oversight

Alaska Housing Finance Corporation, Anchorage, AK, Needs To Improve Its Quality Control Plan

Published by the Department of Housing and Urban Development, Office of Inspector General on 2010-09-27.

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

                                                                Issue Date
                                                                      September 27, 2010
                                                                
                                                                Audit Report Number
                                                                             2010-SE-1002




TO:        Harlan Stewart, Director, Region X Office of Public Housing, 0APH

           //signed//
FROM:      Ronald J. Hosking, Regional Inspector General for Audit, Seattle,
                               Region X, 0AGA


SUBJECT: Alaska Housing Finance Corporation, Anchorage, AK, Needs To Improve Its
           Quality Control Plan


                                   HIGHLIGHTS

 What We Audited and Why

             We audited the Housing Choice Voucher program of the Alaska Housing Finance
             Corporation (Corporation) because the Corporation administers all Alaska Section
             8 funding. We wanted to determine whether the Corporation admitted and housed
             tenants properly, calculated tenant subsidies correctly, and maintained an
             effective quality control program. We also wanted to determine whether the
             Corporation properly administered its U.S. Department of Housing and Urban
             Development (HUD)-Veterans Affairs Supportive Housing (VASH) program.

 What We Found


             The Corporation generally admitted and housed tenants properly and calculated
             tenant subsidies correctly. However some Corporation offices had error rates
             exceeding 20 percent in calculating tenant income or housing assistance payments
             and the quality control program could be improved. In addition, the
             Corporation’s VASH policies conflicted with program requirements. Its
           admission policy could improperly deny housing assistance to an eligible veteran
           who owed it money.

What We Recommend


           We recommend that the Corporation revise its quality control plan. We also
           recommend that it eliminate the repayment agreement requirement for its VASH
           program.

           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 requested that the Corporation provide a response on September 24, 2010, and
           the Corporation provided its written comments on September 23, 2010. The
           Corporation generally agreed with the results.

           The complete text of the auditee’s response is in appendix A of this report.




                                            2
                             TABLE OF CONTENTS

Background and Objectives                                                       4

Results of Audit

        Finding 1: The Corporation Did Not Always Determine Tenant Income and   5
                   Subsidies Correctly
        Finding 2: The Corporation’s VASH Policies Conflicted With Program      8
                   Requirements

Scope and Methodology                                                           10

Internal Controls                                                               11

Appendixes
   A.   Auditee Comments and OIG Evaluation                                     13
   B.   Stratified Sample Selection                                             16
   C.   Stratified Sample Errors                                                17
   D.   100 Percent Selection Sample Errors
                                                                                18




                                             3
                     BACKGROUND AND OBJECTIVES

Alaska Housing Finance Corporation

The Alaska Housing Finance Corporation (Corporation), managed by a seven-member board of
directors, was created in 1971 by the Alaska Legislature to provide affordable housing options
for low- and moderate-income families. The Corporation operates 16 offices around the State,
managing more than 1,300 public housing units and administering more than 4,300 housing
choice vouchers. According to the U.S. Department of Housing and Urban Development’s
(HUD) Voucher Management System, the Corporation provided more than $27 million in
housing assistance payments for housing choice voucher holders in 2009.

Housing Choice Voucher Program

The Section 8 Housing Choice Voucher program is the Federal Government’s major program for
helping very low-income families, the elderly, and the disabled to afford decent, safe, and
sanitary housing in the private market. Participants may choose any housing meeting program
requirements. HUD provides Federal funds to public housing agencies to make housing
assistance payments to landlords on behalf of the families. The agencies calculate the amount of
each family’s subsidy, and the families pay the difference between the actual rent and the
subsidized amount.

HUD – Veterans Affairs Supportive Housing Program

The 2008 Consolidated Appropriations Act (Appropriations Act) provided $75 million for the
HUD-Veterans Affairs Supportive Housing (VASH) program. The VASH program combines
HUD rental assistance for homeless veterans with case management and clinical services
provided by the U.S. Department of Veterans Affairs. Public housing agencies administer the
program in accordance with Housing Choice Voucher program requirements; however, the
Appropriations Act gives HUD the authority to waive or modify the requirements to effectively
deliver and administer the assistance. The program requirements were published in the Federal
Register on May 6, 2008.

Our objective was to determine whether the Corporation admitted and housed tenants properly,
calculated tenant subsidies correctly, and maintained an effective quality control program. We
also wanted to determine whether the Corporation properly administered its VASH program.




                                               4
                                RESULTS OF AUDIT

Finding 1: The Corporation Did Not Always Determine Tenant Income
and Subsidies Correctly
The Corporation did not always determine tenant income and subsidies correctly. The
Corporation’s quality control plan lacked an adequate file review process to detect errors. As a
result, some tenants either paid excessive rent or received excessive assistance from the
Corporation’s limited Housing Choice Voucher program funds.


 The Calculation Error Rate in
 Some Offices Exceeded 20
 Percent


               The Corporation did not always correctly determine tenant income and housing
               assistance payments. Some Corporation offices had error rates exceeding 20
               percent for calculations that could affect the tenants’ subsidies. We grouped the
               Corporation offices administering housing choice vouchers into three strata based
               on office size (see appendix B) and reviewed a random sample of Housing Choice
               Voucher program tenant files from each stratum as well as all of the available
               files administered in the Sitka and Wrangell offices.

               The table below summarizes the errors (see appendices C and D for the complete
               listing of the errors).

                                        Errors       Files reviewed   Error percentage
                     Metro stratum       11                 51              22%
                     Mini stratum          2                33               6%
                     Micro stratum         2                 6              33%
                     Sitka               13                 50              26%
                     Wrangell              9                36              25%

               Common errors included

                  Using incorrect amounts to calculate tenant incomes (23),
                  Missing third-party income verifications (7),
                  Using incorrect utility allowances (7), and
                  Using incorrect payment standards (6).

               Many errors did not affect the subsidy, and most subsidy errors were small;
               however, a few were significant. For example, in 2009, the Corporation
               oversubsidized an Anchorage family by almost $2,400 and inappropriately paid


                                                 5
           the family $340 in utility allowances because employment income and child
           support were not included as income at a recertification.

           Also, the Corporation inappropriately included a Ketchikan family’s supplemental
           Medicare insurance premiums as income, thereby undersubsidizing the family by
           $60 per month. When we notified the Corporation of this error, it determined that
           the case manager mistakenly believed the premiums to be income. This
           misconception existed from at least January 2009 through our review in May
           2010 and according to a Corporation official, affected as many as 29 families.

The Quality Control Plan Needs
Improvement

           In general, the quality control reviews accurately evaluated the tenant files.
           However, the error rates in the Anchorage, Sitka, and Wrangell offices indicated
           that improvements were needed in the Corporation’s quality control plan to
           correct inadequacies in its file review process.

           The Corporation’s quality control plan divided the universe of Housing Choice
           Voucher program tenant files into three categories for review purposes: tenants
           with annual recertifications, tenants with interim recertifications, and tenants that
           had moved in during the review period. Samples for review were randomly
           selected from each of these categories. The file reviews concentrated only on the
           one event corresponding to the category from which they were selected.
           Effectiveness in the detection of errors could be improved if all files sampled
           were reviewed for any recertifications that occurred during the year that the files
           were selected for review.

           The quality control plan did not provide for an adequate separation of duties.
           In offices containing more than one person, the plan required that a supervisor or
           another qualified person, other than the person performing the work, conduct the
           file reviews. However, in a small office like Ketchikan, the only person qualified
           to do the reviews was the person that worked on the files.

           For the small single-staffed offices, the plan required the person who performed
           work on the Housing Choice Voucher program tenant files to perform the quality
           control reviews of the files on which they worked. If the person responsible for
           both working on and reviewing the files had a misconception about what should
           be included in the calculation of the housing assistance payment, his or her
           reviews might not detect errors related to the misconception.

           As a result, some tenants either paid excessive rents or received excessive
           assistance from the Corporation’s limited Housing Choice Voucher program
           funds. When tenants are oversubsidized, funds are not available to assist other




                                             6
          low-income families. Undersubsidized families have less money for other
          expenses.

Recommendations



          We recommend that the Director, Region X Office of Public Housing, require the
          Corporation to

          1A. Evaluate and revise the quality control plan to improve the effectiveness of
          error detection.

          1B. Revise the quality control plan to incorporate independent quality control file
          reviews.




                                           7
Finding 2: The Corporation’s VASH Policies Conflicted with Program
Requirements
The Corporation’s VASH policies conflicted with program requirements. This condition
occurred because the Corporation did not understand that VASH applicant repayment
agreements did not conform to these requirements. As a result, eligible veterans could be denied
housing assistance.



The Corporation’s VASH
Policy Conflicted With
Program Requirements

              The Corporation’s policies did not fully conform to VASH program requirements.
              Federal Register Notice, Docket No. FR-5213-N-01, dated May 6, 2008, states
              that a public housing agency may not deny a veteran a VASH program voucher
              because the applicant owes it money. Nonetheless, the Corporation’s VASH
              policy required that applicants sign repayment agreements for any amounts owed
              before receiving VASH assistance.

              When implementing the VASH program, the Corporation changed its policy of
              denying assistance to persons who owed it money. The Corporation’s board
              passed Resolution 2008-26, allowing veterans who owed it money to receive a
              VASH voucher by signing a repayment agreement for any amounts owed. After
              the resolution passed, the Corporation entered into a memorandum of agreement
              (memorandum) between itself and the U.S. Department of Veterans Affairs
              Medical Center.

              In the memorandum, the Corporation agreed to provide tenant-based voucher
              assistance under the VASH initiative. According to the memorandum, “Once the
              family has been referred to AHFC [the Corporation], AHFC will screen each
              adult family member for prior program participation. If the family member owes
              AHFC money, AHFC will immediately contact the VAMC [U.S. Department of
              Veterans Affairs Medical Center]. AHFC agrees to enter into a Repayment
              Agreement prior to the receipt of a voucher. The family must remain current on
              their Repayment Agreement to retain their housing assistance.” Thus, the
              Corporation would deny the voucher assistance if amounts owed by a veteran or
              the veteran’s family were not repaid.




                                               8
The Corporation Did Not Fully
Understand the VASH
Requirements

           The Corporation believed that its policy met VASH requirements; however, the
           repayment agreement requirement clearly violated these requirements. As a
           result, the Corporation’s policy could deny housing assistance to eligible veterans.

           As of March 2010, available tenant files showed that the Corporation had not
           denied a VASH voucher because the veteran owed it money. Further, the
           Corporation provided a VASH voucher to one veteran who owed it money
           without a repayment agreement. However, Corporation policy must be revised to
           ensure that all qualified veterans receive the assistance they have earned.

Recommendations



           We recommend that the Director, Region X Office of Public Housing,

           2A. Require the Corporation to remove the repayment agreement requirement
           from its HUD-VASH policy.




                                            9
                          SCOPE AND METHODOLOGY

We performed our fieldwork from March through June 2010 at Corporation offices in
Anchorage, Fairbanks, Homer, Juneau, Sitka, Soldotna, Wasilla, and Wrangell and reviewed
files from those offices and Ketchikan, Kodiak, Petersburg, and Valdez. Our audit period was
January 2009 through February 2010 and covered the Corporation’s housing choice voucher
payments made in 2009.

To accomplish our objectives, we reviewed program criteria, interviewed Corporation staff,
reviewed the Corporation’s voucher quality control program, reviewed Housing Choice Voucher
program tenant files, and reviewed Corporation computer records of tenant and financial
information. We compared the documentation in the tenant files to HUD’s program criteria and
the Corporation’s administrative plan.

Stratified Sample

We selected and reviewed a stratified random sample of 90 tenant files from a universe of 5,102
tenants whose housing choice vouchers were administered by the Corporation and for whom the
Corporation made at least 1 housing assistance payment in 2009. We used a 90 percent
confidence level with a precision of plus or minus 10 percent. The Corporation provided the
universe in an electronic text file. We stratified the universe into three office sizes that were the
sampling frames for each stratum (see appendix B). We calculated the number of files for each
stratum in proportion to the level of representation within the universe. Case files were
identified within each stratum by generating a series of random numbers and assigning them to
case files for each stratum, including spares.

In the metro stratum, we incorrectly linked the random numbers with the files. As a result, the
randomizing agent for the metro stratum was the Corporation’s assignment of tenant
identification numbers instead of the generated random numbers. Although we deemed this error
to have no material impact, we did not project sample results to the universe.

100 Percent Sample

We also performed a 100 percent review of the tenant files administered by the Sitka and
Wrangell offices. We selected these single-staff offices based on the number of files to be
reviewed at each office and on travel considerations. To obtain these universes, we used the list
of tenants by month provided by the Corporation, yielding 53 files in Sitka and 37 in Wrangell.

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
objectives. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




                                                 10
                              INTERNAL CONTROLS

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

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

Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.



 Relevant Internal Controls
               We determined that the following internal controls were relevant to our audit
               objectives:

                     Compliance with applicable laws and regulations - Policies and
                      procedures implemented to reasonably ensure that resources are used
                      consistent with laws and regulations. 
                     Safeguarding assets and resources - Policies and procedures implemented
                      to reasonably ensure that assets and resources are safeguarded against
                      fraud, waste, and abuse. 

               We assessed the relevant controls identified above.

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




                                                 11
Significant Deficiencies


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

                   The Corporation’s quality control program did not provide for independent
                    review of tenant files (finding 1).
                   The Corporation’s VASH policy did not comply with program
                    requirements (finding 2).




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                    APPENDIXES

Appendix A

      AUDITEE COMMENTS AND OIG EVALUATION

                    Auditee Comments




             OIG Evaluation of Auditee Comments




                            13
14
                          OIG Evaluation of Auditee Comments

The Corporation’s written response indicates agreement with the recommendations.




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Appendix B

                      STRATIFIED SAMPLE SELECTION


        Stratum (1)          Office                 Universe     Files in random sample
       Metro          Anchorage                      2,903                  51 (2)
       Subtotal                                      2,903                  51
       Mini           Fairbanks                        408                   6
       Mini           Juneau                           398                   7
       Mini           Ketchikan                        107                   2
       Mini           Kodiak                           129                   5 (3)
       Mini           Soldotna                         375                   3
       Mini           Wasilla                          460                  10 (3)
       Subtotal                                      1,877                  33
       Micro          Homer                            130                   2
       Micro          North Slope Borough               10                   0
       Micro          Petersburg                        50                   1
       Micro          Sitka                             51                   1
       Micro          Valdez                            49                   1
       Micro          Wrangell                          32                   1
       Subtotal                                        322                   6
       Total                                         5,102                  90


(1) The metro stratum consists of the main office in Anchorage, the micro stratum consists of
the outlying offices with one staff member who administers AHFC’s housing programs, and the
mini stratum consists of the remaining outlying offices that administer housing choice vouchers.
(2) One Anchorage selection was unavailable. We used the first spare in the metro stratum.
(3) One Kodiak selection was unavailable. The first spare in the mini stratum was a Wasilla file.




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Appendix C

                  STRATIFIED SAMPLE ERRORS


 Tenant ID Stratum/office                                 Error
  013598   Metro/Anchorage     Used tenant statement of employment income instead of
                               the income shown in the file
   013841   Metro/Anchorage    Used incorrect permanent fund dividend amount; no
                               third-party verification of pension
   015020   Metro/Anchorage    Used incorrect amount of Social Security income
   015095   Metro/Anchorage    Used only base pay instead of all employment income
   117626   Metro/Anchorage    No third-party verification of Social Security income
   118093   Metro/Anchorage    Used incorrect amount of Social Security income
   118150   Metro/Anchorage    Did not update payment standard at an annual
                               recertification
   118460   Metro/Anchorage    Used incorrect utility allowance
   118464   Metro/Anchorage    Did not include tenant wages and inappropriately
                               updated the payment standard
   118830   Metro/Anchorage    Used pay stub year-to-date amounts instead of monthly
                               amounts to calculate average monthly income
   119181   Metro/Anchorage    Used tenant statement of assistance income instead of
                               income shown in the file
   329706   Mini/Ketchikan     Inappropriately included supplemental Medicare
                               insurance premium as tenant income
   349477   Mini/Kodiak        No third-party verification of Supplemental Security
                               Income
   300759   Micro/Valdez       Changed the payment standard at an interim
                               recertification; no third-party verification of Social
                               Security income
   345123   Micro/Homer        Miscopied Indian trust income amount




                                        17
Appendix D

        100 PERCENT SELECTION SAMPLE ERRORS


  Tenant ID     Office                                  Error
   323537     Sitka       Miscopied Indian trust income amount
   324040     Sitka       Did not use updated asset interest amount for a recertification
   335335     Sitka       No third-party verification of asset income
   339624     Sitka       Used incorrect wage rate and did not include childcare
                          expenses; no third-party verification for employment
                          income; evidence of employment income that was not
                          included
   345453     Sitka       Lacked third-party verification of the current asset income
   346140     Sitka       Did not update assistance and asset income from previous
                          event for the annual recertification
   346865     Sitka       Entered Indian trust income incorrectly
   354069     Sitka       Used incorrect Social Security amount
   355135     Sitka       Entered Social Security income incorrectly 
   360205     Sitka       Entered child support incorrectly
   361943     Sitka       Entered income on minimum income worksheet incorrectly
   363008     Sitka       Tenant file showed an increase in tenant income, but the
                          housing assistance payment did not change.
   364652     Sitka       Assigned higher payment standard than required by the
                          administrative plan
   305729     Wrangell    Used incorrect utility allowance schedule
   339857     Wrangell    Used tenant-reported Supplemental Security Income instead
                          of the third-party verified income in the file; updated utility
                          allowance at an interim recertification.
   350824     Wrangell    Updated payment standard and utility allowance at an
                          interim recertification; used incorrect permanent fund
                          dividend; no third-party verification of Supplemental
                          Security Income
   353519     Wrangell    Used incorrect utility allowance schedule
   357988     Wrangell    Used incorrect permanent fund dividend amount
   357989     Wrangell    Inappropriately increased the payment standard at a
                          recertification
   358449     Wrangell    Used net amount of Social Security income instead of gross
                          amount; entered utility allowance and medical insurance
                          premium incorrectly
   358875     Wrangell    Updated utility allowance at an interim recertification
   359467     Wrangell    Used incorrect utility allowance schedule




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