oversight

The Boca Raton Housing Authority's Administration of Its Section 8 Housing Choice Voucher Program Tenant Files Had Some Deficiencies

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-08-18.

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

OFFICE OF AUDIT
REGION 4
ATLANTA, GA




                  Boca Raton Housing Authority
                        Boca Raton, FL

       Section 8 Housing Choice Voucher Program:
                   Tenant File Review




2014-AT-1008                                     AUGUST 18, 2014
                                                        Issue Date: August 18, 2014

                                                        Audit Report Number: 2014-AT-1008




TO:            Jose Cintron, Director of Public Housing, Miami Field Office, 4DPH

               //signed//
FROM:          Nikita N. Irons, Regional Inspector General for Audit, Atlanta Region, 4AGA

SUBJECT:       The Boca Raton Housing Authority’s Administration of Its Section 8 Housing
               Choice Voucher Program Tenant Files Had Some Deficiencies


    Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG) final results of our audit of the Boca Raton Housing Authority’s
administration of its Section 8 Housing Choice Voucher program tenant files.

    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 8M, 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
404-331-3369.




                                                 
                                          August 18, 2014
                                          The Boca Raton Housing Authority’s Administration of
                                          Its Section 8 Housing Choice Voucher Program Tenant
                                          Files Had Some Deficiencies



Highlights
Audit Report 2014-AT-1008


 What We Audited and Why                   What We Found

We performed an audit of the Boca         Four of the nine allegations in the complaint were
Raton Housing Authority mainly to         valid. Specifically, the Authority (1) did not correctly
assess the validity of nine allegations   calculate repayment amounts, (2) did not follow due
made against the Authority. The           process when removing tenants from the Section 8
primary audit objective was to            program, (3) paid an excess subsidy to a landlord for a
determine whether the Authority           deceased tenant, and (4) applied the decreased
administered its Section 8 Housing        payment standard amounts prematurely. The
Choice Voucher program tenant files in    deficiencies occurred because the Authority did not
accordance with the U.S. Department of    have adequate procedures and enforcement actions in
Housing and Urban Development’s           place to ensure compliance with the Section 8 program
(HUD) regulations, specifically to        requirements. The deficiencies resulted in $8,689 of
verify the validity of the complaint.     underpayments by tenants with repayment agreements,
                                          $360 of excess funds paid to a landlord for a deceased
                                          tenant, and $11,869 of excess amounts paid by tenants
                                          when the payment standards were prematurely applied.
 What We Recommend

We recommend that the Director of the
Miami Office of Public Housing
require the Authority to pursue actions
against tenants who underpaid $8,689 in
repayments, and determine the accuracy
of the amounts owed by the tenants who
entered into repayment agreements with
the Authority and take corrective
actions for those tenants determined to
have incorrectly calculated repayment
amounts. We also recommend that the
Authority repay the Section 8 fund
$11,869 used to reimburse the tenants
for prematurely applying the decreased
payment standard amounts and
ensure that due process is followed
before removing tenants from the
program.



                                                 
                            TABLE OF CONTENTS

Background and Objectives                                                     3

Results of Audit
      Finding: The Authority’s Administration of Section 8 Tenant Files Had
               Some Deficiencies                                              5

Scope and Methodology                                                         13

Internal Controls                                                             17

Appendixes
A.    Schedule of Questioned and Funds To Be Put to Better Use                19

B.    Auditee Comments and OIG’s Evaluation                                   20




                                             2
                            BACKGROUND AND OBJECTIVES

The Boca Raton Housing Authority, located in Boca Raton, FL, was established to develop, acquire,
and operate safe, decent, sanitary and affordable housing for low-income families and to operate the
housing programs in accordance with Federal legislation. A five-member board of commissioners,
appointed by the mayor of Boca Raton, governs the Authority. The Authority operates 95 units of
public housing and as of May 31, 2014, administered 573 Section 8 vouchers. It also owns and
manages a 51-unit affordable housing development.

The U.S. Department of Housing and Urban Development (HUD) provides public housing
program funds to public housing agencies to supply decent and safe rental housing for eligible
low-income families, the elderly, and people with disabilities. HUD also provides Section 8
program funds for public housing agencies to assist very low-income families, the elderly, and
the disabled in affording decent and safe housing in the private market. Specifically, the public
housing agency uses the funds to pay housing subsidies to the landlords on behalf of the tenant
families. The tenant family pays the difference between the rent and the amount subsidized. To
calculate the housing subsidy, the public housing agency establishes payment standard amounts
for the applicable unit sizes between 90 and 110 percent of HUD’s published fair market rents.

For the most recent 3 years, the Authority received the following in Public Housing operating
subsidies, Public Housing Capital Fund grants,1 and Section 8 funding:

                Year            Public Housing                  Section 8         Total
                            Operating     Capital
                            subsidies       funds
               2011           $ 218,979    $ 120,502            $ 6,734,773     $ 7,074,254
               2012          $ 138,988     $ 109,975            $ 5,585,286     $ 5,834,249
               2013           $ 238,594    $ 107,276            $ 5,695,360     $ 6,041,230
               Total         $ 596,561     $ 337,753           $18,015,419     $18,949,733

We received a complaint against the Authority, alleging that its administration of the Section 8
program violated HUD regulations. Specifically, the complaint alleged that the Authority

       (1) Used an inappropriate method to calculate the repayment amounts due from the tenants
           who failed to report all household income, which resulted in tenants being overcharged.

       (2) Did not follow due process for one tenant before terminating the tenant’s Section 8
           assistance.

       (3) Paid an excess housing subsidy to the landlord for a deceased tenant in violation of HUD
           regulations.


1
    The Public Housing Operating Fund provides operating subsidies to public housing agencies to assist in the
     operations and maintenance of public housing units. The Capital Fund provides funds to modernize public
     housing developments.

                                                           3
   (4) Applied the decrease in payment standards for the one- and three-bedroom units earlier
       than allowed by HUD regulations, which resulted in tenants having to pay more in rent.

   (5) Paid the housing subsidy to the landlord when the tenant file contained no lease between
       the landlord and the tenant, no renewed lease, or no executed Housing Assistance
       Payments contract.

   (6) Paid the housing subsidy to the landlord when the unit rent was not determined to be
       reasonable.

   (7) Did not provide a larger voucher size to the tenant family to accommodate an approved
       live-in aide.

   (8) Used an inappropriate method of inferring income to the tenant family, which had
       limited or no income, thereby affecting the utility reimbursements to the tenant.

   (9) Revised its Section 8 administrative plan without proper approval.

Our overall audit objective was to determine whether the Authority administered its Section 8
Housing Choice Voucher program tenant files in accordance with HUD regulations, specifically
to verify the validity of the complaint. We also determined whether revisions to the Authority’s
Section 8 administrative plan were properly approved, Section 8 tenant data were accurately
entered into the HUD system, Section 8 funds were used for other programs, and the Authority
complied with HUD requirements regarding compensation to its officials.




                                                4
                                                 
                                        RESULTS OF AUDIT


Finding: The Authority’s Administration of Section 8 Tenant Files Had
Some Deficiencies
The Authority essentially complied with HUD regulations when administering the Section 8
Housing Choice Voucher program tenant files; however, four of the nine allegations made
against the Authority were found to be valid. Specifically, the Authority (1) did not correctly
calculate repayment amounts, (2) did not follow due process when removing tenants from the
Section 8 program, (3) paid an excess subsidy to a landlord for a deceased tenant, and (4) applied
the decreased payment standard amounts prematurely. The deficiencies occurred because the
Authority did not have adequate controls and enforcement actions in place to ensure compliance
with Section 8 program requirements. The deficiencies resulted in $8,689 of underpayments by
tenants with repayment agreements, $360 of excess funds paid to a landlord for a deceased
tenant, and $11,869 of excess amounts paid by tenants when the payment standards were
prematurely applied.


    Complaint Assessment

                    The audit assessed the validity of the nine allegations in the complaint against the
                    Authority and found the following 4 allegations to be valid:2

                           The Authority did not correctly calculate the repayment amounts, resulting
                            in tenants being overcharged.

                           The Authority did not follow due process before terminating tenants’
                            Section 8 assistance.

                           The Authority paid an excess housing subsidy to the landlord for a
                            deceased tenant in violation of HUD regulations.

                           The Authority applied the decrease in payment standards for the one- and
                            three-bedroom units earlier than allowed by HUD, resulting in tenants
                            having to pay more in rent.

                    Although the four allegations were valid, the Authority essentially administered
                    the Section 8 Housing Choice Voucher program tenant files in compliance with
                    HUD regulations. This assessment was based on the overall audit results in the
                    areas tested, which support that five of the allegations were not valid and the
                    deficiencies identified were not systemic.
2
    The nine allegations are summarized in the Background and Objective section of the audit report. The four
     allegations are listed in order of impact to the Section 8 program.

                                                           5
                                                            
    Repayment Amounts Were Not
    Calculated Correctly

                    The Authority entered into repayment agreements with tenants who were found to
                    have paid less rent than required due to the tenant’s underreporting or failure to
                    report income. To calculate the amount of additional rent the tenant should have
                    paid if the tenant’s correct income had been considered, the Authority multiplied
                    the amount determined to be the unreported income by 30 percent. Using
                    scenarios from one of the tenant files, we calculated what the tenant’s additional
                    rent amount would have been by following the process in the form HUD-50058,
                    Family Report,3 and by multiplying 30 percent of the unreported income amount.
                    The comparison of the two methods yielded a minimal difference. Thus, we
                    determined that the Authority’s method for calculating the repayment amount was
                    appropriate.

                    We reviewed the files of 13 tenants who had repayment agreements with the
                    Authority. Using the Authority’s method of calculating the repayment amount,
                    we recalculated the repayment amounts and found that 7 of the 13 agreements, or
                    53.8 percent, were not calculated correctly. For example, for three repayment
                    amounts, Authority staff did not use the correct unreported income amount to
                    calculate the repayment. Of the seven incorrect repayment amounts, five resulted
                    in underpayments by the tenants totaling $6,638 and two resulted in excess
                    repayment amounts from the tenants totaling $1,656.

                        Tenant #       Repayment        OIG-calculated             Excess           Underpayment
                                     amount listed in     repayment              repayment             amount
                                      the agreement        amount                 amount               (A – B)
                                            (A)               (B)                  (A – B)
                            1             $ 808             $ 744                  $ 64
                            2             $ 978             $ 3,450                                    ($ 2,472)
                            3             $ 1,165           $ 1,398                                    ($ 233)
                            4             $ 2,324           $ 2,340                                    ($ 16)
                            5             $ 972             $ 1,288                                    ($ 316)
                            6             $ 600             $ 4,201                                    ($ 3,601)
                            7             $ 4,244           $ 2,652                $ 1,592
                                                    Total                          $ 1,656              $ 6,638

                    Since two files resulted in excess repayment amounts, this allegation was valid.

                    HUD regulations at 24 CFR (Code of Federal Regulations) 982.158(a) state that
                    the public housing agency must maintain complete and accurate accounts and

3
    The form HUD-50058, Family Report, for the Section 8 Housing Choice Voucher program is a form completed by
    the public housing agency to document, among other items, the data related to the tenant family’s household
    composition, rented unit, assets, expected income for the year, total tenant payment, voucher size, housing subsidy
    to the landlord, and tenant’s portion of rent to the landlord.


                                                            6
                                                              
other records for the program in accordance with HUD requirements in a manner
that permits a speedy and effective audit. Since the recovery of the funds from
the tenants affects the Authority’s Section 8 equity and unrestricted administrative
fee accounts, records must be maintained to support the amounts entered into
those accounts. If the repayments are not correctly calculated, either HUD funds
are overspent or the tenant overpays. The deficiency occurred because the
Authority did not provide adequate guidance to its staff to ensure the repayment
amounts were calculated correctly and in a consistent manner. After we discussed
this issue with the executive director, the Authority took corrective actions for
both tenants with an excess repayment amount. For tenant 1, the Authority
reimbursed the tenant. For tenant 7, the Authority re-executed the tenant’s
repayment agreement at the lower amount and adjusted the tenant’s repayment
balance in its financial system.

During the tenant file review, we also found two other deficiencies:

   The Authority did not execute 5 of the 13 repayment agreements as stipulated
    in section 16 of Public and Indian Housing (PIH) Notice 2010-19, which
    states that all repayment agreements must be in writing, dated, and signed by
    both the tenant and the housing agency. The Authority reasoned that the
    tenant’s acknowledgement to pay is not in the execution of the agreement but
    when the tenant pays, but agreed that the agreements need to be signed. By
    not ensuring that a repayment agreement is executed by the Authority and the
    tenant, the Authority may be without recourse or encounter more difficulty in
    pursuing actions should the tenant choose not to repay the amount owed.

   The Authority did not pursue the repayments of two tenants who stopped
    paying; one tenant, who owed $1,646, made the last payment in August 2011,
    and the other, who owed $405, made the last payment in December 2012.
    Both tenants had ported to other housing authorities. Section 16 of PIH
    Notice 2010-19 states that tenants are required to reimburse the housing
    agency if they were charged less rent than required by HUD’s rent formula
    due to the tenant’s underreporting or failure to report income. The tenant is
    required to reimburse the housing agency for the difference between the
    tenant rent that should have been paid and the tenant rent that was charged.
    HUD does not authorize any housing authority sponsored amnesty or debt
    forgiveness programs. By not pursuing the collection of the debt, the
    Authority did not collect the funds due to the Section 8 program. The
    Authority agreed that staff should have followed-up on the tenants’ repayment
    balances before processing the portability.




                                 7
                                   
Due Process Was Not Followed
When Terminating Section 8
Assistance


           The allegation that the Authority did not follow due process for a tenant was
           valid. Of the 11 tenant files reviewed, 4 revealed situations in which the tenant
           could have requested a hearing. Two tenants were not given written notification
           that they were entitled to request a hearing before their Section 8 assistance was
           terminated. HUD regulations at 24 CFR 982.555(a)(1)(v) and (c)(2) state that the
           housing agency must give a participant family, through prompt written notice, an
           opportunity for an informal hearing to consider whether the determination to
           terminate assistance because of the family’s action or inaction was in accordance
           with the law, HUD regulations, and housing agency policies. By not giving the
           tenants written notification that they were entitled to request a hearing when the
           housing authority was terminating their assistance, the tenants were not afforded
           an opportunity to know and refute the evidence against them. In addition, for one
           other tenant, who was mentioned in the complaint, the Authority allowed the
           tenant to have a hearing but did not provide the tenant with a written decision
           from that hearing. HUD regulations at 24 CFR 982.555(e) state that the person
           who conducts the hearing must issue a written decision, briefly stating the reasons
           for the decision, and the housing agency shall provide a copy of the decision to
           the family. The Authority did not enforce its own policies to ensure it followed
           HUD regulations when terminating Section 8 assistance. It did not know why
           staff did not prepare or maintain the notification and decision letters, but agreed
           that the letters should have been provided to the tenants.

An Excess Subsidy Was Paid to
a Landlord and Required
Reports Were Not Pulled

           The allegation that the Authority did not promptly stop the housing subsidy to the
           landlord for one tenant who passed away was also valid. Section 8 of PIH Notice
           2012-4 states that for deceased single-member households, housing agencies are
           required to discontinue the housing subsidy to the owner no later than the first of
           the following month after the month in which the death occurred. For the one
           tenant mentioned in the complaint, although the tenant passed away October
           2013, the Authority disbursed the November 2013 housing subsidy, totaling $360,
           to the landlord. The Authority was not aware of the requirement. After we
           discussed this matter, the Authority repaid the Section 8 program $360 from non-
           Federal funds. Of the 11 tenant files reviewed, only one file contained a
           termination due to the passing of the tenant. Therefore, our review did not find
           this incident to be systemic. In addition, the Authority promptly stopped the
           housing subsidies for the other 10 tenants whose assistance was terminated.



                                            8
                                              
            The Authority also violated section 5 of PIH Notice 2012-4, which requires
            housing agencies to generate the Deceased Tenants Report before disbursing the
            upcoming monthly housing subsidy to the landlords to prevent, eliminate, or
            recover improper payments made on behalf of deceased tenants. By not promptly
            stopping the housing subsidies or generating the Deceased Tenants Report, the
            Authority may inadvertently make subsidy overpayments. The Authority was
            also not aware of this requirement but agreed that it will print the report monthly
            moving forward.

The Authority Applied
Decreased Payment Standards
Prematurely


            The allegation that the Authority applied the decreased payment standards for the
            one- and three-bedroom units before the tenant’s second annual reexamination
            was valid. HUD regulations at 24 CFR 982.505(c)(3) state that if the payment
            standard amount is decreased, the lower payment standard amount must be used
            to calculate the monthly housing subsidy beginning on the effective date of the
            tenant’s second regular reexamination following the effective date of the
            decrease. Authority staff prematurely applied the lower payment standard
            amounts contrary to its policy. However, the Authority took corrective action
            when it identified the mistake. To correct the situation, Authority staff went
            through all tenant files with a one- and three-bedroom voucher to recalculate the
            housing subsidy to the landlord and the tenant’s portion of rent to identify the
            tenants who were overcharged. The Authority disbursed checks totaling $11,869
            to the applicable tenants in December 2013, which was before our audit started.
            We performed a limited review to determine whether the Authority correctly
            calculated the amount owed to the tenants and traced the amounts to its financial
            system to verify the amounts paid. The review showed no concerns with the
            calculation and payment amounts.

            However, the reimbursements to the tenants came from the Section 8 expense
            fund rather than the Section 8 administrative fee reserves. The Authority
            reasoned that because the incorrect payment standards were used, tenants paid
            more toward rent and the Section 8 fund paid less subsidy toward the rent; thus,
            the Section 8 funds were used to reimburse the tenants to offset the difference.
            Yet, chapter 22.5 of the Housing Choice Voucher Program Guidebook states that
            in cases where the error or omission is the fault of the housing agency, it must
            immediately refund the total amount due to the family from its administrative fee
            reserves.

Other Deficiencies




                                             9
                                               
                    The review of the leases between the Section 8 landlord and tenant showed that
                    provisions of the tenancy addendum were not included in the leases for all six
                    tenants reviewed. HUD regulations at 24 CFR 982.308(f)(2) state that all
                    provisions in the tenancy addendum must be added word-for-word to the
                    landlord’s standard form lease. If the provisions in the lease are not included, the
                    tenant may not be aware of the owner’s and his or her obligations and rights
                    regarding the unit rented and assisted by HUD’s Section 8 Housing Choice
                    Voucher program. The Authority was not aware that the provisions were required
                    to be included in the lease.

                    We also reviewed the Authority’s compensation data to determine its compliance
                    with HUD requirements. The Authority did not submit the compensation data for
                    2011 and 2012 as required by PIH Notice 2011-48, which stated that housing
                    agencies that operated public housing would be required to complete the form
                    HUD-52725, Schedule of Positions and Compensation, and submit it annually
                    with their form HUD-52723, Operating Fund: Calculation of Operating Subsidy.
                    It did not know the data had to be submitted to HUD annually.

    Conclusion

                    Overall, the Authority essentially administered its Section 8 Housing Choice
                    Voucher program tenant files in accordance with HUD regulations. Although
                    four allegations proved to be valid, the deficiencies did not appear to be systemic.
                    For the payment standard deficiency, the Authority knew of the mistake and took
                    corrective actions before our audit started. Additionally, it was proactive in
                    resolving the deficiencies when they were brought to the attention of officials
                    during the audit. The deficiencies occurred because the Authority did not have
                    adequate controls and enforcement actions in place to ensure compliance with
                    Section 8 program requirements. The deficiencies resulted in underpayments by
                    tenants with repayment agreements, excess funds paid to a landlord for a deceased
                    tenant, and excess amounts paid by tenants when the Authority prematurely
                    applied the payment standards. .

    Recommendations

                    We recommend that the Director of the Miami Office of Public Housing require
                    the Authority to

                    1A. Pursue collection actions against the five tenants who paid less in
                        repayments due to the incorrect calculation of the tenants’ repayment
                        amounts, or reimburse the Section 8 fund $6,6384 from the Section 8
                        administrative fee reserves account.

4
    The five tenants underpaid a total of $6,638. When the Authority collects on the repayment amounts, it evenly
     splits the collections between the Section 8 Housing Assistance Payment equity account and Section 8
     unrestricted administrative fee reserves. The Section 8 fund would be due 50 percent of the amount, or $3,319.

                                                          10
                                                             
                    1B. Determine the accuracy of the amounts owed by the tenants who had entered
                        into repayment agreements with the Authority since January 1, 2011. For
                        excess repayment amounts, the Authority is to reimburse the excess amount
                        to the tenant if the tenant paid off the amount on the agreement or re-execute
                        the agreement to reflect the correct amount and adjust the outstanding
                        balance in its financial system if the tenant had not paid off the amount on
                        the agreement. For underpayment amounts, the Authority should pursue
                        collection actions against the applicable tenants or reimburse its program for
                        any uncollected amounts if the tenant paid off the amount on the agreement,
                        or re-execute the agreement to reflect the correct amount and adjust the
                        outstanding balance in its financial system if the tenant had not paid off the
                        agreement amount.

                    1C. Develop and implement detailed procedures for its staff to ensure that the
                        calculation of the repayment amount is accurate and supported by
                        documentation.

                    1D. Ensure that tenants execute the repayment agreements.

                    1E. Pursue actions to require the two tenants, with balances of $1,646 and $405,
                        to continue making payments on the repayment amount if the tenants remain
                        in the program.5

                    1F. Implement and enforce procedures to reasonably ensure the collection of the
                         repayment amounts from tenants who enter into repayment agreements with
                         the Authority.

                    1G. Implement and enforce procedures to ensure that it complies with HUD
                        requirements when removing tenants from the Section 8 program, such as
                        providing written notification to the tenant of his or her right to request for a
                        hearing, documenting the hearing results, and providing the tenant the
                        results.

                    1H. Implement and enforce procedures to ensure that the Deceased Tenants
                        Report is generated before disbursing the upcoming monthly housing
                        subsidy and develop other control measures to detect a tenant’s termination
                        from the program.




5
    Collections are split; 50 percent goes back to the Authority’s Section 8 Housing Assistance Payment equity
    account, and 50 percent goes toward its Section 8 unrestricted administrative fee reserves. If the $2,051 ($1,646 +
    $405) is collected, 50 percent, or $1,025, is considered funds put to better use as the money will go to the Section 8
    Housing Assistance Payments equity account, which is used to pay the housing subsidy to the Section 8 landlords.


                                                            11
                                                               
1I. Repay the Section 8 fund $11,869 used to reimburse the tenants for
     prematurely applying the decreased payment standard amounts from its
     administrative fee reserves.

1J. Ensure that the lease between the Section 8 landlord and tenant includes the
     provisions listed in the tenancy addendum.

1K. Ensure the annual submission to HUD of the cash compensation data for
    required employees.




                                12
                                  
                                SCOPE AND METHODOLOGY

We received a complaint against the Boca Raton Housing Authority, which detailed nine
allegations summarized in the Background and Objective section of the audit report. Our overall
audit objective was to determine whether the Authority administered its Section 8 Housing
Choice Voucher program tenant files in accordance with HUD regulations, specifically to verify
the validity of the complaint. To accomplish our objective, we reviewed the relevant Federal
regulations and HUD requirements, interviewed HUD officials to obtain information about the
Authority and discussed areas of concern, and interviewed Authority officials to understand the
Section 8 process and obtain clarification during our fieldwork.

To specifically address the first eight allegations, we grouped them into 6 categories and selected
tenant files from each category for testing. The selection of the tenants came mainly from the
universe of Section 8 Housing Choice Voucher program tenant data entered by the Authority into
HUD’s Public and Indian Housing Information Center (PIC) system for the period January 1,
2011, through December 31, 2013. The system showed 787 tenants. Although the period
covered 3 years, the system provides the most recent data for the tenant. Other selections came
from records provided by the Authority. The last allegation was addressed by interviewing staff
and reviewing the board of commissioners minutes. The paragraphs below detail the number of
tenant files selected for each category and how we addressed the allegation and provide a brief
statement of the results if we determined that the allegation did not appear to be valid.

       Allegation (1) – To determine whether the Authority overcharged tenants who entered into
       repayment agreements, we selected 11 of the 218 tenants the Authority’s financial system
       showed as having repayment agreements for the period January 1, 2011, to January 30, 2014.
       We selected an additional 2 of 6 tenants for the period February 1 to April 14, 2014, for a
       total of 13 tenants. The review of the repayment agreements and documentation supporting
       the repayment amounts showed that the allegation was valid (see finding).

       Allegations (2) and (3) – To determine whether the Authority followed due process before
       removing a tenant from the program or paid an excess housing subsidy on behalf of a
       deceased tenant, we selected 11 of the 107 tenants who ended participation in the Section 8
       program during the scope period.6 Two of the eleven tenants selected were mentioned in the
       complaint. The review of the documentation in the tenant files showed that both allegations
       were valid (see finding).

       Allegation (4) – To determine whether the Authority prematurely applied the decrease in
       payment standards for the 1- and 3-bedroom units, we selected 6 of the 116 tenants with 1-
       bedroom vouchers and 4 of the 68 tenants with 3-bedroom vouchers for review. In
       performing the review of the annual reexamination documents on the first four files – two


6
    The tenant data from the PIC system identifies those tenants who ended their participation in the Section 8 program
     but does not distinguish the reasons why the tenant ended participation, such as the tenant’s passing, voluntary
     termination by the tenant, or the tenant’s removal due to a program violation.


                                                           13
                                                             
      tenants with a one-bedroom voucher and two tenants with a three-bedroom voucher – and
      discussions with Authority officials, we found the allegation to be valid (see finding).

      Allegations (5) and (6) – To determine whether the Authority obtained the lease, executed
      the Housing Assistance Payments contract, and determined rent reasonableness before
      paying the housing subsidy, we obtained an understanding of the service used by the
      Authority to determine rent reasonableness and reviewed six tenant files. From the universe
      of tenants, we selected one tenant who was newly admitted to the Section 8 program, three
      tenants who were assisted with the largest housing subsidy payments, and two tenants who
      lived in the Authority-owned development.7 All six tenant files reviewed contained the
      executed Housing Assistance Payments contracts and corresponding leases. Additionally,
      the Authority maintained documentation in five of the six tenant files to support that the unit
      rents were reasonable. For the one exception, the file contained documentation to support
      that the rent was reasonable at the tenant’s initial move-in in 2009 and at the first rent
      increase in 2011 but did not contain documentation to support rent reasonableness at the next
      rent increase of $10 in 2013. Since documentation was present to show that the unit’s past
      rents were reasonable overall, the allegation did not appear to be valid for the tenant files
      reviewed.

      Allegation (7) – To determine whether the Authority provided the correct voucher size to
      tenants with approved live-in aides, we selected 2 of the 19 tenants the Authority’s system
      showed as having an approved live-in aide. In addition, using the minimum and maximum
      number of people to a bedroom voucher size as stipulated in the Authority’s Section 8
      administrative plan, we analyzed the tenant data for exceptions.8 We selected 4 of the 87
      exceptions to determine whether the Authority documented justifications for the exceptions
      to support that it provided voucher sizes to tenants in accordance with its policy. The
      Authority provided the tenants with the correct voucher sizes to accommodate approved live-
      in aides and provided the correct voucher size in accordance with its own policy. Based on
      the tenant files tested, the allegation did not appear to be valid.

      Allegation (8) – To determine whether the Authority’s method of inferring income to the
      tenant affected the utility reimbursements, we selected 4 of the 80 tenants who received
      utility reimbursements. Through interviews with the executive director and a review of the
      four tenant files, we determined that the Authority inferred income onto families that claimed
      little or no income. If the amount estimated by the Authority exceeded the income reported
      by the tenant from wages, child support, cash contribution, etc., it took the difference and
      added the amount to the tenant’s total annual income to calculate the housing subsidy to the
      landlord, tenant rent to the landlord, and utility reimbursement. The practice was included in
      the Authority’s Section 8 administrative plan, Authority staff applied and carried out the
      practice consistently for the tenants reviewed, and the Authority did not violate Federal
      regulations as they do not prohibit a housing authority from inferring such income.

7
    The Section 8 tenant data, downloaded on February 10, 2014, from the PIC system, showed that there were 3
    tenants admitted into the Section 8 program and 21 tenants residing in the Authority-owned development.
8
    For example, the Section 8 administrative plan allowed a three-bedroom voucher for a minimum of five people and
     a maximum of six people; an exception would be providing a six-person household with a four-bedroom voucher.

                                                         14
                                                           
      Therefore, we determined that the Authority’s method was appropriate. Using this
      conclusion as a basis, the tenant’s utility reimbursement while affected by the income
      calculation, was correctly calculated. Based on the review, the allegation did not appear to
      be valid.

      Allegation (9) – To determine whether the Authority properly approved revisions to its
      Section 8 administrative plan, we interviewed Authority staff and reviewed the board of
      commissioners’ minutes. HUD regulations at 24 CFR 982.54(a) state that the administrative
      plan and any revisions to the plan must be formally adopted by the board of commissioners
      or other authorized housing agency officials. Interviews indicated that only the executive
      director revised the Section 8 administrative plan, and the board of commissioners minutes
      indicated that changes to the plan were discussed with and approved by the board members.
      Thus, the revisions to the Section 8 administrative plan were properly approved, and the
      allegation was not valid.

In addition to testing the Section 8 tenant files, we reviewed three other areas related to the
Authority’s administration of the Section 8 program. We determined whether the data in the
form HUD-50058, Family Report, reported in the PIC system were accurate by verifying key
data fields with the information contained in 18 tenant files. The review showed that the data
were 98.7 percent accurate. We also reviewed disbursements from the Section 8 fund to
determine whether funds were used for other than Section 8 program purposes. Tests of five
transactions totaling $167,944, or 26.1 percent of the total transaction amounts in 2013 showed
that Section 8 funds tested were not used for other programs. Finally, we reviewed the
Authority’s compensation data to determine its compliance with HUD requirements. Our review
of the Authority’s 2010 through 2014 compensation data for the three highest paid staff members
showed that it did not exceed the $155,500 amount stipulated in PIH Notices 2012-14 and 2014-
01.9

The results of this audit apply only to the items reviewed and cannot be projected to the universe
of tenant files and transactions.

We did not assess the reliability of the computer-processed data generated by the Authority
because the data were not used to materially support our audit findings, conclusions, and
recommendations.

Our review generally covered the period January 1, 2011, to December 31, 2013, and was
extended as necessary. We performed the work from January 2014 to May 2014 at the
Authority’s main office and the Miami HUD audit office. 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


9
    PIH Notice 2012-14 states that no housing agency may use 2012 appropriations funding for Section 8 Housing
    Choice Voucher administrative fees or the Section 9 Public Housing Capital Fund or Operating Fund to pay any
    amount of salary to employees that exceeds $155,500. According to PIH Notice 2014-01, the source of funds must
    be reported for employees with cash compensation exceeding $155,500.

                                                        15
                                                           
obtained provides a reasonable basis for our findings and conclusions based on our audit
objectives.




                                               16
                                                 
                              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 laws and regulations - Policies and procedures that
                      management has implemented to reasonably ensure that program
                      implementation is consistent with laws and regulations.
                     Relevance and reliability of information - Policies and procedures that
                      management has implemented to reasonably ensure that operational and
                      financial information used for decision making and reporting externally is
                      relevant, reliable, and fairly disclosed in reports.
                     Safeguarding of assets - Policies and procedures that management has
                      implemented to reasonably prevent and promptly detect unauthorized
                      acquisition, use, or disposition of assets and resources.

               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.




                                                 17
                                                   
Significant Deficiency

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

               The Authority did not have adequate controls in place or did not enforce those
                that were to ensure that repayment amounts were correctly calculated, due
                process was followed before tenants were removed from the program, an excess
                subsidy was not paid on behalf of a deceased tenant, and payment standards
                were not prematurely applied.




                                             18
                                                
                                   APPENDIXES

Appendix A

            SCHEDULE OF QUESTIONED COSTS AND
              FUNDS TO BE PUT TO BETTER USE

               Recommendation         Questioned        Funds to be put
                   number             Ineligible 1/     to better use 2/

                      1A                $ 6,638
                      1E                                         $1,025
                      1I                $11,869
                     Total              $18,507                  $1,025



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/   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. For recommendation 1E, should the $2,051 be collected,
     50 percent, or $1,025, will go to the Authority’s Section 8 Housing Assistance Payments
     equity account, which will be used to pay housing subsidies to the Section 8 landlords.




                                            19
                                               
Appendix B

     AUDITEE COMMENTS AND OIG’S EVALUATION


                     Auditee Comments




                      20
                        
Comment 1

Comment 2




            21
              
Comment 3




            22
              
Comment 4




            23
              
Comment 5




            24
              
Comment 5




            25
              
Comment 5




Comment 1
Comment 6



Comment 3



Comment 3




            26
              
                           OIG Evaluation of Auditee Comments


Comment 1 – For recommendation 1A, the Authority will not pursue collection from the five
            tenants who were under billed due to incorrect calculations, but has reimbursed
            the Section 8 fund from its Section 8 administrative fee reserves. The Authority
            recorded a journal entry which showed the expense account used to pay the
            $6,638 and the account used to record the refund to the Section 8 HAP equity
            account. It also provided support to show that the Authority’s Section 8 HAP
            equity was increased and the administrative fee reserves were decreased. The
            management decision for this recommendation has been reached and will be
            recorded in the departmental audit resolution tracking system upon issuance of the
            final audit report.

Comment 2 – The Authority is commended for developing a plan to address
            recommendation1B. OIG agrees with the Authority’s stated efforts to review the
            tenant files and take necessary corrective actions. HUD will work with the
            Authority to set up the target completion dates.

Comment 3 – OIG agrees with the Authority that the written procedures to address
            recommendations 1C, 1D, 1J, and 1K, when implemented and enforced, will help
            to ensure its compliance with HUD requirements. The management decision for
            these four recommendations has been reached and will be recorded in the
            departmental audit resolution tracking system upon issuance of the final audit
            report.

Comment 4 – The Authority is commended for starting the process to pursue collection efforts
            on the two tenants in recommendation 1E. HUD will work with the Authority to
            set up the target completion dates.

Comment 5 – The Authority provided written procedures to address recommendations 1F, 1G,
            and 1H. The recommendations will be resolved when the Authority provides
            documentation to show that staff has followed these procedures. For example, on
            recommendation 1F, the Authority can provide the letters to tenants listed on the
            past due receivables report and any follow-up letters to the tenant and respective
            landlord. For 1G, the Authority can provide the letter to tenants who are in the
            process of being removed from the program or the decision letters to tenants who
            were provided a hearing. For 1H, the Authority can provide the Deceased
            Tenants Reports. HUD will work with the Authority to set up applicable target
            completion dates.

Comment 6 – For recommendation 1I, the Authority agreed to repay the Section 8 Housing
            Assistance Payment equity account from the Section 8 administrative fee
            reserves. It recorded a journal entry which showed the expense account used to

                                              27
                                                
pay the $11,869 and the account used to record the refund to the Section 8 HAP
equity account. It also provided support to show that the Authority’s Section 8
HAP equity was increased and the administrative fee reserves were
decreased. The management decision for this recommendation has been reached
and will be recorded in the departmental audit resolution tracking system upon
issuance of the final audit report.




                               28