oversight

U.S. Department of Housing and Urban Development, Washington, DC, Housing Choice Voucher Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2013-07-18.

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

OFFICE OF AUDIT
REGION 2
NEW YORK-NEW JERSEY




               U.S. Department of Housing and Urban
                   Development, Washington, DC

               Housing Choice Voucher Program




2013-NY-0002                                JULY 18, 2013
                                                        Issue Date: July 18, 2013

                                                        Audit Report Number: 2013-NY-0002




TO:            Milan Ozdinec,
               Deputy Assistant Secretary for Public Housing and Voucher Programs, PE

               Lindsey Reames,
               Acting Deputy Assistant Secretary for Field Operations, PQ



FROM:          Edgar Moore
               Regional Inspector General for Audit, New York-New Jersey Region, 2AGA


SUBJECT:       HUD Can Improve Public Housing Agencies Use of Housing Choice Vouchers
               by Consistently Implementing All Utilization Protocols and Improving Controls


    Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG) final results of our review of HUD’s Housing Choice Voucher
program and the implementation of its protocol for optimizing and stabilizing housing choice
voucher utilization.

    HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.

    The Inspector General Act, Title 5 United States Code, section 8L, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.

   If you have any questions or comments about this report, please do not hesitate to call me at
212-264-4174.
                                            July 18, 2013
                                            HUD Can Improve Public Housing Agencies Use of
                                            Housing Choice Vouchers by Consistently Implementing
                                            All Utilization Protocols and Improving Controls



Highlights
Audit Report 2013-NY-0002


 What We Audited and Why                     What We Found

We reviewed the U.S. Department of          HUD officials had generally implemented the guidance
Housing and Urban Development’s             for optimizing and stabilizing housing choice voucher
(HUD) Housing Choice Voucher                utilization through HUD’s utilization protocol.
program as part of an Office of             However, some utilization protocol controls had not
Inspector General plan to improve the       been implemented. In addition, opportunities exist to
efficiency and effectiveness of HUD         strengthen controls to ensure stable optimal utilization,
programs. The objective of the audit        such as (1) formalizing the processes to assist public
was to determine whether HUD’s              housing agencies in achieving optimal utilization, (2)
guidance for optimizing and stabilizing     ensuring that public housing agencies understand its
housing choice voucher utilization had      utilization situation, (3) centralizing all correspondence
been implemented effectively by the         affecting utilization, (4) addressing tools available for
field offices and public housing            consistently poor utilization performance, and (5)
agencies.                                   ensuring that information is analyzed in a timely
                                            manner. This condition can be attributed to
                                            inconsistent implementation of the utilization protocol
 What We Recommend
                                            within HUD offices.
We recommend that HUD (1)
implement procedures outlining the
responsibilities and expectations of each
person involved in the improvement of
utilization performance; (2) develop
procedures that would require providing
concise information to public housing
agencies regarding their utilization
performance issues; (3) establish
procedures requiring that information
affecting utilization performance is
accessible to the HUD field officials
responsible for analyzing utilization
performance; (4) establish procedures to
address public housing agencies that fail
to improve their utilization
performance; and (5) ensure HUD
officials receive and analyze utilization
information in a timely manner.
                            TABLE OF CONTENTS

Background and Objective                                                       3

Results of Audit
      Finding:      HUD Can Improve Public Housing Agencies Use of
                    Housing Choice Vouchers by Consistently Implementing All
                    Utilization Protocols and Improving Controls               5

Scope and Methodology                                                          13

Internal Controls                                                              14

Appendixes
A.    Schedule of Funds To Be Put to Better Use                                16
B.    Auditee Comments and OIG’s Evaluation                                    17




                                            2
                       BACKGROUND AND OBJECTIVE

The Section 8 Housing Choice Voucher program is the Federal Government’s major program for
assisting very low-income families, the elderly, and the disabled in obtaining decent, safe, and
sanitary housing in the private market. The Housing Choice Voucher program is the U.S.
Department of Housing and Urban Development’s (HUD) largest rental assistance program and
provides more than two million families with rental assistance.

Housing choice vouchers are administered locally by public housing agencies. The public
housing agencies receive federal funds from HUD to administer the voucher program. A family
that is issued a housing voucher is responsible for finding a suitable housing unit of the family's
choice where the owner agrees to rent under the program. Rental units must meet minimum
standards of health and safety. A housing subsidy is paid to the landlord directly by the public
housing agencies on behalf of the participating family. The family then pays the difference
between the actual rent charged by the landlord and the amount subsidized by the program.

In 2012, Congress appropriated more than $18.9 billion to fund the Housing Choice Voucher
program. The Housing Choice Voucher program is administered locally by more than 2,300 public
housing agencies. HUD enters into annual contributions contracts with the public housing agencies,
under which the public housing agencies are responsible for the administration of the Housing
Choice Voucher program in accordance with Federal laws and program regulations.

Since January 2005, HUD has used a budget-based approach for program funding. This funding is
a fixed amount based on the prior year’s cost, and public housing agencies must maintain any
budget authority that exceeds actual program expenses as net restricted assets. Effective January
2012, HUD implemented cash management procedures for the disbursement of housing assistance
payment funds to public housing agencies under the Housing Choice Voucher program. The
process of disbursing only the funds required for current housing assistance payment costs resulted
in the reestablishment of HUD-held program reserves, whereby excess housing assistance payment
funds remained obligated but undisbursed at the HUD level rather than held by the public housing
agencies.

HUD officials set a goal in HUD’s strategic plan to meet the need for quality affordable rental
homes. The Office of Public and Indian Housing engaged both headquarters and field office staff to
continue to implement comprehensive strategies and tools for increasing utilization at those public
housing agencies where it can be done responsibly, considering the renewal base that can be
supported by the individual public housing agency’s available funding as well as incremental
vouchers that become available and the speed at which those new vouchers are put under lease.

The utilization effort initiated by HUD constituted a major new business process conducted
within limited existing resources and was a proactive attempt to work to improve and stabilize
housing choice voucher leasing performance in an increasingly complex and challenging
appropriations environment. It required extensive capacity building both within HUD and at
public housing agencies. Also, the utilization effort was developed at a time when the dominant
new workload was the implementation and monitoring of the Recovery Act. The tools

                                                 3
developed, training provided and engagement with public housing agencies has added value and
contributed to HUD meeting strategic housing goals.

HUD has developed a 2-year forecasting spreadsheet tool for use by public housing agencies and
HUD staff to assist in projecting Housing Choice Voucher leasing, spending and funding over a two
year period. The purpose of the tool was to facilitate decision making by public housing agencies
and to guide HUD oversight and technical assistance so that public housing agencies can achieve
optimal use of the Housing Choice Voucher funds while stabilizing the program. The goal was to
make full use of the program while avoiding the typical large cyclical swings of lease up followed
by attrition, and to eliminate abrupt cutbacks that might adversely impact participants.

Projections of leasing and spending require consideration of four key interacting variables (1) the
success rate which is the percentage of voucher issuances that result in a lease, (2) the turnover rate
which is the annual rate of participants leaving the program, (3) the time it takes to lease after the
issuance of vouchers, and (4) the per unit cost.

HUD officials from the Office of Public Housing and Voucher Programs are responsible for a
variety of Housing Choice Voucher program administrative duties. These duties include forecasting
the budgetary needs of the program, developing and preparing budget requests based on those
forecasts, calculating and allocating voucher renewal funding in accordance with the appropriations
acts, and evaluating public housing agencies’ applications for additional funding from the set-asides.
HUD officials also are responsible for policy development and strategic planning for the Housing
Choice Voucher program. The Office of Field Operations oversees the regional networks and field
offices comprised of hubs and program centers. HUD field staff is responsible for monitoring and
interaction with the public housing agencies regarding leasing and spending to ensure optimum use
of the funds to house families.

The objective of the audit was to determine whether HUD’s guidance for optimizing and stabilizing
housing choice voucher utilization had been implemented effectively by the field offices and public
housing agencies. Specifically, we wanted to determine whether HUD needs to strengthen its
regulatory requirements, program guidance, or both to ensure that the Housing Choice Voucher
program is administered in a manner that results in optimal utilization.




                                                   4
                                 RESULTS OF AUDIT


Finding:       HUD Can Improve Public Housing Agencies Use of Housing
               Choice Vouchers by Consistently Implementing All
               Utilization Protocols and Improving Controls

HUD officials had generally implemented the guidance for optimizing and stabilizing housing
choice voucher utilization through HUD’s utilization protocol. However, some utilization
protocol controls had not been implemented. Specifically, HUD officials did not always ensure
that oversight controls were applied and actions taken to address utilization performance were
properly documented. In addition, opportunities exist to strengthen controls such as (1)
formalizing the processes to assist public housing agencies in achieving optimal utilization, (2)
ensuring that public housing agencies understand its utilization situation, (3) centralizing all
correspondence affecting utilization, (4) addressing tools available for consistently poor
utilization performance, and (5) ensuring that information is analyzed in a timely manner. This
condition can be attributed to the inconsistent implementation of the utilization protocol within
HUD offices. As a result, HUD could not ensure that public housing agencies were achieving
optimal, stable use of the Housing Choice Voucher program.

 HUD Officials Had Generally
 Implemented the Utilization
 Protocol

               HUD officials had generally implemented the guidance for optimizing and
               stabilizing housing choice voucher utilization. Specifically, HUD had been
               successful with its shortfall prevention process and implementation of most of the
               controls in the utilization guidance. HUD had established a protocol for
               optimizing and stabilizing housing choice voucher utilization that was issued by
               memorandums on June 20, 2011, and revised on March 14, 2012. The shortfall
               prevention process within the utilization protocol was intended to ensure that
               there were no terminations of participants due to overspending by public housing
               agencies. HUD officials stated that the challenge going forward is to continue to
               improve management of this business process, ensure better execution of its
               utilization protocol across HUD’s field offices, and to enhance the quality and
               ease of use of tools and information provided PHAs.

               HUD officials stated that there had been no terminations of participants due to
               insufficient funding since the shortfall prevention team concept was implemented.
               In addition, the HUD field offices reviewed had implemented most of the controls
               established in the utilization protocol. For example, each field office reviewed
               was utilizing the 2-year forecasting spreadsheet in its analysis of public housing
               agencies. Also, each field office reviewed had its staff post conclusions and

                                                5
           analysis using the Housing Choice Voucher program checklist. Likewise, each
           office reviewed had created public housing agency folders, included them on its
           utilization SharePoint site, and populated them with the information requested by
           management in the utilization protocol.

HUD Did Not Always Ensure
That Oversight Controls Were
Applied

           Some HUD officials did not ensure that oversight controls were fully applied.
           Specifically, the regional network directors failed to develop and implement
           Housing Choice Voucher program procedures explaining how the Housing
           Choice Voucher program utilization function would be carried out in the regions,
           how management would assess utilization performance, and how well the process
           was implemented. The regional network procedures were to include a quality
           control process with at least a quarterly sample review of documentation to ensure
           completion, accuracy, and a review of the quality of the entries according to the
           utilization protocol.

           We examined the Housing Choice Voucher program procedures for the four
           regional networks in our sample. There are 6 regional public housing directors
           overseeing 10 regions. One regional network did not have procedures, and a
           HUD official stated that the regional network followed the national protocol. The
           four field offices reviewed within the regional networks performed various levels
           of quality control. However, the field office officials had not documented those
           procedures. Also, the field office officials could not explain whether quality
           control procedures had been developed by the regional network directors.

           HUD officials had been actively planning changes to the quality control process
           that was implemented after our audit testing period. They informed us that a
           centralized quality control process had been established and was implemented in
           February 2013. The central quality control testing would review an example of
           every analyst’s work twice a year. The review would entail looking at the
           checklists submitted by the analysts and the 2-year tool they completed and
           posted. The changes were to be described in a revised utilization protocol, which
           was being drafted.

HUD Officials Did Not Fully
Document Their Analyses of
Utilization Performance

           HUD officials did not fully document the actions taken to address utilization
           performance. The utilization protocol provided that the comment fields in the
           checklist were for good narrative descriptions of performance and the nature of
           any performance problems. The comment fields should provide a description of

                                            6
                 the challenge, problem, or what led to the need to comment. Also, the comment
                 fields should contain a description of what is being done to improve the situation
                 and when improvement can be expected.

                 HUD field office officials did not properly document performance for 16 of 25
                 public housing agency files reviewed. For example, a HUD official’s comments
                 for a public housing agency reiterated what was already known and speculated on
                 what needed to be done. There was no evidence from the comments that the
                 HUD official had discussed the situation with the public housing agency. The
                 comments for the challenge or problem were that the public housing agency was
                 underleased and not spending annual budget authority. The comment did not
                 explain the reason why this condition occurred, nor did it address why housing
                 assistance payment expenditures as a percentage of all funds available was less
                 than 86 percent. The comments for what was being done to improve the situation
                 and when improvement could be expected were that the number of unleased
                 special purpose vouchers1 may have contributed to the public housing agency’s
                 high leasing potential. The comments went on to state that the public housing
                 agency had 110 special purpose vouchers with only 80 leased. There was nothing
                 in the comments about what was being done and when improvement could be
                 expected. As such, the checklists could be more helpful in achieving HUD’s
                 goals if they provided more meaningful responses.

    Opportunities Exist To
    Strengthen Controls


                 Protocol controls can be strengthened to assist in achieving a more optimal, stable
                 use of the Housing Choice Voucher program. Additional controls should include
                 (1) formalizing the processes to assist public housing agencies in achieving
                 optimal utilization, (2) ensuring that public housing agencies understand its
                 utilization situation, (3) centralizing all correspondence affecting utilization, (4)
                 addressing enforcement tools available for poor utilization performance, and (5)
                 ensuring that information is analyzed in a timely manner.

                 The additional utilization controls to strengthen protocols are discussed below.

                 1. Formalizing the Processes To Assist Public Housing Agencies in Achieving
                    Optimal Utilization

                 The field offices visited did not formalize the process to assist public housing
                 agencies in achieving optimal utilization. HUD officials had developed guidance
                 to address public housing agencies with potential shortfalls that defined the roles

1
  Special Purpose Vouchers are specifically provided for by Congress in line item appropriations which distinguish
them from regular vouchers. Examples of Special Purpose Vouchers are (1) Veteran Affairs Supportive Housing
(VASH), (2) Family Unification Program (FUP), (3) Non-Elderly Disabled (NED), (4) Enhanced Vouchers, and (5)
Tenant Protection Vouchers (TPV).

                                                        7
                and responsibilities of each participant involved in the process. The guidance
                provided a framework of how to conduct the analysis and achieve a solution.
                However, each field office visited had its own set of procedures for addressing the
                remaining types of public housing agency utilization performance issues.
                Moreover, most of the field offices procedures were not documented. The lack of
                structure resulted in individual HUD staff incorrectly interpreting what they
                needed to accomplish.

                Some HUD officials were completing the required tasks but not assisting the
                public housing agency in resolving the utilization performance issue. There was
                no evidence of discussions with public housing agency officials or a set of actions
                that the parties had agreed upon to resolve the performance issue. Therefore,
                written procedures to address public housing agency utilization performance
                issues would provide the guidance to HUD officials for assisting public housing
                agencies in achieving optimal utilization and would allow for consistency among
                field offices.

                2. Ensuring That Public Housing Agencies Understand Its Utilization Situation

                The utilization protocol provided that the discussion of the leasing and spending
                data with the public housing agency ideally should result in a consensus on an
                issuance or attrition approach. Before any discussion, HUD officials should
                convey to the public housing agency in writing the information that HUD has
                used in developing its utilization analysis. This measure would allow the public
                housing agency to verify the information. Also, the information should be
                provided to the appropriate public housing officials; that is, those responsible for
                voucher issuance and attrition along with officials who have knowledge of the
                financial position of the public housing agency. The data would assist in
                developing a meaningful consensus approach to utilization.

                HUD analysts should have provided more concise information to public housing
                agency officials making utilization decisions. For example, new cash
                management rules in 2012 resulted in the reestablishment of HUD-held program
                reserves, whereby excess housing assistance payment funds remained obligated
                but undisbursed at the HUD level rather than being held by the public housing
                agencies. There were four public housing agencies in our sample that made
                utilization decisions based on the disbursed amount and not the potential HUD-
                held reserve amount. HUD analysts should have provided the public housing
                agencies that were projected to have HUD-held program reserves the potential
                amount of those reserves based upon the undispersed budget authority. The total
                amount of HUD-held program reserves for these four agencies at the end of 2012
                totaled more than $1.9 million.2 If HUD officials had provided the public housing
                agencies with the information regarding the potential HUD-held reserves during

2
 Four public housing agencies had a total of $1,961,078 in HUD-held reserves for 2012. The agencies were
Middletown Housing Authority, CT ($1,442,207), Boulder County Housing Authority, CO ($349,993), Wallingford
Housing Authority, CT ($158,210), and Uniontown Housing Authority, AL ($10,668).

                                                     8
the year, the public housing agencies could have issued more vouchers, and
housing assistance funds could have been put to better use, utilizing more
vouchers.

3. Centralizing All Correspondence Affecting Utilization

The field office staff is responsible for analyzing the utilization performance of its
public housing agencies and discussing with them solutions for utilization
performance issues. However, there are administrative activities performed by
HUD officials in the Office of Public Housing and Voucher Programs that could
affect the field office analyses. For example, the public housing agency officials
interviewed explained that they consulted their Financial Management Center
analysts when they had questions regarding funding. The field office staff would
like to be able to access the information the Financial Management Center
provided to the public housing agency to ensure that there are no contradictions.

Also, the Quality Assurance Division within the Office of Public Housing and
Voucher Programs performs various reviews of the public housing agencies.
Again, those reviews and their outcomes should be easily accessible to the HUD
field office staff responsible for public housing agency analyses. HUD officials
developed a utilization SharePoint site where the field office staff’s analyses can
be posted. HUD should consider posting additional information affecting
utilization to this site.

4. Addressing Tools Available for Consistently Poor Utilization Performance

The utilization protocol did not provide guidance as to the measures available to
HUD for public housing agencies that were unwilling to improve their utilization.
Large reserve balances hinder HUD’s goal to assist the maximum number of
families. The regulations that HUD has in place for utilization do not address
public housing agencies that do not spend reserve balances. For example, the
Section Eight Management Assessment Program indicator 13, entitled “Lease-
Up,” measures a public housing agency’s utilization of housing assistance
payments for the year in which it was awarded. However, the indicator does not
consider public housing agencies reserve balances when determining voucher
utilization.

Field office officials explained that it would be useful if there were tools available
to them to entice nonresponsive public housing agencies to improve their
utilization. HUD officials explained that there are provisions within the annual
contributions contract that could be enforced for serious utilization performance
issues. Therefore, HUD officials should document the measures they will take to
address poor utilization performance.

Offsets are one mechanism in place to encourage public housing agencies to
utilize their funding. HUD has requested from Congress the ability to offset

                                  9
reserves in an effort to increase the number of families it supports and encourage
public housing agencies to fully utilize its funds. In the latest congressional
justification, HUD requested authority to allow HUD to offset public housing
agency contract renewal allocations by the excess amount of agencies’ reserves as
established by HUD. This authority would ensure that public housing agencies’
programs have reasonable reserves to address unanticipated costs or spikes in
rents during the calendar year and would discourage the buildup of excessive
reserves.

Congress has included offsets of $750 million and $650 million in the 2009 and
2012 appropriations, respectively. However, the congressional offsets have not
been used to assist additional families but, rather, to reduce the amount of
appropriations available. A HUD-authorized offset would require that HUD first
use the funds from the offset to avoid or reduce any downward proration in
renewal funding. If there was no downward proration of contract renewal funding
or if offset funding remained after any downward proration was eliminated, HUD
would have the authority to reallocate these renewal funds to other public housing
agencies based on need and performance. However, HUD has not received this
authority in any of the appropriations.

5. Ensuring That Information Is Analyzed in a Timely Manner

HUD needs to ensure that information is analyzed in a timely manner. Most of
the field offices reviewed relied on the monthly utilization report to complete the
2-year forecasting spreadsheet or identify which public housing agencies had
utilization performance issues. The utilization protocol indicated that a public
housing agency had until the 22nd of the following month to enter data into the
Voucher Management System. Then, the information would be vetted and
packaged in the monthly utilization report by the 19th of the following month.
However, the monthly utilization report was not completed until a month later.
For example, the information for October 2012 needed to be submitted by the
public housing agencies by November 22nd, but the monthly utilization report was
not available until January 2013.

The utilization protocol provided that the monthly utilization report did not have
to be issued before monthly analysis was conducted. However, the monthly
utilization report is popular because it autopopulates information for entry into the
2-year forecasting spreadsheet. The delay of the monthly utilization report had
caused confusion at public housing agencies. Public housing agencies were
getting letters and questions about their utilization performance from 3 or more
months earlier. Therefore, HUD officials need to analyze this data regarding the
public housing agencies’ utilization in a timely manner because of the time it
takes to make the changes necessary to affect utilization performance and so that
utilization performance data can be effectively used by public housing agencies.




                                 10
Conclusion

             HUD officials had generally implemented the guidance for optimizing and
             stabilizing housing choice voucher utilization. However, some utilization
             protocol controls had not been implemented as designed and other controls could
             be strengthened to ensure optimal utilization. Specifically, HUD officials did not
             ensure that oversight controls were applied and actions taken to address utilization
             performance were properly documented. This condition can be attributed to the
             inconsistent implementation of the utilization protocol within HUD offices.

Recommendations

             We recommend that the Deputy Assistant Secretary for Field Operations

             1A.    Document and implement the new quality control process in the utilization
                    protocol.

             1B.    Ensure that each regional network implements the utilization protocol
                    requirements explaining how the Housing Choice Voucher program
                    utilization function will be carried out in the regions, how management
                    will assess utilization performance, and how well the process was
                    implemented.

             1C.    Ensure that the comment fields in the checklist tool include the description
                    and nature of the performance problem, what is being done to improve the
                    situation by the public housing agency, and when improvement can be
                    expected.

             1D.    Develop controls that will ensure that existing procedures are
                    implemented at all field offices so that all utilization performance issues
                    will consistently outline the responsibilities and expectations of each
                    person involved in the improvement of utilization performance at public
                    housing agencies.


             We recommend that the Deputy Assistant Secretary for Public Housing and
             Voucher Programs

             1E.    Develop procedures that would require providing concise documentation
                    to the applicable public housing agency officials regarding their utilization
                    performance. The documentation should include the current reserve
                    balances and all pertinent details affecting utilization necessary for
                    meaningful discussion and for the agency to make informed decisions.
                    Such corrective action could ensure that $1,961,078 in program reserve


                                              11
      funds could be used to maximize the number of housing choice voucher
      leased units.

1F.   Ensure that HUD officials receive and analyze utilization information in a
      timely manner regarding public housing agencies’ utilization performance
      so that they can effectively work with the agencies on an issuance or
      attrition approach.

1G.   Establish procedures requiring that HUD officials who provide public
      housing agency information affecting utilization performance, such as the
      Financial Management Center and Quality Assurance Division, document
      their results and ensure that they are accessible to the HUD field officials
      responsible for analyzing utilization performance.

1H.   Establish procedures that would address public housing agencies that
      consistently fail to improve their utilization performance. The procedures
      should provide guidance to field office officials for the actions that can be
      taken based upon the level of poor performance.




                                12
                        SCOPE AND METHODOLOGY

We performed the audit fieldwork from August 2012 through March 2013 at the HUD Office of
Inspector General (OIG) Office of Audit in Buffalo, NY, and HUD field offices including
Hartford, CT, Birmingham, AL, New Orleans, LA, and Denver, CO. The audit scope generally
covered the period between January 2010 and December 2012.

To accomplish our objectives, we

      Reviewed applicable laws, regulations, and other HUD requirements.

      Interviewed HUD officials to identify and obtain an understanding of the controls over
       the Housing Choice Voucher program and in particular, the controls regarding the
       utilization protocol.

      Selected a sample of 25 public housing agencies that were identified by HUD as not
       optimally utilizing program funds. Specifically, the majority of these agencies were
       identified as underutilizing their funding. The purpose of the public housing agency
       selection was to determine how HUD officials implemented the utilization protocol.

      Interviewed public housing agency officials at 8 of the 25 agencies in our sample to
       determine their understanding of the utilization protocol and interaction with the field
       office.

      Relied on electronic data from HUD’s Voucher Management System and HUD Central
       Accounting and Program System as maintained by HUD’s Office of Public Housing and
       Voucher Programs, Program Support Division, in its monthly utilization report. We
       primarily used the data as background information that did not affect the results of our
       objectives; thus, we did not assess the reliability of the electronic data.

We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective. We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                                13
                              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
               objective:

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

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




                                                 14
Significant Deficiency

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

                  HUD officials did not ensure that oversight controls were consistently
                   applied and actions taken to address poor utilization performance were
                   always properly documented (see finding).




                                             15
                                    APPENDIXES

Appendix A

                         SCHEDULE OF
                 FUNDS TO BE PUT TO BETTER USE

                            Recommendation        Funds to be put
                                number            to better use 1/
                                  1E                $1,961,078



1/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an OIG recommendation is implemented. These amounts include
     reductions in outlays, deobligation of funds, withdrawal of interest, costs not incurred by
     implementing recommended improvements, avoidance of unnecessary expenditures
     noted in preaward reviews, and any other savings that are specifically identified. In this
     instance, implementation of our recommendation to notify public housing agencies of the
     HUD-held reserves that are available could result in more than $1.9 million in available
     program funds being used to maximize the number of housing choice voucher leased
     units.




                                             16
Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




                         17
Ref to OIG Evaluation   Auditee Comments




Comment 1




                         18
Ref to OIG Evaluation   Auditee Comments




Comment 2




                         19
Ref to OIG Evaluation   Auditee Comments




                         20
Ref to OIG Evaluation   Auditee Comments




Comment 3




Comment 4




                         21
Ref to OIG Evaluation   Auditee Comments




Comment 5




Comment 6




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Ref to OIG Evaluation   Auditee Comments




Comment 7




Comment 8




Comment 9




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Ref to OIG Evaluation   Auditee Comments




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                         OIG Evaluation of Auditee Comments

Comment 1   Public Housing officials provided documentary evidence that regional network
            protocols included quality control measures. As such, the statement in the report
            that regional network directors did not include a quality control process in any of
            the procedures was removed. In addition, we took into consideration HUD’s
            comments regarding changes made to the quality control process and have revised
            the paragraph (on page 6) to reflect that HUD had been actively planning changes
            to quality control procedures and they were implemented after our audit testing
            period.

Comment 2   Public Housing officials concur that HUD officials did not fully document the
            actions taken to address utilization performance. However, they questioned the
            number of those instances identified in the audit. We reviewed the additional
            documentation provided and still found that the narratives for 16 of the 25 public
            housing agencies reviewed either did not provide a good narrative description of
            performance and the nature of any performance problems or contain a description
            of what is being done to improve the situation and when improvement can be
            expected. The examples that HUD provided in their comments identified
            problems but did not provide a time frame for correcting them. Therefore, we did
            not change the report.

Comment 3   Public Housing officials disagree that there is a lack of guidance as it relates to
            formalizing the process to assist public housing agencies in achieving optimal
            utilization; as they refer to a step by step guide provided to the field in March
            2012. However, audit work has found that the existing procedures identified by
            HUD have not been implemented by all field offices. Nevertheless, we have
            taken HUD’s comments on the draft report and revised the language to clarify
            recommendation 1D to instruct HUD officials to develop controls that will ensure
            that existing procedures are implemented at all field offices so that all utilization
            performance issues will consistently outline the responsibilities and expectations
            of each person involved in the improvement of utilization performance at public
            housing.

Comment 4   Public Housing officials believe that recommendation 1C is unnecessary since its
            underlying objective is also addressed by the quality control recommendation.
            We believe the recommendations address two different conditions. First,
            recommendation 1A addresses the need to document and implement the new
            quality control process in the utilization protocol. Second, recommendation 1C
            requires HUD to ensure that the comment fields in the checklist tool include the
            description and nature of the performance problem, what is being done to improve
            the situation by the public housing agency, and when improvement can be
            expected. Therefore, this recommendation will remain in the report.




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Comment 5   Public Housing officials questioned whether providing HUD’s version of the
            forecasting tool would suffice in conveying to the public housing agency in
            writing the information that HUD has used in developing its utilization analysis.
            It is our recommendation to provide more concise documentation to the
            applicable public housing agency officials regarding their utilization performance.
            The documentation should include the current reserve balances and all pertinent
            details affecting utilization necessary for meaningful discussion and for the
            agency to make informed decisions.

Comment 6   Public Housing officials concurred with the broader notion of making the amount
            of projected HUD-held funds available to public housing agency officials making
            utilization decisions. However, they felt that the statements made in the draft
            report were not accurate because all public housing agencies were given the
            amount of HUD held reserves in each quarterly cash management reconciliation
            sent to them by the financial management center. Nevertheless, since we cannot
            be assured that the information was provided to the public housing agency
            personnel involved with making the utilization decisions and it did not
            specifically identify the reserve balance available; we have taken HUD’s
            comments on the draft report and revised the language in the report (page 8) to
            read that HUD analysts should have provided more concise information to public
            housing agency officials making utilization decisions.

Comment 7   Public Housing officials did not believe that the October report represented a
            typical month when ensuring that information was analyzed in a timely manner.
            The audit work found that the October report was typical of the other monthly
            reports in regards to timeliness. Therefore, HUD officials need to analyze data
            regarding the public housing agencies’ utilization in a timely manner because of
            the time it takes to make the changes necessary to affect utilization performance
            and so that utilization performance data can be effectively used by public housing
            agencies.

Comment 8   The auditees’ comments are responsive to the finding in that it would be
            beneficial to ensure that information that may affect utilization performance is
            easily accessible by all HUD staff working on utilization performance.

Comment 9   The auditees’ comments are responsive to the finding in that they will explore
            with the Office of General Counsel what guidance would be appropriate to issue
            as internal guidance to field office staff to ensure that they are fully aware of
            actions that may be taken.




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