oversight

The Jackson Housing Commission, Jackson, MI, Needs To Improve Its Administration of Its Section 8 Housing Choice Voucher Program

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-08-29.

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

OFFICE OF AUDIT
REGION 5
CHICAGO, IL




                  Jackson Housing Commission
                          Jackson, MI


       Section 8 Housing Choice Voucher Program




2014-CH-1007                                   AUGUST 29, 2014
                                                        Issue Date: August 29, 2014

                                                        Audit Report Number: 2014-CH-1007




TO:            Willie C. Garrett, Director of Public Housing, 5FPH

               //signed//
FROM:          Kelly Anderson, Regional Inspector General for Audit, Chicago Region, 5AGA

SUBJECT:       The Jackson Housing Commission, Jackson, MI, Needs To Improve Its
               Administration of Its Section 8 Housing Choice Voucher Program

    Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG) final audit report on our audit of the Jackson Housing Commission’s
Section 8 Housing Choice Voucher program.

    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
(312) 353-7832.
                                             August 29, 2014
                                             The Jackson Housing Commission, Jackson, MI, Needs
                                             To Improve Its Administration of Its Section 8 Housing
                                             Choice Voucher Program



Highlights
Audit Report 2014-CH-1007


    What We Audited and Why                   What We Found

We audited the Jackson Housing               The Commission generally administered its program in
Commission’s Section 8 program as            accordance with HUD’s and its own requirements with
part of the activities in our fiscal year    two exceptions. Specifically, it did not always (1)
2014 annual audit plan. We selected          properly select households from its Section 8 program
the Commission based on our analysis         waiting list and (2) conduct interim reexaminations for
of the risk factors relating to public       zero-income households in accordance with its
housing agencies in Region 5’s 1             administrative plan. As a result, housing assistance
jurisdiction. Our objective was to           may have been (1) unjustly denied or delayed for
determine whether the Commission             eligible households or (2) overpaid to households that
administered its program in accordance       inappropriately reported no income.
with HUD’s and its own program
requirements.

    What We Recommend

We recommend that HUD require the
Commission to (1) establish and
implement adequate procedures and
controls, including but not limited to
providing training to its staff to ensure
that it manages its Section 8 program
waiting list and zero-income households
in accordance with its administrative
plan and (2) implement adequate
procedures and controls to ensure that
repayment agreements are created to
recover overpaid housing assistance
when unreported income is discovered
during the examination process in
accordance with its administrative plan.



1
 Region 5 includes the States of Illinois,
Indiana, Michigan, Minnesota, Ohio, and
Wisconsin.
                           TABLE OF CONTENTS

Background and Objective                                                       3

Results of Audit

      Finding: The Commission Did Not Always Administer Its Waiting List and
               Zero Income Households In Accordance With HUD’s or Its Own
               Requirements                                                     4

Scope and Methodology                                                          7

Internal Controls                                                              9

Appendixes

A.    Federal and the Commission’s Requirements                                11




                                           2
                       BACKGROUND AND OBJECTIVE

The Jackson Housing Commission was established by the City of Jackson in 1946 and entered into
its first annual contributions contract with the Federal Government in 1964. The Commission is
governed by a five-member board of commissioners appointed by the mayor of Jackson, MI, with
the consent of the city council. The board’s responsibilities include (1) establishing policies under
which the Commission conducts business and (2) ensuring that the Commission is successful in
achieving its mission. The board appoints the Commission’s executive director. The executive
director is responsible for carrying out the policies established by the commissioners and managing
the day-to-day operations of the Commission.

The Commission administers the Section 8 Housing Choice Voucher program funded by the U.S.
Department of Housing and Urban Development (HUD). The Housing Choice Voucher program
provides assistance to low- and moderate-income individuals seeking decent, safe, and sanitary
housing by subsidizing rents with owners of existing private housing. HUD approved the
Commission to administer up to 475 vouchers. As of May 2014, it had 447 units under contract
and was authorized to receive more than $2.3 million in program funds for the fiscal year.

The objective of the audit was to determine whether the Commission administered its Section 8
Housing Choice Voucher program in accordance with HUD’s and the Commission’s program
requirements. Specifically, we wanted to determine whether the Commission appropriately
administered its waiting list and zero-income households.




                                                  3
                                     RESULTS OF AUDIT


Finding: The Commission Did Not Always Administer Its Waiting List
and Zero Income Households In Accordance With HUD’s or Its Own
Requirements
The Commission did not always administer its waiting list and zero income households in
accordance with HUD’s or its own requirements. Specifically, it did not (1) select Section 8
program households from its waiting list in sequential order and (2) conduct interim
reexaminations for zero-income households. The deficiencies occurred because the Commission
lacked adequate procedures and controls to ensure that it administered its program in accordance
with its administrative plan. As a result, housing assistance may have been (1) unjustly denied or
delayed for eligible households or (2) overpaid to households that inappropriately reported no
income.


    The Commission
    Inappropriately Selected
    Households From Its Waiting
    List

                 The Commission did not select program households from its Section 8 program
                 waiting list in sequential order in accordance with its administrative plan.
                 According to the plan, 2 the Commission’s waiting list was arranged based on a
                 lottery system and the Commission was to select households in numerical order. 3
                 However, the Commission skipped over eligible households on the waiting list to
                 accommodate other households without proper justification. 4 Specifically, of the
                 96 households selected for its program from October 1, 2011, to December 1,
                 2013, the Commission selected 75 households before other households that were
                 on the waiting list first and had a lower lottery number.

                 We reviewed the household files for 10 the 75 households to determine whether
                 the Commission maintained documentation to justify the selection of the
                 households. For all 10 files, the Commission did not document in the household
                 files the reason why it selected certain households before other households that
                 were on the waiting list and had lower numbers but were not selected. We also
                 reviewed 10 of the Commission’s 29 waiting list files for the households that
                 were passed over for selection and still on the list. For all 10 files, the
                 Commission did not document the reason why the households were not selected.


2
  Section 4-I.D of the Commission’s Housing Choice Voucher program administrative plan
3
  Section 4-III.C of the Commission’s Housing Choice Voucher program administrative plan
4
  24 CFR (Code of Federal Regulations) 982.207(e)

                                                      4
    The Commission Did Not
    Perform Interim
    Reexaminations for Zero-
    Income Households

                 Contrary to its administrative plan, the Commission did not conduct interim
                 reexaminations every 3 months for households that had zero income. 5 Further,
                 according to the Commission’s Section 8 program director, the households were
                 also required to certify monthly that they had no income. However, the
                 Commission did not consistently enforce this requirement. It also did not always
                 compare HUD’s Enterprise Income Verification System’s 6 income reports against
                 past certifications during the reexamination process to determine whether the
                 households had income and reported all their income to the Commission. Because
                 the Commission did not conduct the interim reexaminations or compare the
                 income reports against the past certifications, it may have failed to detect income
                 that was earned by households and included in HUD's Enterprise Income
                 Verification System but not reported by the households to the Commission. As a
                 result, housing assistance may have been overpaid.

    The Commission Lacked
    Adequate Procedures and
    Controls


                 The deficiencies described above occurred because the Commission lacked
                 adequate procedures and controls to ensure that it administered its waiting list and
                 zero income households in accordance with its administrative plan. The former
                 staff person who managed the Commission’s waiting list disregarded the
                 Commission’s administrative plan by selecting households from the waiting list
                 out of sequential order. Further, the Commission did not have a control process in
                 place to ensure that the appropriate households were selected. In addition, the
                 Commission’s Section 8 program director said that the requirement to perform
                 quarterly reexaminations of the households that reported zero income was
                 overlooked and the Commission did not have a system for tracking the
                 households that reported zero income.

    Conclusion



5
  Section 11-II.C of the Commission’s Housing Choice Voucher program administrative plan
6
  The Enterprise Income Verification system (system) is a web-based application, available to all public housing
agencies nationwide, providing them with employment, wage, unemployment compensation and social security
benefit information of tenants who participate in the Public Housing and various Section 8 programs under the
jurisdiction of HUD’s Office of Public and Indian Housing. The system also identifies former tenants of Public and
Indian Housing rental assistance programs who voluntary or involuntary left the program and owe money to a public
housing agency.

                                                        5
          The Commission did not always administer its waiting list and zero income
          households in accordance with HUD’s requirements and its own administrative
          plan. The deficiencies occurred because the Commission lacked adequate
          procedures and controls to ensure that it administered its program in accordance
          with its administrative plan. As a result, housing assistance may have been (1)
          unjustly denied or delayed for eligible households or (2) overpaid to households
          that inappropriately reported no income.

Recommendations

          We recommend that the Director of the Detroit Office of Public Housing require
          the Commission to

           1A. Establish and implement adequate procedures and controls, including but
               not limited to adopting a quality control review process and providing
               training to its staff, to ensure that it appropriately manages its Section 8
               program waiting list and zero-income households in accordance with its
               administrative plan.

           1B. Implement adequate procedures and controls to ensure that repayment
               agreements are created to recover overpaid housing assistance when
               unreported income is discovered during the reexamination process.




                                           6
                         SCOPE AND METHODOLOGY

We performed our onsite audit work between December 2013 and May 2014 at the
Commission’s office located at 301 Stewart Avenue, Jackson, MI. The audit covered the period
October 1, 2011, through October 31, 2013, but was expanded when necessary to include other
periods.

To accomplish our objective, we reviewed:

   •   Applicable laws and regulations; HUD’s program requirements at 24 CFR (Code of
       Federal Regulations) Parts 5and 982; public and Indian housing notices; and HUD’s
       Guidebook, 7420.10G.

   •   The Commission’s Section 8 program administrative plan; annual contributions contract;
       5-year plan; program household files; waiting list and support; accounting records;
       audited financial statements; bank statements; general ledger; policies and procedures;
       board meeting minutes and resolutions from October 2011 through October 2013; and
       organizational chart.

   •   HUD data for the Commission’s program included in its files and in HUD’s Financial
       Assessment Subsystem, Enterprise Income Verification System, Public and Indian
       Housing Information Center’s Inventory Management System, and Voucher Management
       System.

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

From October 1, 2011, to December 1, 2013, the Commission selected 75 households before
other households that were listed on its program waiting list first and had a lower lottery number.
We randomly selected 10 of the 75 households to determine whether the Commission
documented its justification for selecting the households.

From October 1, 2011, to December 1, 2013, we identified 29 households that were passed over
for selection and still on the Commission’s program waiting list. We randomly selected 10 of
the 29 households to determine whether the Commission documented the reason(s) why the
households were not selected.

We reviewed 13 households’ files that reported they received no income to the Commission.
The Commission did not track the households that were to receive the interim reexaminations or
that reported zero-income; therefore, we were unable to determine the entire population that was
affected by the deficiency.

We provided our discussion draft audit report to HUD’s staff, Jackson Housing Commission’s
executive director and board on July 31, 2014. We asked the Commission’s executive director to
provide written comments on our discussion draft audit report by August 14, 2014. The
executive director chose not to comment on the report.

                                                 7
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(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.




                                                8
                              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 the
                      audited entity has implemented to provide reasonable assurance that a
                      program meets its objectives, while considering cost effectiveness and
                      efficiency.

               •      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.

               •      Safeguarding resources – Policies and procedures that management has
                      implemented to reasonably ensure that resources are safeguarded against
                      waste, loss, and misuse.

               •      Validity and reliability of data – Policies and procedures that management
                      has implemented to reasonably ensure that valid and reliable data are
                      obtained, maintained, and fairly disclosed in reports.

               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

                                                 9
           financial or performance information, or (3) violations of laws and regulations on a
           timely basis.

           We evaluated internal controls related to the audit objective in accordance with
           generally accepted government auditing standards. Our evaluation of internal
           controls was not designed to provide assurance regarding the effectiveness of the
           internal controls structure as a whole. Accordingly, we do not express an opinion
           on the effectiveness of Jackson Housing Commission’s internal control.

Separate Communication of
Minor Deficiencies

           We reported minor deficiencies to both HUD and the auditee separately in a
           memorandum issued on August 29, 2014.




                                            10
Appendix A

     FEDERAL AND THE COMMISSION’S REQUIREMENTS

Regulations at 24 CFR 5.240(c) state that the responsible entity must verify the accuracy of the
income information received from the family and change the amount of the total tenant payment,
tenant rent, or program housing assistance payment or terminate assistance, as appropriate, based
on such information.

Regulations at 24 CFR 982.54(c) state that public housing agencies must administer the program
in accordance with their administrative plan.

Regulations at 24 CFR 982.153 state that public housing agencies must comply with their
consolidated contributions contract, the application, HUD regulations and other requirements,
and their program administrative plan.

Regulations at 24 CFR 982.204(a) state that except for special admissions, participants must be
selected from the public housing agency’s waiting list. The public housing agency must select
participants from the waiting list in accordance with admission policies in the public housing
agency’s administrative plan.

Regulations at 24 CFR 982.207(e) state that the method for selecting applicants from a
preference category must leave a clear audit trail that can be used to verify that each applicant
has been selected in accordance with the method specified in the administrative plan.

The Commission’s administrative plan, section 1-I.E, states that as a public service agency, the
Commission is committed to providing excellent service to Housing Choice Voucher program
participants, owners, and the community. The Commission’s standards include administering
applicable Federal and State laws and regulations to achieve high ratings in performance
measurement indicators while maintaining efficiency in program operations to ensure fair and
consistent treatment of clients served.

Section 4-I.D of the Commission’s plan states that applicants will be placed on the waiting list
using a lottery system. Once each application has been randomly assigned a number, the
applications will be placed on the waiting list in order of the assigned numbers and according to
the Commission’s preferences(s).

Section 4-II.F of the Commission’s plan states that if an applicant family is on the waiting list
and the Commission determines that the family is not eligible for assistance (see chapter 3), the
family will be removed from the waiting list.

Section 4-III.C of the Commission’s plan states:

    •   The Commission will offer a local preference, which will require a minimum of one of
        the following documents: rent receipts, leases, utility bills, employer or agency records,

                                                 11
        school records, driver’s licenses, voter’s registration records, credit reports, or a
        statement from the household with whom the family resides.

    •   The Commission will monitor progress in meeting the income targeting requirement
        throughout the fiscal year. Extremely low-income families will be selected ahead of
        other eligible families on an as-needed basis to ensure that the income targeting
        requirement is met.

    •   Families will be selected from the waiting list based on the targeted funding or selection
        preference(s) for which they qualify and in accordance with the Commission’s hierarchy
        of preferences if applicable. Within each targeted funding or preference category,
        families will be selected in numerical order based on the numbers that were assigned to
        each application, by lottery, at the time the applications were placed on the waiting list.

Section 11-II.C of the Commission’s plan states that if the family has reported zero income, the
Commission will conduct an interim reexamination every 3 months as long as the family
continues to report that it has no income.




                                                 12