
              recalculate the households’ subsidy determinations based upon the increases in
              income contrary to its administrative plans.

              The following is an example of a household for which the Authority was aware of
              the reported income but excluded the income in the subsidy determination:

                 Household 19 had employment income, which was reported to the Authority
                  and maintained in the household file. However, the Authority failed to
                  perform proper third-party verification and incorporate this increase in income
                  into a subsidy determination in accordance with its program administrative
                  plan (see appendix C in this audit report, finding 2). Since the household had



                                               13
               income, the Authority overpaid $606 in housing assistance from September 1,
               2009, through February 28, 2010.

           As a result, the Authority overpaid $17,896 in housing assistance and utility
           allowances for the 15 households.

Households Had Unreported
Income

           In addition, 17 of the 58 households had unreported income because they did not
           report their increases in income to the Authority in a timely manner or at all. For
           11 of the 17 households, the Authority had information obtained from HUD’s
           system or other verifications indicating that the household had income, but the
           Authority failed to pursue overpaid assistance due to the unreported income.

           The following are examples of households that had unreported income:

              Household 13 had income, according to HUD’s system, totaling $9,373.
               Since the household had unreported income, the Authority overpaid $1,639 in
               housing assistance from June 15, 2009, through March 31, 2010. If the
               Authority had conducted periodic reviews every 3 months as required by its
               program administrative plan (see appendix C in this audit report, finding 2), it
               would have identified the unreported income and been able to verify the
               household’s employment status by performing a third-party verification.

              Household 49 had employment income, which was confirmed through HUD’s
               system and third-party verification, totaling $7,252. The household file
               contained a third-party employment verification received by the Authority on
               approximately October 14, 2009, stating that a household member was
               employed from October 20, 2008, through October 14, 2009. However, the
               Authority did not attempt to recover the overpaid housing assistance in
               accordance with its program administrative plan (see appendix C in this audit
               report, finding 2). Since the household had income, the Authority overpaid
               $1,284 in housing assistance from January 1 through December 31, 2009.

           As a result, the Authority overpaid $18,181 in housing assistance and utility
           allowances for the 17 households.

The Authority’s Procedures
and Controls Had Weaknesses


           The Authority overpaid housing assistance and utility allowances for reported
           zero-income households that had excluded and/or unreported income because it
           lacked adequate procedures and controls to ensure that HUD’s regulations and its
           program administrative plan were followed.



                                            14
The cause of the majority of the errors in the zero-income household review (i.e.,
annual income calculation errors) mirrored the cause of errors discussed in audit
report number 2009-CH-1012 since annual income is one of the driving factors in
determining the accuracy of housing assistance and utility allowance payments.
In audit report number 2009-CH-1012, we identified causes related to insufficient
guidance, inadequate training, and inadequate quality control reviews. We
identified the following additional causes during this audit:

      The Authority implemented an updated administrative plan, effective
       April 2009. However, the administrative plan contained inconsistent and
       contradictory guidance regarding performing interim reexaminations,
       which resulted in the Authority’s staff not always recalculating the subsidy
       after a zero-income household began receiving income.

      The Authority lacked standard procedures for monitoring zero-income
       households. Although the Authority’s administrative plans indicated that
       written certifications of income status and/or periodic interim
       examinations were to be performed for the zero-income households,
       neither the administrative plans nor program procedures outlined how the
       Authority’s certification specialists should accomplish these tasks.
       Therefore, the certification specialists indicated that they developed their
       own methods.

      The Authority’s program staff made inadvertent errors. Due to their
       caseloads, program staff members said that they had limited time to
       monitor zero-income households as well as they should to prevent
       overpayments of housing assistance to households that were required to
       meet their rental obligations. Over the course of our audit period,
       caseloads increased from approximately 250 households to approximately
       480 households per certification specialist. The job responsibilities of the
       certification specialists include scheduling and conducting appointments
       for all households for their annual recertification, verifying the
       households’ income information and other factors, and processing the
       annual reexaminations. In addition, the certification specialists perform
       the necessary interim reexaminations; process change of unit examinations
       when households want to move; and engage in other miscellaneous tasks
       such as providing input to help the Authority revise its administrative plan
       which was updated in April 2009. Although they generally accessed
       HUD’s system to obtain income reports at each annual recertification, the
       reports were not always used to identify or pursue overpaid assistance.
       Therefore, the program staff was not surprised by the errors identified in
       our zero-income household review. The Authority’s executive director
       and program manager acknowledged that there were deficiencies in their
       monitoring of zero-income households.

      The Authority performed inadequate quality control reviews. It did not
       perform quality control reviews that specifically related to the monitoring
       of zero-income households, including ensuring that written certifications


                                15
                    were obtained, interim reexaminations were performed, and overpaid
                    assistance was pursued once unreported income was identified.

                   The Authority’s program manager said that she had not received formal
                    training for her position since August 2009 when the executive director
                    suggested that she transfer from the position of administrative office
                    manager to program manager. She said she was denied executive
                    management training although she ran the Authority’s largest program.
                    As of April 2010, she was scheduled to receive executive management
                    training. However, she was no longer employed with the Authority as of
                    May 2010.

             As of September 2010, the Authority was in the process of revising its program
             administrative plan. In addition, it planned to obtain technical assistance from its
             software provider PHA-Web to enhance the functions of its software by either
             embedding a reminder or notification within the system to assist staff in
             performing regular, periodic reviews of zero-income households or some other
             means.

Conclusion

             As a result of the weaknesses in the Authority’s procedures and controls, the
             Authority overpaid $36,077 in housing assistance and utility allowances to the 29
             households due to excluded and unreported income.

             In accordance with 24 CFR 982.152(d), HUD may reduce or offset any
             administrative fee to public housing authorities, in the amount determined by
             HUD, if the authorities fail to perform their administrative responsibilities
             correctly or adequately under the program. The Authority received $3,720 in
             administrative fees for the 15 households for which it excluded income, and it
             received $3,087 in administrative fees for the 11 households that had unreported
             income for which it failed to pursue overpaid assistance.

             Unless the Authority implements adequate procedures and controls regarding its
             monitoring of zero-income households to ensure compliance with HUD’s
             regulations and its program administrative plan, we estimate that nearly $12,000
             in payments will be misspent over the next year. Our methodology for this
             estimate is explained in the Scope and Methodology section of this audit report.
             The Authority could put these funds to better use if proper procedures and
             controls are put in place to ensure the accuracy of housing assistance and utility
             allowance payments to its zero-income households.

Recommendations

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


                                              16
2A.   Pursue collection from the applicable households or reimburse its program
      $18,181 from non-Federal funds for the overpayment of housing
      assistance and utility allowances for the 17 households with unreported
      income cited in this finding.

2B.   Reimburse its program $17,896 from non-Federal funds for the
      overpayment of housing assistance and utility allowances for the 15
      households with excluded income cited in this finding.

2C.   Reimburse its program $6,807 ($3,720 plus $3,087) from non-Federal
      funds for the improper administrative fees related to the 25 households
      cited in this finding.

2D.   Revise its program administrative plan (1) to ensure that its procedures
      and controls are uniform and consistent regarding its zero-income
      households and (2) to ensure Public and Indian Housing Notice 2010-19,
      Administrative Guidance for Effective and Mandated Use of the
      Enterprise Income Verification System, is incorporated.

2E.   Implement adequate procedures and controls to properly monitor zero-
      income households and ensure that households that report zero income do
      not have income that would result in an overpayment of housing and
      utility assistance. By implementing adequate procedures and controls, the
      Authority should help to ensure that $11,752 in program funds is
      appropriately used for future payments.

2F.   Ensure that its staff responsible for monitoring zero-income households is
      knowledgeable of HUD’s and its program policies and procedures by
      providing adequate training.

2G.   Ensure that its staff responsible for performing quality controls is
      knowledgeable of HUD’s and its program policies and procedures to
      ensure that proper monitoring of zero-income households is not
      overlooked and households that receive income pay their appropriate share
      of their rent.

2H.   Analyze its staffing levels for the program based upon the job
      requirements for each position to determine the need for additional staff.




                               17
Finding 3: The Authority Generally Complied with Family Self-
                 Sufficiency Program Requirements
The Authority generally complied with HUD’s requirements, its program administrative plan,
and its family self-sufficiency action plan. However, it failed to consistently compute
participants’ escrow credits and maintain their escrow accounts accurately. These conditions
occurred because the Authority lacked adequate procedures and controls to ensure that HUD’s
regulations, its program administrative plan, and its family self-sufficiency action plan regarding
maintaining escrow accounts were followed. As a result, it overpaid more than $14,000 and
underpaid more than $3,000 in escrow credit. Further, we estimate that the Authority will
overpay more than $4,000 in escrow credit over the next year.



 The Authority Made Incorrect
 Escrow Credit Payments

               We performed a 100 percent review of the 32 family self-sufficiency participants
               with escrow account balances as of September 30, 2009. The 32 files were
               reviewed to determine whether the Authority maintained the required
               documentation and correctly calculated and applied the family self-sufficiency
               program participants’ escrow credits for our audit period of July 1, 2007, through
               September 30, 2009, and other periods as necessary. Our review was limited to
               the information maintained by the Authority in its participants’ files.

               The Authority appropriately maintained the contracts of participation and the
               individual training and service plans for all 32 participants reviewed, and it
               appropriately distributed annual statements to the participants that had an escrow
               balance at fiscal year-end in 2008 and 2009. However, the Authority did not
               always properly authorize interim escrow disbursements. Of the five interim
               escrow disbursements reviewed, four were improperly authorized due to (1) lack
               of written approval, (2) lack of an escrow withdrawal request from the participant,
               and/or (3) inappropriate distribution of the disbursement check to the participant
               instead of the agency or business that would be accepting the payment. Since the
               participants’ files did contain documentation that indicated that the interim
               disbursements were for approved purposes as indicated in the Authority’s family
               self-sufficiency action plan, we did not question the amount of the disbursements.
               Further, we did not want to double count the questioned costs since at least three
               of the disbursements were affected during our review of the escrow credit
               accuracy.

               Further, the Authority’s miscalculations and its failure to comply with program
               requirements resulted in escrow credit overpayments of $14,544 and
               underpayments of $3,347. Twenty (63 percent) of the 32 files reviewed contained
               errors in one or more of the escrow credit applications. These files included 11
               participant files with overpayments and 9 participant files with underpayments.
               The 20 files contained the following errors:


                                                18
               14 had calculation errors relating to annual income for the current income
                certification,
               6 had calculation errors relating to annual income for the income
                certification applicable at commencement of the family self-sufficiency
                program,
               3 had incorrect income limits used in their escrow credit calculation,
               2 had incorrect posting of the escrow credit in the subsidiary ledger,
               2 had understated escrow credits due to the Authority’s failure to
                determine an escrow credit since the participant did not reside in an
                assisted unit,
               1 had the incorrect amount of earned income and total tenant payment at
                program commencement used in the escrow credit calculation,
               1 had the incorrect amount of current earned income in the escrow credit
                calculation, and
               1 incorrectly had escrow credits determined although there was no
                increase in earned income (see appendix C for finding 3 in this audit
                report).

The Authority’s Procedures
and Controls Had Weaknesses


           The Authority lacked adequate procedures and controls to ensure that HUD’s
           regulations, its program administrative plan, and its family self-sufficiency action
           plan regarding maintaining escrow accounts were followed. The cause of the
           majority of the errors in the escrow credits and escrow account balances (i.e.,
           annual income errors) occurred because the Authority did not appropriately
           calculate participants housing assistance and utility allowance, as were the cause
           of errors discussed in audit report number 2009-CH-1012 since annual income is
           a driving factor in determining both housing assistance payments and escrow
           credits. For the family self-sufficiency program review, we identified annual
           income calculation errors in both the current examination and the examination
           used to enroll the participant in the family self-sufficiency program. Since the
           escrow credit is based upon increases in earned income and is a calculated
           difference in earned income and total tenant payment at program commencement
           rather than the current examination, annual income errors at program
           commencement generally will affect the escrow credit amount during the term of
           the participant’s family self-sufficiency contract. In audit report number 2009-
           CH-1012, we identified causes related to insufficient guidance, inadequate
           training, and inadequate quality control reviews. We identified the following
           additional causes during this audit.

           The Authority performed inadequate quality control reviews because it failed to
           identify errors that were specific to the participants’ escrow credits and/or escrow
           accounts and did not ensure that errors affecting the escrow were corrected.

           In addition, the Authority’s housing choice voucher manager said that not all staff
           assigned to perform the family self-sufficiency coordinator responsibilities was


                                            19
             qualified or well equipped to perform the duties. She said that this condition
             existed because the background for being a good coordinator was having strong
             interviewing (or rent calculation) skills. The Authority made staff changes in its
             family self-sufficiency department during and following our audit period.
             As discussed in finding 2 of this report, the Authority’s program manager said
             that she had not received formal training for her position.

             During the course of the audit, the Authority took the following measures to
             improve its program:

                   The Authority implemented an updated administrative plan, effective
                    April 2009. We performed a comparison of errors in the escrow credits
                    that occurred before the implementation of the administrative plan,
                    effective April 2009, rather than after the implementation of the plan, and
                    we noted a decrease in the percentage of errors from 26 to 14 percent.

                   Program staff attended training for the family self-sufficiency program.

                   The Authority was developing a new family self-sufficiency action plan.

                   As of June 2010, the Authority had addressed the escrow credit and
                    account errors that we identified.

Conclusion

             As a result of the weaknesses in the Authority’s procedures and controls, it
             overpaid $14,544 and underpaid $3,347 in escrow credit.

             In accordance with 24 CFR 982.152(d), HUD may reduce or offset any
             administrative fee to public housing authorities, in the amount determined by
             HUD, if the authorities fail to perform their administrative responsibilities
             correctly or adequately under the program. The Authority received $7,480 in
             program administrative fees for the 20 households with incorrect escrow account
             balances. The ineligible administrative fees related to the escrow credit errors
             identified during this review do not overlap the ineligible administrative fees
             identified in audit report number 2009-CH-1012.

             Unless the Authority implements adequate procedures and controls regarding its
             escrow payments to ensure compliance with HUD’s regulations, its program
             administrative plan, and its family self-sufficiency action plan, we estimate that
             more than $4,000 in payments will be misspent over the next year. Our
             methodology for this estimate is explained in the Scope and Methodology section
             of this audit report. The Authority could put these funds to better use if proper
             procedures and controls are put in place to ensure the accuracy of the escrow
             payments.




                                              20
Recommendations


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

          3A.     Reimburse its program $14,544 and correct the applicable escrow
                  accounts for the overfunding of the family self-sufficiency program
                  participants’ escrow accounts cited in this finding.

          3B.     Reimburse the appropriate family self-sufficiency program participants’
                  escrow accounts $3,347 for the underpayments cited in this finding.

          3C.     Reimburse its program $7,480 from non-Federal funds for the improper
                  administrative fees related to the 20 households cited in this finding.

          3D.     Implement adequate procedures and controls to ensure that staff properly
                  calculates family self-sufficiency program participants’ escrow credits and
                  properly maintains the participants’ escrow accounts. By implementing
                  adequate procedures and controls, the Authority should help to ensure that
                  $4,043 in net program funds is appropriately used for future payments.

          3E.     Ensure that its staff responsible for administering the family self-
                  sufficiency program is knowledgeable of both the program and the family
                  self-sufficiency program, including HUD’s and its program policies and
                  procedures.

          3F.     Ensure that its staff responsible for performing quality control reviews
                  includes reviews that ensure that escrow credits received under the family
                  self-sufficiency program are accurate.

          3G.     Provide documentation to support the implementation of its quality
                  controls over the program to ensure proper supervision and oversight over
                  its family self-sufficiency program participants.




                                           21
                         SCOPE AND METHODOLOGY

To accomplish our objective, we reviewed

                  Applicable laws and regulations; and HUD’s program requirements at 24 CFR
                   Parts 5, 982, and 984; HUD’s Public and Indian Housing Notice 2004-1; and
                   HUD’s Housing Choice Voucher Guidebook 7420.10.

                  The Authority’s accounting records; general ledgers; bank statements; board
                   resolutions from August 2003, November 2004, and June 2006 through
                   February 2010; organizational chart; program household files; procurement files;
                   program policies and procedures; procurement policy; ethical policy; and
                   program administrative plans, effective January 2000 and April 2009.

                  HUD’s reports and files for the Authority’s program.

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

Finding 1

We performed a 100 percent review of the 13 contractual agreements entered into by the
Authority during the period July 1, 2007, through October 2009, that specifically related to the
program. We reviewed the procurement process for the 13 agreements to determine whether the
Authority obtained the contracted services in accordance with its procurement and ethical
policies.

Finding 2

We performed a 100 percent review of the 58 households reported as having zero income as of
November 19, 2009. The 58 household files were reviewed to determine whether the households
had income while showing zero income during the period July 1, 2007, through February 28,
2010, and other periods as necessary to determine whether the Authority was aware of any
income identified and appropriately incorporated the income in the households’ subsidy
determination. Our review was limited to the information maintained in the household files and
HUD’s system.

Unless the Authority implements adequate procedures and controls regarding its monitoring of
zero-income households to ensure compliance with HUD’s regulations and its program
administrative plan, we estimate that more than $12,000 in payments will be misspent over the
next year. Using information provided by the Authority regarding the program retention rate for
the 5-year period July 1, 2005, through June 30, 2010, we determined that 97 percent of the
audited households would remain on the program over the next year. Since our audit period
covered multiple years, we determined that a 1-year period would represent 38 percent of our
error rate. Although some errors identified during our audit expanded beyond our audit scope of
July 1, 2007, through February 28, 2010, we only used the errors identified within the audit
scope to estimate funds to be put to better use. We multiplied (1) the retention rate of 97 percent


                                                22
by (2) the 38 percentage rate for the 1-year period and (3) the net error amount of $32,308 to
determine funds to be put to better use totaling $11,752.

Finding 3

We performed a 100 percent review of the 32 family self-sufficiency participants with escrow
account balances as of September 30, 2009. The 32 files were reviewed to determine whether
the Authority correctly calculated and applied the participants’ escrow credits for the audit
period July 1, 2007, through September 30, 2009, and other periods as necessary. Our review
was limited to the information maintained by the Authority in its participants’ files.

Unless the Authority implements adequate procedures and controls regarding its escrow
payments to ensure compliance with HUD’s regulations, its program administrative plan, and its
family self-sufficiency action plan, we estimate that more than $4,000 in payments will be
misspent over the next year. Using information provided by the Authority regarding the family
self-sufficiency program retention rate for the 5-year period July 1, 2005, through June 30, 2010,
we determined that 82 percent of the audited participants would remain on the program over the
next year. Since our audit period covered multiple years, we determined that a 1-year period
would represent 44 percent of our error rate. Although some errors identified during our audit
expanded beyond the audit scope of July 1, 2007, through September 30, 2009, we only used the
errors identified within the audit scope to estimate funds to be put to better use. We multiplied
(1) the retention rate of 82 percent by (2) the 44 percentage rate for the 1-year period and (3) the
net error amount of $11,092 to determine funds to be put to better use totaling $4,043.

We performed our on-site audit work from October 2009 through May 2010 at the Authority’s
program office located at 189 First Street, Painesville, OH. The audit covered the period January 1,
2007, through September 30, 2009, but was expanded as necessary.

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 finding 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 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 audit
               objective:

                     Effectiveness and efficiency of operations - Policies and procedures that
                      management has implemented to reasonably ensure that a program meets
                      its objectives.

                     Reliability of financial reporting - 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 applicable 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 and efficiency of operations, (2) misstatements in
               financial or performance information, or (3) violations of laws or regulations on a
               timely basis.




                                                 24
Significant Deficiency

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

                  The Authority lacked adequate procedures and controls over its family
                   self-sufficiency escrow credits, zero-income households, and contracted
                   services (see findings 1, 2, and 3).




                                            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/
                1A                   $3,652
                1B                                      $64,264
                1C                                                            $431
                2A                   18,181
                2B                   17,896
                2C                    6,807
                2E                                                          11,752
                3A                   14,544
                3B                                                            3,347
                3C                    7,480
                3D                                                           4,043
               Totals               $68,560             $64,264            $19,573


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.




                                                26
Appendix B

        AUDITEE COMMENTS AND OIG’s EVALUATION

Ref to OIG Evaluation   Auditee Comments




                         27
Ref to OIG Evaluation   Auditee Comments




                         28
Ref to OIG Evaluation   Auditee Comments




                         29
Ref to OIG Evaluation   Auditee Comments




                         30
Ref to OIG Evaluation   Auditee Comments




                         31
Ref to OIG Evaluation   Auditee Comments




Comment 1
Comment 2




Comment 3




                         32
Ref to OIG Evaluation   Auditee Comments




Comment 1




Comment 4




                         33
Ref to OIG Evaluation   Auditee Comments




Comment 5




Comment 6




                         34
Ref to OIG Evaluation   Auditee Comments




Comment 7




Comment 8




                         35
Ref to OIG Evaluation   Auditee Comments




Comment 9


Comment 10




                         36
Ref to OIG Evaluation   Auditee Comments




Comment 8




Comment 11



Comment 12




Comment 9


Comment 11




                         37
Ref to OIG Evaluation   Auditee Comments




Comment 9



Comment 13




Comment 14

Comment 15




Comment 15




                         38
Ref to OIG Evaluation   Auditee Comments




Comment 16
Comment 1




Comment 7




Comment 3




                         39
Ref to OIG Evaluation   Auditee Comments




Comment 17
Comment 9


Comment 9
Comment 1


Comment 15




Comment 1
Comment 18
Comment 19




Comment 19
Comment 17
Comment 20




                         40
Ref to OIG Evaluation   Auditee Comments




Comment 15




Comment 21



Comment 1



Comment 22
Comment 1



Comment 19




                         41
Ref to OIG Evaluation   Auditee Comments




Comment 9


Comment 23
Comment 19


Comment 24
Comment 1




Comment 24
Comment 25



Comment 26
Comment 1




                         42
Ref to OIG Evaluation   Auditee Comments




Comment 26
Comment 1




Comment 27




Comment 1
Comment 16
Comment 24


Comment 1
Comment 18
Comment 24




                         43
Ref to OIG Evaluation   Auditee Comments




Comment 1
Comment 18


Comment 1
Comment 16
Comment 18
Comment 24


Comment 12
Comment 28




                         44
Ref to OIG Evaluation   Auditee Comments




Comment 29




                         45
Ref to OIG Evaluation   Auditee Comments




Comment 30




Comment 24




Comment 31




                         46
Ref to OIG Evaluation   Auditee Comments




Comment 32




Comment 33




Comment 33




                         47
Ref to OIG Evaluation   Auditee Comments




Comment 33




Comment 34


Comment 35



Comment 36




                         48
Ref to OIG Evaluation   Auditee Comments




Comment 37




Comment 38




Comment 37




                         49
Ref to OIG Evaluation   Auditee Comments




Comment 37


Comment 33




Comment 37


Comment 37


Comment 35




                         50
                         OIG Evaluation of Auditee Comments

Comment 1   The audit report evaluates whether the contracted services were obtained in
            accordance with the Authority’s procurement and ethical policies.

Comment 2   The Authority indicated that the services were needed, in part due to its “ineffective
            management staff,” yet the executive director deferred the procurement
            responsibilities to this same management staff. Further, the Authority’s board-
            approved procurement policy, dated November 2004, and its ethical policy, dated
            August 2003, were available to both the executive director and his management staff
            to ensure that the contracted services met its procurement requirements.

Comment 3   We based our procurement review on the Authority’s procurement policy, dated
            November 9, 2004. A review of the Authority’s board resolutions from 2006
            through 2010 did not reflect the adoption or implementation of the two additional
            procurement policies, which were later provided by the executive director on June 8,
            2010. These two procurement policies did not reflect an effective date or board
            approval date. On June 8, 2010, the executive director provided an additional copy
            of the procurement policy that was dated November 9, 2004, which was previously
            provided to OIG in July 2008 and March 2010. An office memorandum, dated
            February 15, 2007, indicated that the 2004 procurement policy was still in effect and
            should be followed. There were no exceptions to this policy. Since the two undated
            procurement policies did not obtain board approval, we did not use these policies as
            criteria in evaluating the Authority’s procurement procedures.

Comment 4   The procurement file indicated that the Authority only contacted one other
            contractor (Advantageous Consulting) regarding these contracted services.
            Therefore, full and open competition was hindered. Further, the Authority failed to
            maintain adequate documentation to support that these services were obtained in
            accordance with its procurement policy.

Comment 5   The Authority failed to provide adequate documentation to support the claim that
            according to its admissions and continued occupancy policy, the public housing
            program is required to utilize the program system to perform rent reasonableness.

Comment 6   This contract was dated October 14, 2008. File documentation provided by the
            Authority indicated that it had decided to contract with the program manager of the
            Parma Housing Authority between October 9 and 10, 2008. We held a survey
            briefing with the Authority on October 14, 2008, where we informed the Authority
            of our survey results and audit plans. However, we did not review the Authority’s
            waiting list, nor did we evaluate the Authority’s office organization. The
            verification and third-party tracking process was not discussed with the Authority
            before the survey results briefing since we had only performed a limited file review.
            Further, based upon a review performed by CGI in June 2008, the Authority had
            new written policies regarding file organization and maintenance. Guidance was
            provided by CGI to assist the staff in determining what should be maintained in the
            tenant files. Therefore, the contractual agreement with the Parma Program Manager
            in October 2008 and again in May 2009 for file organization appeared to be


                                              51
               duplicated and unnecessary since the Authority already received this technical
               assistance from CGI.

Comment 7      The Authority’s procurement policy in effect during the awarding of this contract,
               dated November 9, 2004, did not exclude technical service agreements from the
               requirement that “purchases must be distributed amongst qualified sources.”

Comment 8      Once the Authority realized that it had exceeded the small purchase threshold, which
               was revised to $25,000 effective April 14, 2009, it failed to rebid the contract.
               Instead, the Authority proceeded to issue work orders and contract modifications
               from this contract even after it completed its responses to us. For instance, in
               September and October 2009, CGI performed quality control inspections and
               provided technical assistance with the Section Eight Management Assessment
               Program report to the Authority that did not pertain to our findings. In addition, the
               total expected contract price was not documented in the procurement file. Since the
               contract with CGI did not contain a ceiling price, it opened the way for the services
               to exceed the small purchase threshold. Therefore, the Authority failed to maintain
               adequate documentation to support that these services were obtained in accordance
               with its procurement policy.

Comment 9      According to section III, paragraph C, of the Authority’s procurement policy, dated
               November 2004, the invitation for bids method of procurement is a type of sealed
               bid. However, this section further states that for professional service contracts,
               sealed bidding should not be used.

Comment 10 Section III, paragraph B, of the Authority’s procurement policy, dated November
           2004, was included because it pertained to the umbrella contract with CGI, whose
           contract modifications and work orders exceeded the $25,000 threshold. It is the
           Authority’s responsibility to follow its own requirements, including its procurement
           policy.

Comment 11 As stated in this audit report, the Authority did not use the scoring criteria for request
           for proposal 2009-1. This is the same request for proposal that should have used the
           large purchase method of procurement, specifically the competitive proposals
           method. Section II, paragraph B, of the Authority’s procurement policy, dated
           November 2004, states that contract award is made to the offeror whose proposal is
           most advantageous to the Authority, considering price, technical, and other factors
           as specified in the solicitation (for contracts awarded based on competitive
           proposals). Request for proposal 2009-1 stated that “the selection committee will
           score each proposal according to the criteria listed in this request for proposal....The
           project scoring sheet...documents the evaluation factors being used, the criteria for
           each factor, and the maximum point value assigned to each factor. The firm
           receiving the highest number of points will be asked to negotiate and finalize a
           contract with the Agency. If contract negotiations are not successful with the
           highest ranked firm, the firm with the next highest number of points will be chosen
           to negotiate. The process will repeat until a contract can be successfully negotiated.”
           Therefore, since the request for proposal issued by the Authority indicated selection
           criteria, these criteria should have been used.


                                                 52
Comment 12 We acknowledge the improvements made by the Authority in its procurement
           process.

Comment 13 The contractor’s resume was not provided during our review of the Authority’s
           procurement files. The resume was subsequently provided to us on September 27,
           2010. However, the Authority did not ensure that the contractor had the ability to
           provide the requested services before awarding the contracts.

Comment 14 The executive director’s resume did disclose his employment with CGI, including
           the technical assistance he provided to the Parma Public Housing Authority and with
           the Akron Metropolitan Housing Authority. However, this resume did not provide
           full disclosure of his relationship with Advantageous Consulting or the program
           manager of the Parma Public Housing Authority to the Authority’s board of
           commissioners before awarding contracts to these individuals. In addition, these
           relationships give the appearance of a conflict of interest, which is prohibited by the
           Authority’s ethical policy and HUD’s regulations.

Comment 15 The Authority’s ethical policy, dated August 2003, states that employees or
           members may not participate in matters that involve their own financial interests or
           those of their family or business associates. Employees or members may not use or
           authorize the use of their public position to benefit themselves or others in
           circumstances that create a conflict of interest where their objectivity could be
           impaired. Employees and members must avoid situations in which they might gain
           personally as a result of the decisions they make or influence they possess as public
           servants. Public officials or employees are also prohibited from using their position
           to benefit others, such as business associates and family members, because their
           relationship with those individuals could impair their objectivity in their public
           duties. An employee or member should avoid all conduct that creates the
           appearance of impropriety. Further, the employee should report any such conduct to
           the employee’s supervisor. A member should report any such conduct to the
           membership of the Authority. This requirement was added to this audit report.

Comment 16 As stated in this audit report, section IV, paragraph C, of the Authority’s
           procurement policy, dated November 2004, states that firms shall not be precluded
           from qualifying during the solicitation period. Section VI, paragraph B, further
           states that specification limitations, including geographic restrictions, shall be
           avoided. See comment 1.

Comment 17 As stated in this audit report, section II, paragraph B, of the Authority’s procurement
           policy, dated November 2004, states that the executive director or his/her designee
           shall ensure that contracts and modifications are in writing, clearly specifying the
           desired supplies, services, or construction, and are supported by sufficient
           documentation regarding the history of the procurement, including as a minimum
           the method of procurement chosen, the selection of the contract type, the rationale
           for selecting or rejecting offers, and the basis for the contract price. See comment 9.

Comment 18 Although the deliverables may have been provided, there were deficiencies in the
           procurement process for all 13 agreements. Failure to identify the contract type


                                               53
              on the contract agreement was one of the deficiencies determined based upon our
              review. In addition, failure to maintain adequate contract management was
              determined to be one of the causes of this deficiency. Therefore, the Authority
              failed to maintain adequate documentation to support that these services were
              obtained in accordance with its procurement policy.

Comment 19 Our draft finding outline provided to the Authority on May 28, 2010, and the
           supporting documentation provided on June 1, 2010, provide details to the
           contract type deficiencies and the description of the inadequate contract
           management. The Authority was invited to ask questions when the draft finding
           outline was issued. However, no inquiries were made until we held our exit
           conference on September 24, 2010.

Comment 20 As stated in this audit report, section V, paragraph A, and section V, paragraph C,
           of the Authority’s procurement policy, dated November 2004, support the cited
           deficiency. These requirements were from the Authority’s policies and were
           included in our draft finding outline submitted to the Authority in May.

Comment 21 The contractual agreements that were reviewed spanned more than 1 year, and at
           least two of the contracts reviewed did not include definite terms of the
           agreement. In addition, the Authority did obtain duplicate contracted services.
           We acknowledged that some duplicate services were appropriate, but not all. Had
           the Authority engaged in an annual planning process, it could have ensured
           efficient and economical purchasing for the services it obtained.

Comment 22 Despite the Authority being in a crisis mode, its procurement policy, dated
           November 2004, was still in effect and provided the Authority the basis to obtain
           the needed services in accordance with its own requirements. See comment 1.

Comment 23 While the classification of questioned costs changed from ineligible in our draft
           finding outline to unsupported in our discussion draft audit report, the total
           amount of questioned costs did not change. See comment 19.

Comment 24 As this report indicates, the Authority failed to maintain support that the services
           were obtained in accordance with its procurement policy. The recommendation is
           for the Authority’s program to be reimbursed for services that it did not receive in
           accordance with its procurement policy. See comment 1.

Comment 25 Appendix A, Schedule of Questioned Costs and Funds To Be Put to Better Use, of
           our draft audit report issued to the Authority on September 11, 2010, defined both
           ineligible expenses and unsupported costs.

Comment 26 This audit report states that “we acknowledge that some of the duplicative
           services were appropriate but not all.” Regardless of the need for the housing
           quality standards services or the services obtained, the Authority allowed the
           work to be performed without written approval via work orders or board
           resolutions, which is contrary to the Authority’s procurement policy and the
           contractual agreement. See comment 1.


                                              54
Comment 27 This audit report states that “we acknowledge that some of the duplicative
           services were appropriate but not all.” As indicated in comment 1, we evaluated
           whether the services were obtained in accordance with the Authority’s
           procurement and ethical policies. As this report states, the Authority failed to
           maintain support that the services were obtained in accordance with its
           procurement policy.

Comment 28 We reviewed the Authority’s procurement process for the administration of its
           program. The Authority’s Recovery Act procurement process was outside the
           scope of our review.

Comment 29 The Authority agreed with our finding that it overpaid housing assistance and
           utility allowance to 15 households that had excluded income.

Comment 30 We acknowledge the improvements made by the Authority to monitor its zero-
           income households.

Comment 31 As indicated in this audit report, the requirements in Public and Indian Housing
           Notice 2004-1 support the statement that the Authority lacked standard
           procedures for monitoring zero-income households. Regarding the quality control
           reviews, we did not repeat the requirements discussed in our prior audit report
           (report #2009-CH-1012), which discusses the requirements in chapter 6 of HUD’s
           Public and Indian Housing Rental Integrity Summit Manual.

Comment 32 As stated in this audit report, it was the Authority’s program staff members who
           stated that it was their caseloads that contributed to the errors with the zero-
           income households. We included all issues determined to contribute to the errors
           with the zero-income households.

Comment 33 The Authority failed to provide adequate documentation to confirm these
           statements. However, we revised the statement made by the program manager to
           clarify the training issue.

Comment 34 On September 24, 2010, the Authority provided us with additional verifications it
           obtained in July 2010. Based upon this information, we modified the total
           questioned costs due to unreported income in finding 2 of this report.

Comment 35 As stated in this audit report, 24 CFR 981.152(d) allows HUD to reduce or offset
           any administrative fee to public housing authorities, in the amount determined by
           HUD, if the authorities fail to perform their administrative responsibilities
           correctly or adequately under the program.

Comment 36 The Authority’s plan to revise its program administrative plan was already noted
           in this report; however, we revised the date.

Comment 37 The Authority agreed with our finding that it miscalculated the Family Self-
           Sufficiency program participants’ escrow credits.



                                             55
Comment 38 Since the participants’ files contained documentation showing interim
           disbursements were for approved purposes as indicated in the Authority’s Family
           Self-Sufficiency program action plan, we did not question the amount of the
           disbursements. Further, we did not want to double count the questioned costs
           since at least three of the disbursements were affected during our review of the
           escrow credit accuracy. This statement was added to this report.




                                            56
Appendix C

  FEDERAL REQUIREMENTS AND AUTHORITY’S POLICIES

Finding 1
HUD’s regulations at 24 CFR 982.152(a)(3) state that “housing authority administrative fees
may only be used to cover costs incurred to perform administrative responsibilities for the
program in accordance with HUD regulations and requirements.”

HUD’s regulations at 24 CFR 982.161 state that “neither the public housing authority nor any of
its contractors or subcontractors may enter into any contract or arrangement in connection with
the tenant-based programs in which any of the following classes of persons has any interest,
direct or indirect, during tenure or for one year thereafter: (1) any present or former member or
officer of the public housing authority (except a participant commissioner) and (2) any employee
of the public housing authority, or any contractor, subcontractor, or agent of the public housing
authority, who formulates policy or who influences decisions with respect to the programs.”

The Authority’s procurement policy, dated November 9, 2004, states the following:

      Section II, paragraph A, states that “all procurement transactions shall be administered by
       the contracting officer, who shall be the executive director or other individual he or she
       has authorized in writing. Authorization of any employee will state clearly the
       limitations on the appointee’s procurement authority. The executive director shall issue
       procurement procedures to implement this statement, which shall be based on HUD
       Handbook 7460.8.”

      Section II, paragraph B, states that “the executive director or his/her designee shall ensure
       that:
       1. Procurement requirements are subject to an annual planning process to assure
           efficient and economical purchasing;
       2. Contracts and modifications are in writing, clearly specifying the desired supplies,
           services or construction, and are supported by sufficient documentation regarding the
           history of the procurement, including as a minimum the method of procurement
           chosen, the selection of the contract type, the rationale for selecting or rejecting
           offers, and the basis for the contract price;
       3. For procurements other than small purchases, public notice is given of each upcoming
           procurement at least 10 days before a solicitation is issued; responses to notices are
           honored to the maximum extent practical; a minimum of 15 days is provided for
           preparation and submission of bids or proposals; and notice of contract awards is
           made available to the public;
       4. Solicitation procedures are conducted in full compliance with Federal standards stated
           in 24 CFR 85.36, and applicable State and local laws and regulations provided they
           are consistent with 24 CFR 85.36;
       5. An independent cost estimate is prepared before solicitation issuance and is
           appropriately safeguarded for each procurement above the small purchase limitation,


                                                57
       and a cost or price analysis is conducted of the responses received for all
       procurements;
    6. Contract award is made to the low bidder who is responsive and responsible to
       perform the work (for sealed bid contracts) or to the offeror whose proposal is most
       advantageous to the Authority, considering price, technical and other factors as
       specified in the solicitation (for contracts awarded based on competitive proposals):
       unsuccessful firms are notified within ten days after contract award;
    7. Work is inspected before payment, and payment is made promptly for contract work
       performed and accepted; and
    8. The Authority complies with applicable HUD review requirements, as provided in the
       operational procedures supplementing this statement.”

   Section III, paragraph B, states that “any contract not exceeding $25,000 may be made in
    accordance with the small purchase procedures authorized in this section. Contract
    requirements shall not be artificially divided so as to constitute a small purchase under
    this section, (except as may be reasonably necessary to comply with section VIII of this
    statement). After evaluating quotations, the Authority may award a purchase order to the
    lowest acceptable quoter. For small purchases below $2,500, only one quotation need be
    solicited if the price received is reasonable. Such purchases must be distributed equitably
    among qualified sources. If practicable, a quotation shall be solicited from other than the
    previous source before placing a repeat order. The executive director’s written approval
    is required for small purchases of $2,500 or less. For small purchases in excess of $2,500
    but not exceeding $10,000 no less than three offerors shall be solicited to submit price
    quotations, which may be obtained orally by telephone. (Telephone quotations must be
    kept or recorded in written form for documentation). For purchases in excess of $10,000
    but less than $25,000, a minimum of three price quotations submitted in writing is
    required. No public advertisement will be necessary, and the executive director’s written
    approval is required. For purchases in excess of $25,000, the sealed bids procedure set
    forth in section III.C. will be adhered to after public advertisement and the board of
    commissioners’ approval will be required for contract award. The award shall be made
    to the lowest responsive and responsible bidder, unless justified in writing based on price
    and other specified factors, such as for architect-engineer and other professional services
    contracts. If non-price factors are used, they shall be specified in the bidding documents.
    The names, addresses, and/or telephone numbers of the offerors and persons contracted
    and the date and amount of each quotation shall be recorded and maintained as a public
    record.”

   Section III, paragraph C, states that “for professional services contracts, sealed bidding
    should not be used.”

   Section III, paragraph D, states that “competitive proposals may be used if there is an
    adequate method of evaluating technical proposals and the Authority determines that
    conditions are not appropriate for the use of sealed bids. An adequate number of
    qualified sources shall be solicited. Competitive proposals are the preferred method for
    contracting for professional services. The Authority begins the process by describing its
    needs in a statement of work, publicizing the upcoming procurement (e.g., advertising in
    local newspapers or trade journals), and preparing both an independent cost estimate and
    a technical evaluation plan for analyzing proposals received. The Authority then


                                             58
    prepares a request for proposals, which identifies the technical and price evaluation
    factors and the format for submitting technical and price proposals. The request for
    proposals is issued to the respondents to the public notice and those on the mailing list.
    Proposals shall be kept confidential and not be publicly opened. The Authority evaluates
    the proposals from both a technical and price standpoint, documents the evaluation in a
    written report, and establishes a range of offerors who have a reasonable chance of
    receiving a contract. The proposals shall be evaluated only on the evaluation factors
    stated in the request for proposals.”

   Section III, paragraph E, states that “procurements shall be conducted competitively as
    often as possible. Procurement by non-competitive proposals may be used only when the
    award of a contract is not feasible using small purchase procedures, sealed bids or
    competitive proposals, and one of the following applies: (a) The item is available only
    from a single source. (b) The public exigency or emergency for the requirement will not
    permit a delay resulting from competitive solicitation. In such cases, there must be an
    immediate and serious need for supplies, services, or construction such that the need
    cannot be met through any other procurement methods. The emergency procurement
    shall be limited to those supplies, services or construction necessary to meet the
    emergency; (c) HUD authorizes non-competitive proposals; or (d) after solicitation of a
    number of sources, competition is determined inadequate. Each procurement based on
    noncompetitive proposals shall be supported by a written justification for using such
    procedures. The justification shall be approved in writing by the executive director. Any
    approval required by HUD must be obtained before proceeding with a non-competitive
    proposal. The reasonableness of the price for all procurements based on noncompetitive
    proposals shall be determined by performing cost analysis, as described in section III.F.”

   Section III, paragraph F, states that “a cost or price analysis shall be performed for every
    procurement, including contract modifications. The extent of the analysis depends on the
    dollar value and complexity of the procurement. The method of analysis shall be
    determined as follows. When competition is not obtained, a change order or other
    modification is being negotiated, the procurement is for a complex item such as
    professional services, or for other procurements as deemed necessary by the Authority,
    the offeror shall be required to submit a cost breakdown analyzing the labor, material,
    indirect costs and proposed profit or commercial pricing and sales information, sufficient
    to enable the Authority to verify the reasonableness of the proposed price as a catalog or
    market price of a commercial product sold in substantial quantities to the general public
    or documentation showing that the offered price is set by law or regulation. Cost analysis
    shall be performed if an offeror/contractor is required to submit a cost breakdown as part
    of its proposal. When a cost breakdown is submitted, a cost analysis shall be performed
    of the individual cost elements, and profit shall be analyzed separately. In establishing
    profit, the Authority shall consider factors such as the complexity and risk of the work
    involved, the contractor’s investment and productivity, the amount of subcontracting, the
    quality of past performance, and industry profit rates in the area for similar work. A
    comparison of prices shall be used in all cases other than those described in subsection
    lll.F.3.”

   Section III, paragraph G, states that “a solicitation may be canceled and all bids or
    proposals that have already been received may be rejected if the supplies, services, or


                                            59
    construction are no longer required; ambiguous or otherwise inadequate specifications
    were part of the solicitation; the solicitation did not provide for consideration of all
    factors of significance to the Authority; prices exceed available funds and it would not be
    appropriate to adjust quantities to come within available funds, as determined by the
    Authority; there is reason to believe that bids or proposals may not have been
    independently arrived at in open competition, may have been collusive, or may have been
    submitted in bad faith; or for good cause of a similar nature when it is in the best interests
    of the Authority. The reasons for cancellation shall be documented in the procurement
    file and the reasons for cancellation and/or rejection shall be provided upon request to
    any offeror solicited.”

   Section IV, paragraph A, states that “procurements shall be conducted only with
    responsible contractors (i.e., those who have the technical and financial competence to
    perform and have a satisfactory record of integrity). Before awarding a contract, the
    Authority shall review the proposed contractor’s ability to perform the contract
    successfully, considering factors such as the contractor’s integrity, compliance with
    public policy, record of past performance, and financial and technical resources. If a
    prospective contractor is found to be non-responsible, a written determination of non-
    responsibility shall be prepared and included in the contract file, and the prospective
    contractor shall be advised of the reasons for the determination.”

   Section IV, paragraph C, states that “interested businesses shall be given an opportunity
    to be included on qualified bidders’ lists. Any prequalified lists of persons, firms, or
    products, which are used in the procurement of supplies and services, shall be kept
    current and shall include enough qualified sources to ensure competition. Firms shall not
    be precluded from qualifying during the solicitation period. Solicitation mailing lists of
    potential contractors shall include, but not be limited to, such pre-qualified suppliers.
    Such businesses shall meet the requirements set forth in paragraph IV.A.”

   Section V, paragraph A, states that “any type of contract which is appropriate to the
    procurement and which will promote the best interests of the Authority may be used,
    provided that the cost-plus-a-percentage-of-cost and percentage-of-construction-cost
    methods are prohibited. All procurements shall include the clauses and provisions
    necessary to define the rights and responsibilities of the parties. A cost reimbursement
    contract shall not be used unless it is likely to be less costly or it is impracticable to
    satisfy the Authority’s needs otherwise, and the proposed contractor’s accounting system
    is adequate to allocate cost in accordance with applicable costs principles. A time-and-
    materials contract may be used only if a written determination is made that no other
    contract type is suitable, and the contract includes a ceiling price that the contractor
    exceeds at its own risk.”

   Section V, paragraph C, states that “in addition to containing a clause identifying the
    contract type, all contracts shall include any clauses required by Federal statutes,
    Executive Orders, and their implementing regulations, as provided in 24 CFR 85.36(i),
    including but not limited to “General Conditions of the Contract for Construction: Public
    Housing Programs,” form HUD-5370 (April/2002), “General Contract Conditions, Non-
    Construction,” and/or such other forms as are required by law.”



                                             60
      Section V, paragraph D, states that “a contract administration system designed to insure
       that contractors perform in accordance with their contracts and purchase orders shall be
       maintained. The operational procedures required by section II. A shall contain guidelines
       for inspection of supplies, services, or construction, as well as monitoring contractor
       performance, status reporting on construction contracts, and similar matters.”

      Section VI, paragraph A, states that “all specifications shall be drafted so as to promote
       overall economy for the purposes intended and to encourage competition in satisfying the
       Authority’s needs. Specifications shall be reviewed prior to solicitation to ensure that
       they are not unduly restrictive or represent unnecessary or duplicative items. Functional
       or performance specifications are preferred. Detailed product specifications shall be
       avoided whenever possible. Consideration shall be given to consolidating or breaking
       out procurements to obtain a more economical purchase (but see section VIII.).”

      Section VI, paragraph B, states that “the following specification limitations shall be
       avoided: geographic restrictions not mandated or encouraged by applicable Federal law,
       unnecessary bonding or experience requirement, brand name specifications (unless
       written determination is made that only the identified item will satisfy the Authority’s
       needs), and brand name or equal specifications (unless they list the minimum essential
       characteristics and standards to which the item must conform to satisfy its intended use).
       Nothing in this procurement policy shall pre-empt any State licensing laws.
       Specifications shall be scrutinized to ensure that organizational conflicts of interest do not
       occur (for example, having a consultant perform a study of the Authority’s computer
       needs and then allowing that consultant to compete for the subsequent contract for the
       computers).”

Board Resolution 24-2009, effective April 14, 2009, states that for small purchases in excess of
$2,500 but not exceeding $25,000, no less than three offerors shall be solicited to submit price
quotations, which may be obtained orally by telephone (telephone quotations must be kept or
recorded in written form for documentation). For purchases in excess of $25,000, all
requirements for competitive bidding applicable to county and municipal political subdivisions
shall be strictly observed.

The Authority’s ethical policy, dated August 12, 2003, states that “employees or members may
not participate in matters that involve their own financial interests, or those of their family or
business associates. Employees or members may not use or authorize the use of their public
position to benefit themselves or others in circumstances that create a conflict of interest where
their objectivity could be impaired. Employees and members must avoid situations in which
they might gain personally as a result of the decisions they make, or influence they possess, as
public servants. Public officials or employees are also prohibited from using their position to
benefit others, such as business associates and family members, because their relationship with
those individuals could impair their objectivity in their public duties. An employee or member
should avoid all conduct that creates the appearance of impropriety. Further, the employee
should report any such conduct to the employee’s supervisor. A member should report any such
conduct to the membership of the Authority. A public contract includes any purchases or
acquisition of goods or services, including employment, by or for the use of a public agency.
Specifically, a public official or employee is prohibited from authorizing, voting on, or otherwise
using the authority or influence of the office to secure approval of a public contract in which the


                                                61
official, a family member, or a business associate has an interest. Employees are also prohibited
from having an interest in a public contract with their public entity, or an agency with which they
are connected, even if they do not participate in the issuance of the contract. Exemptions are:
The employee takes no part in the deliberations and decisions of the transaction. The employee
informs his public agency of the interest. The contract involves necessary supplies or services
that are not obtainable elsewhere at the same or lower cost or that are part of a contract
established before the employee was hired.”

Finding 2
HUD’s regulations at 24 CFR 5.236 state that upon receiving income information from a State
wage information collection agency or a Federal agency, HUD or, when applicable, the public
housing agency shall compare the information with the information about a family’s income that
was provided by the assistance applicant or participant to the authority. When the income
information reveals an employer or other income source that was not disclosed by the assistance
applicant or participant, or when the income information differs substantially from the
information received from the assistance applicant or participant or from his or her employer: (i)
HUD or, as applicable or directed by HUD, the public housing agency shall request the
undisclosed employer or other income source to furnish any information necessary to establish
an assistance applicant’s or participant’s eligibility for or level of assistance in a covered
program. This information shall be furnished in writing, as directed, to (i)(B) the responsible
entity (as defined in section 5.100) in the case of the public housing program or any Section 8
program. (ii) HUD or the public housing agency may verify the income information directly
with an assistance applicant or participant. Such verification procedures shall not include any
disclosure of income information prohibited under paragraph (b)(6) of this section. HUD and the
public housing agency shall not be required to pursue these verification procedures when the
sums of money at issue are too small to raise an inference of fraud or justify the expense of
independent verification and the procedures related to termination, denial, suspension, or
reduction of assistance.

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

HUD’s regulations at 24 CFR 5.609(a) state that annual income means all amounts, monetary or
not, which (1) go to or on behalf of the family head or spouse (even if temporarily absent) or to
any other family member or (2) are anticipated to be received from a source outside the family
during the 12-month period following admission or annual reexamination effective date, and (3)
which are not specifically excluded in paragraph (c) of this section. (4) Annual income also
means amounts derived (during the 12-month period) from assets to which any member of the
family has access.

HUD’s regulations at 24 CFR 982.54 state that the public housing agency must adopt a written
administrative plan that establishes local policies for administration of the program in accordance
with HUD requirements. The administrative plan and any revisions of the plan must be formally
adopted by the public housing agency’s board of commissioners or other authorized public
housing agency officials. The administrative plan states policy on matters for which the public


                                                62
housing agency has discretion to establish local policies. The administrative plan must be in
accordance with HUD regulations and requirements. The public housing agency must revise the
administrative plan if needed to comply with HUD requirements. The public housing agency
must administer the program in accordance with the administrative plan. The administrative plan
must cover policies on subjects including interim redeterminations of family income and
composition.

HUD’s regulations at 24 CFR 982.516 require the authority “to conduct a reexamination of
family income and composition at least annually. The 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 authority may conduct an interim
reexamination of family income and composition. Interim examinations must be conducted in
accordance with policies in the authority’s administrative plan. The public housing agency must
adopt policies prescribing when and under what conditions the family must report a change in
family income or composition and prescribing how to determine the effective date of a change in
the housing assistance payment resulting from an interim redetermination. At the effective date
of a regular or interim reexamination, the public housing agency must make appropriate
adjustments in the housing assistance payment. Family income must include income of all
family members, including family members not related by blood or marriage. If any new family
member is added, family income must include any income of the additional family member. The
public housing agency must conduct a reexamination to determine such additional income, and
must make appropriate adjustments in the housing assistance payment. Procedures must be
established that are appropriate and necessary to assure that income data provided by applicant or
participant families is complete and accurate.”

HUD’s regulations at 24 CFR 982.551(b) state that the family must supply any information
requested by the public housing agency or HUD for use in a regularly scheduled reexamination
or interim reexamination of family income and composition in accordance with HUD
requirements. Any information supplied by the family must be true and complete.

Public and Indian Housing Notice 2005-9, paragraph 4(e), states that public housing agencies
can require families to report all increases in income between reexaminations, and conduct more
frequent interim income reviews for families reporting no income. The effective date of an
annual or interim reexamination of family income is dependent upon public housing agency
policies.

The verification guidance included in Public and Indian Housing Notice 2004-1, section II,
Income and Rent Determination Policies, states that “the public housing agency should provide
detailed verification procedures in its written policies so that participants are thoroughly
informed of the verification process. This will clarify the steps to be taken in the independent
validation of income and deter falsification of information. While the high level of details of the
verification process is not a mandatory component of the administrative plan, public housing
agencies are strongly encouraged to demonstrate their ability to effectively manage and account
for government funds appropriated for low-income housing programs. A detailed statement of
the rent determination policies, including verification procedures, is an important step towards
demonstrating the public housing agency’s ability to establish management controls geared to


                                                 63
reducing subsidy overpayment errors. In addition to inclusion of verification procedures in its
policies, public housing agencies should ensure that staff interviewers are trained to explain the
types of information that will be verified during interviews, and the methods of verification that
will be used, including upfront income verification and computer matching. The public housing
agency should include its general policy on verification in its administrative plan. The policy
should also provide information on the following components of rent determination: (1) what
must be verified, (2) the type of verification methods that will be used by the public housing
agency (including computer matching), (3) require all family members 18 years of age or older
to sign a consent form to authorize the release of information, (4) applicant’s/tenant’s
responsibility to provide documents at the request of the public housing agency, (5) minimum
rent, and (6) interim reexamination procedures.”

The verification guidance included in Public and Indian Housing Notice 2004-1, section VII,
Verification of Income, states that the verification methods that a public housing agency may use
in determining a family's total tenant payment: (1) upfront income verification, (2) written third-
party verification, (3) oral third-party verification, (4) document review, and (5) tenant
certification.

The verification guidance included in Public and Indian Housing Notice 2004-1, section VIII,
Levels of Verification Methods, states that public housing agencies should begin with the highest
level of verification methods. The use of lower level verification methods will place a higher
burden on the authority to justify its use of that particular verification method rather than a
higher level of verification methods. Public housing agencies may be required to provide
documentation for each case.

The Authority’s administrative plan, dated January 2000, states the following:

   Chapter 6, Factors Related to Total Tenant Payment and Family Share Determination, section
    E, states that families who report zero income are required to complete a written certification
    every 60 days. The families will be required to provide information regarding their means of
    basic subsistence such as food, utilities, transportation, etc.

   Chapter 7, Verification Procedures, section A, states that “the Authority will verify
    information through the five methods of verification acceptable to HUD in the following
    order: (1) enterprise information verification [system] whenever available, (2) third-party
    written verification, (3) third-party oral verification, (4) review of documents, and (5) self-
    certification. The Authority will allow 14 days for return of third-party verifications and will
    submit a second request on day 15 if no response. The Authority will allow an additional 14
    days for return of third-party verifications with the second request and will resort to a lower
    form of verification if no response by day 29. The Authority will document the file as to
    why third party written verification was not used. For applicants, verifications may not be
    more than 60 days old at the time of voucher issuance. For participants, verifications are
    valid for 120 days from date of receipt.” Section C, Computer Matching, states that “the
    Authority will utilize the HUD established computer-based Tenant Eligibility Verification
    System tool for obtaining Social Security, Supplemental Security Income, benefit history,
    and tenant income discrepancy reports from the Social Security Administration. When the
    computer matching results in a discrepancy with the Authority’s records, the Authority will
    follow up with the family and the verification sources to resolve the discrepancy. If the


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    family has unreported or underreported income, the Authority will follow the procedures in
    the program integrity addendum of the administrative plan.” Section E, Verification of
    Information, states that “families claiming to have no income will be required to execute
    verification forms to determine that forms of income such as unemployment benefits,
    temporary aid for needy families, and Social Supplemental Income, etc. are not being
    received by the household. The Authority will request information from the Internal
    Revenue Service. The Authority may check the records of other departments in the
    jurisdiction that have information about the income sources of customers.”

   Chapter 12, Recertifications, section C, states that “the Authority will conduct an interim
    reexamination when the family has an increase in income and had been reporting zero
    income previously. Families will be required to report all increases in income/assets within
    10 days of the increase. Participants may report a decrease in income and other changes that
    would reduce the amount of tenant rent, such as an increase in allowances or deductions.
    The Authority must calculate the change if a decrease in income is reported. If the Authority
    makes a calculation error at admission to the program or at an annual reexamination, an
    interim reexamination will be conducted, if necessary, to correct the error, but the family will
    not be charged retroactively. Families will be given decreases, when applicable; retroactive
    to when the decrease for the change would have been effective if calculated correctly.
    Section G requires that families report interim changes to the Authority within 10 calendar
    days of when the change occurs. Any information, document or signature needed from the
    family that is needed to verify the change must be provided within 30 calendar days of the
    change. If the change is not reported within the required time period, or if the family fails to
    provide documentation or signatures, it will be considered untimely reporting. The Authority
    will notify the family and the owner of any change in the housing assistance payment to be
    effective according to the following guidelines: Increases in the tenant rent are effective on
    the first of the month following at least 30 days notice. Decreases in the tenant rent are
    effective the first of the month following that in which the change is reported. However, no
    rent reductions will be processed until all the facts have been verified, even if a retroactive
    adjustment results. The change may be implemented based on documentation provided by
    the family, pending third-party written verification. If the family does not report the change
    as described under Timely Reporting, the family will have caused an unreasonable delay in
    the interim reexamination processing and the following guidelines will apply: [The] increase
    in tenant rent will be effective retroactive to the date it would have been effective had it been
    reported on a timely basis. The family will be liable for any overpaid housing assistance and
    may be required to sign a repayment agreement or make a lump sum payment. [The]
    decrease in tenant rent will be effective on the first of the month following the month that the
    change was reported. “Processed in a timely manner” means that the change goes into effect
    on the date it should when the family reports the change in a timely manner. If the change
    cannot be made effective on that date, the change is not processed by the Authority in a
    timely manner. In this case, an increase will be effective after the required 30 days notice
    prior to the first of the month after completion of processing by the Authority. If the change
    resulted in a decrease, the overpayment by the family will be calculated retroactively to the
    date it should have been effective, and the family will be credited for the amount.”

The Authority’s administrative plan, dated April 2009, states the following:




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   Chapter 7 states that “the Authority must verify all information that is used to establish
    the family’s eligibility and level of assistance and is required to obtain the family’s
    consent to collect the information. Applicants and program participants must cooperate
    with the verification process as a condition of receiving assistance. The Authority will
    follow the verification guidance provided by HUD in Public and Indian Housing Notice
    2004-01 and any subsequent guidance issued by HUD. In order of priority, the forms of
    verification that the authority will use are: up-front income verification whenever
    available, third-party written verification, third-party oral verification, review of
    documents, and self-certification. The Authority must document in the file how the
    figures used in income and rent calculations were determined. All verification attempts,
    information obtained, and decisions reached during the verification process will be
    recorded in the family’s file in sufficient detail to demonstrate that the Authority has
    followed all of the verification policies set forth in this plan.” Section 7-I.C states that
    “tenant income data reports will be used in interim reexaminations when it is necessary to
    verify and calculate earned income, unemployment benefits, Social Security and/or
    Supplemental Security Income benefits, and to verify that families claiming zero income
    are not receiving income from any of these sources. When the Authority determines
    through tenant income data reports and third-party verification that a family has
    concealed or under-reported income, corrective action will be taken pursuant to the
    policies in chapter 14, Program Integrity.” Section 7-I.D states that “the Authority will
    diligently seek third-party verification using a combination of written and oral requests to
    verification sources. Information received orally from third parties may be used either to
    clarify information provided in writing by the third party or as independent verification
    when written third-party verification is not received in a timely fashion. The Authority
    may mail, fax, e-mail, or hand deliver third-party written verification requests and will
    accept third-party responses using any of these methods. The Authority will send a
    written request for verification to each required source within 5 business days of securing
    a family’s authorization for the release of the information and give the source 10 business
    days to respond in writing. If a response has not been received by the 11th business day,
    the Authority will request third-party oral verification. The Authority will make a
    minimum of two attempts, one of which may be oral, to obtain third-party verification. A
    record of each attempt to contact the third-party source (including no-answer calls) and
    all contacts with the source will be documented in the file. Regarding third-party oral
    verification, program staff will record in the family’s file the name and title of the person
    contacted, the date and time of the conversation (or attempt), the telephone number used,
    and the facts provided. When any source responds verbally to the initial written request
    for verification the Authority will accept the verbal response as oral verification but will
    also request that the source complete and return any verification forms that were
    provided. If a third party agrees to confirm in writing the information provided orally,
    the Authority will wait no more than 5 business days for the information to be provided.
    If the information is not provided by the 6th business day, the Authority will use any
    information provided orally in combination with reviewing family-provided documents.
    When third-party verification has been requested and the timeframes for submission have
    been exceeded, the Authority will use the information from documents on a provisional
    basis. If the Authority later receives third-party verification that differs from the amounts
    used in income and rent determinations and it is past the deadline for processing the
    reexamination, the Authority will conduct an interim reexamination to adjust the figures
    used for the reexamination, regardless of the interim reexamination policy.” Section 7-


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    III.I states that “the Authority will check up-front income verification sources and/or
    request information from third-party sources to verify that certain forms of income such
    as unemployment benefits, temporary assistance for needy families, Supplemental
    Security Income, etc., are not being received by families claiming to have zero annual
    income.”

   Chapter 11, Reexaminations, section 11-II.A, states that “when an interim reexamination
    is conducted, only those factors that have changed are verified and adjusted.” Section 11-
    II.C states that “if the family has reported zero income, the Authority will conduct an
    interim reexamination every 3 months as long as the family continues to report that they
    have no income. If at the time of the annual reexamination, it is not feasible to anticipate
    a level of income for the next 12 months (e.g., seasonal or cyclic income), the Authority
    will schedule an interim reexamination to coincide with the end of the period for which it
    is feasible to project income. If at the time of the annual reexamination, tenant-provided
    documents were used on a provisional basis due to the lack of third-party verification,
    and third-party verification becomes available, the Authority will conduct an interim
    reexamination. The Authority must adopt policies prescribing when and under what
    conditions the family must report changes in family income or expenses. Families are
    required to report all increases in earned income, including new employment, within 10
    business days of the date the change takes effect. The Authority will only conduct
    interim reexaminations for families participating in the family self-sufficiency program
    and families that qualify for the earned income disallowance when the family’s share of
    rent will change as a result of the increase. In all other cases, the Authority will note the
    information in the tenant file but will not conduct an interim reexamination. Families are
    not required to report any other changes in income or expenses. The family may request
    an interim reexamination any time the family has experienced a change in circumstances
    since the last determination. The Authority must process the request if the family reports
    a change that will result in a reduced family income. If a family reports a change that it
    was not required to report and that would result in an increase in the family share of the
    rent, the Authority will note the information in the tenant file, but will not conduct an
    interim reexamination. If a family reports a change that it was not required to report and
    that would result in a decrease in the family share of rent, the Authority will conduct an
    interim reexamination. Families may report changes in income or expenses at any time.”
    Section 11-II.D states that “the family may notify the Authority of changes either orally
    or in writing. If the family provides oral notice, the Authority may also require the
    family to submit the changes in writing. Based on the type of change reported, the
    Authority will determine the documentation the family will be required to submit. The
    family must submit any required information or documents within 10 business days of
    receiving a request from the Authority. This time frame may be extended for good cause
    with approval. The Authority will accept required documentation by mail, by fax, or in
    person. The Authority must establish the time frames in which any changes that result
    from an interim reexamination will take effect. The changes may be applied either
    retroactively or prospectively, depending on whether there is to be an increase or a
    decrease in the family share of the rent, and whether the family reported any required
    information within the required time frames. If the family share of the rent is to increase:
    The increase generally will be effective on the first of the month following 30 days’
    notice to the family. If a family fails to report a change within the required time frames,
    or fails to provide all required information within the required time frames, the increase


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    will be applied retroactively, to the date it would have been effective had the information
    been provided on a timely basis. The family will be responsible for any overpaid subsidy
    and may be offered a repayment agreement in accordance with the policies in chapter 16.
    If the family share of the rent is to decrease, the decrease will be effective on the first day
    of the month following the month in which the change was reported and all required
    documentation was submitted. In cases where the change cannot be verified until after
    the date the change would have become effective, the change will be made retroactively.”

   Chapter 14, Program Integrity covers policies designed to prevent, detect, investigate,
    and resolve instances of program abuse or fraud. It also describes the actions that will be
    taken in the case of unintentional errors and omissions. “The Authority will investigate
    inconsistent information related to the family that is identified through file reviews and
    the verification process. For each investigation, the Authority will determine (1) whether
    an error or program abuse has occurred, (2) whether any amount of money is owed the
    Authority, and (3) what corrective measures or penalties will be assessed. A subsidy
    under- or overpayment includes (1) an incorrect housing assistance payment to the
    owner, (2) an incorrect family share established for the family, and (3) an incorrect utility
    reimbursement to a family. Whether the incorrect subsidy determination is an
    overpayment or underpayment of subsidy, the Authority must promptly correct the
    housing assistance payment, family share, and any utility reimbursement prospectively.
    Increases in the family share will be implemented only after the family has received 30
    days’ notice. Any decreases in family share will become effective the first of the month
    following the discovery of the error. Whether the family is required to reimburse the
    Authority or the Authority is required to make retroactive subsidy payments to the family
    depends upon which party is responsible for the incorrect subsidy payment and whether
    the action taken was an error or program abuse. An incorrect subsidy determination
    caused by a family generally would be the result of incorrect reporting of family
    composition, income, assets, or expenses, but also would include instances in which the
    family knowingly allows the Authority to use incorrect information provided by a third
    party. In the case of family-caused errors or program abuse, the family will be required
    to repay any excess subsidy received. The Authority may, but is not required to, offer the
    family a repayment agreement in accordance with chapter 16. If the family fails to repay
    the excess subsidy, the Authority will terminate the family’s assistance in accordance
    with the policies in chapter 12. Any of the following will be considered evidence of
    family program abuse: intentional misreporting of family information or circumstances
    (e.g., income, family composition) and omitted facts that were obviously known by a
    family member (e.g., not reporting employment income). In the case of program abuse
    caused by a family the Authority may, at its discretion, impose any of the following
    remedies: require the family to repay excess subsidy amounts paid by the Authority;
    require, as a condition of receiving or continuing assistance, that a culpable family
    member not reside in the unit; deny or terminate the family’s assistance; or refer the
    family for State or Federal criminal prosecution. Authority-caused incorrect subsidy
    determinations include (1) failing to correctly apply housing choice voucher rules
    regarding family composition, income, assets, and expenses...and (3) errors in
    calculation. Neither a family nor an owner is required to repay an overpayment of
    subsidy if the error or program abuse is caused by program staff. The Authority must
    reimburse a family for any underpayment of subsidy, regardless of whether the
    underpayment was the result of staff-caused error or staff or owner program abuse.


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       Errors will be calculated retroactive to the family’s most recent annual re-certification.
       Funds for this reimbursement must come from the Authority’s administrative fee
       reserves.”

      Chapter 16, Program Administration, states that “any amount due to the Authority by a
       [program] participant must be repaid by the family. If the family is unable to repay the
       debt within 30 days, the Authority will offer to enter into a repayment agreement in
       accordance with the policies below. If the family refuses to repay the debt, enter into a
       repayment agreement, or breaches a repayment agreement, the Authority will terminate
       the assistance upon notification to the family and pursue other modes of collection.”

Finding 3
HUD’s regulations at 24 CFR 982.54(a) state that the authority must administer the program in
accordance with its administrative plan.

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 984.305(a)(2) state that “during the term of the contract of
participation, the public housing agency shall credit periodically, but not less than annually, to
each family’s [escrow] account, the amount of the [escrow] credit determined in accordance with
paragraph (b) of this section.” Paragraph (b) state that “for purposes of determining the [escrow]
credit, “family rent”' is: for the rental voucher program, 30 percent of adjusted monthly income.
The [escrow] credit shall be computed as follows: For families who are very low-income
families, the [escrow] credit shall be the amount which is the lesser of: Thirty percent of current
monthly adjusted income less the family rent, which is obtained by disregarding any increases in
earned income (as defined in 24 CFR 984.103) from the effective date of the contract of
participation; or the current family rent less the family rent at the time of the effective date of the
contract of participation. For families who are low-income families but not very low-income
families, the [escrow] credit shall be the amount determined according to paragraph (b)(1)(i) of
this section, but which shall not exceed the amount computed for 50 percent of median income.
Families who are not low-income families shall not be entitled to any [escrow] credit. The
public housing authority shall not make any additional credits to the family’s [escrow] account
when the family has completed the contract of participation, as defined in 24 CFR 984.303(g), or
when the contract of participation is terminated or otherwise nullified.”

Form HUD-52650, Family Self-Sufficiency Contract of Participation, states that” the [housing
authority] will establish an escrow account for the family. A portion of the increases in the
family’s rent because of increases in earned income will be credited to the escrow account in
accordance with HUD requirements. The family’s annual income, earned income, and family
rent when the family begins the family self-sufficiency program...will be used to determine the
amount credited to the family’s escrow account because of future increases in earned income.
[Housing authority] responsibilities [include the following:] Establish an escrow account for the
family, invest the escrow account funds, and give the family a report on the amount in the
escrow account at least once a year. Determine which, if any, interim goals must be completed
before any escrow funds may be paid to the family; and pay a portion of the escrow account to


                                                  69
the family if the [housing authority] determines that the family has met these specific interim
goals and needs the funds from the escrow account to complete the contract. Determine if the
family has completed this contract. Pay the family the amount in its escrow account, if the
family has completed the contract and the head of the family has provided written certification
that no member of the family is receiving welfare assistance. Completion of the contract occurs
when the [housing authority] determines that: (1) the family has fulfilled all of its
responsibilities under the contract; or (2) 30 percent of the family’s monthly adjusted income
equals or is greater than the fair market rent amount for the unit size for which the family
qualifies. The income and rent numbers to be inserted on page one may be taken from the
amounts on the last reexamination or interim determination before the family’s initial
participation in the family self-sufficiency program, unless more than 120 days will pass between
the effective date of the reexamination and the effective date of the contract of participation. If it
has been more than 120 days, the [housing authority] must conduct a new reexamination or
interim redetermination. If a family moves under program portability procedures and is going to
participate in the receiving [housing authority’s] family self-sufficiency program, the receiving
[housing authority] must use the amounts listed for annual income, earned income, and family
rent on page one of the contract between the initial [housing authority] and the family.”

Form HUD-52652, Family Self-Sufficiency Program Escrow Account Credit Worksheet, states
that an escrow credit must be determined at each reexamination and interim determination
occurring after the effective date of the contract of participation while the family is participating
in the family self-sufficiency program. The amount of the escrow credit will vary depending on
the income level of each family and is based on increases of earned income since the effective
date of the contract of participation. If the family’s adjusted income exceeds the lower-income
limit in the jurisdiction in which the family is living (the amount on line 3 is greater than the
amount on line 2), the family does not qualify for an escrow credit. In such cases, lines 4-22 of
form HUD-52652 will not be completed. Line 2, Applicable Lower-Income Limit, states, “Enter
the current lower-income limit for the jurisdiction in which the family is living.” Line 19,
Applicable Very Low-Income Limit, states, “Enter the current very low-income limit for the
jurisdiction in which the family is living.”

Chapter 23 of HUD’s Housing Choice Voucher Guidebook, 7420.10G, states that the amount of
the escrow credit is based on increases in the family’s total tenant payment resulting from
increases in the family’s earned income during the term of the family self-sufficiency contract.
As a family’s income increases, the housing authority calculates rent and the family pays
increased rent, as does any other subsidized tenant. The housing authority then makes deposits
to an escrow account in the appropriate amount. The housing authority must compute escrow
credit any time it conducts an annual or interim reexamination of income for a family during the
term of the contract of participation in the family self-sufficiency program.




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