oversight

The Ferndale Housing Commission, Ferndale, MI, Generally Administered Its Housing Choice Voucher Program Household Files in accordance With HUD's and Its Own Requirements

Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-09-11.

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

 OFFICE OF AUDIT
  A
 REGION 5
 CHICAGO, IL




               Ferndale Housing Commission,
                       Ferndale, MI
                             

       Section 8 Housing Choice Voucher Program




2014-CH-1008                              SEPTEMBER 11, 2014
                                                        Issue Date: September 11, 2014

                                                        Audit Report Number: 2014-CH-1008




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

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

SUBJECT:       The Ferndale Housing Commission, Ferndale, MI, Generally Administered Its
               Housing Choice Voucher Program Household Files in Accordance With HUD’s
               and Its Own Requirements

    Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG), final report on our audit of the Ferndale 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. 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.




                                                 
                                             September 11, 2014
                                             The Ferndale Housing Commission, Ferndale, MI,
                                             Generally Administered Its Housing Choice Voucher
                                             Program Household Files in Accordance With HUD’s
                                             and Its Own Requirements


Highlights
Audit Report 2014-CH-1008


    What We Audited and Why                   What We Found

We audited the Ferndale Housing              For the 24 household files reviewed, the Commission
Commission’s Section 8 Housing               generally (1) appropriately calculated housing
Choice Voucher program as part of the        assistance and utility allowance payments and (2)
activities in our fiscal year 2014 annual    appropriately obtained and maintained the required
audit plan. We selected the                  eligibility documentation to support the admission and
Commission based upon an analysis of         continued occupancy of its program households. In
risk factors related to public housing       addition, it appropriately used HUD’s Enterprise
agencies in Region 5’s jurisdiction.1        Income Verification system to (1) ensure that its zero-
Our objectives were to determine             income households did not have unreported income in
whether the Commission appropriately         the system and (2) determine that the households with
(1) calculated housing assistance            reported income discrepancies did not have unreported
payments, (2) maintained required            income at the time of their annual reexamination.
eligibility documentation, and (3)
ensured that its households did not have
unreported income.

    What We Recommend

This report contains no
recommendations, and no further action
is necessary with respect to this report.




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


                                                    
                          TABLE OF CONTENTS

Background and Objectives                                                       3

Results of Audit

      The Commission Generally Managed Its Program Household Files in Accordance
      With HUD’s and Its Own Requirements                                        4


Scope and Methodology                                                           6

Internal Controls                                                               8

 




                                          2
                      BACKGROUND AND OBJECTIVES

The Ferndale Housing Commission was established in 1969 under ordinance number 548 and
public act number 18 to provide affordable housing free from discrimination and to ensure
quality housing in a safe and cost-effective manner through cooperation and communication with
residents and participants. The Commission’s priority is to continually develop and provide
decent, safe, and sanitary housing for the low-income residents of the community.

The Commission is governed by a five-member board of commissioners. The board members
are appointed by the city manager of Ferndale, MI, with confirmation by the Ferndale City
Council, to 5-year staggered terms so that there is one vacancy every year. Efforts are made to
appoint at least one board member that is a Commission resident or program participant. The
Commission’s executive director is appointed by its board of commissioners and is responsible
for coordinating established policies and carrying out the Commission’s day-to-day operations.

The Commission administers public housing and Section 8 Housing Choice Voucher programs
funded by the U.S. Department of Housing and Urban Development (HUD). The Section 8
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. As of September 2013, the Commission had 975 units under contract and was authorized
to receive more than $1.7 million in program funds for the fiscal year. Further, on July 1, 2012, the
Commission accepted a transfer of 222 vouchers from the Royal Oak Housing Commission.

Our audit objectives were to determine whether the Commission (1) appropriately calculated
housing assistance payments, (2) maintained appropriate documentation to support the admission
and continued occupancy of its program households, and (3) appropriately ensured that its
households did not have unreported income.




                                                  3
                                         RESULTS OF AUDIT


The Commission Generally Managed Its Program Household Files in
Accordance With HUD’s and Its Own Requirements
The Commission generally managed its program household files in accordance with HUD’s
requirements and its own administrative plan. Specifically, for the 24 files reviewed, it
appropriately (1) calculated housing assistance and utility allowance payments and (2) obtained
and maintained the required eligibility documentation to support the admission and continued
occupancy of its program households. In addition, it appropriately used HUD’s Enterprise
Income Verification system to (1) ensure that its zero-income households did not have
unreported income in the system and (2) determine that the households with reported income
discrepancies did not have unreported income at the time of their annual reexamination.


    The Commission Generally
    Ensured That Housing Assistance
    and Utility Allowance Payments
    Were Calculated Appropriately

                    We reviewed one statistically selected2 certification for 24 of the Commission’s
                    program household files to determine whether the Commission correctly
                    calculated housing assistance payments for the period January 1, 2012, through
                    December 31, 2013. For the 24 certifications, the Commission generally ensured
                    that housing assistance and utility allowance payments were correctly calculated
                    for the 24 households.

    The Commission Generally
    Ensured That Required Eligibility
    Documents Were Maintained

                    We reviewed 24 of the Commission’s household files to determine whether the
                    Commission maintained the required documentation to support the households’
                    eligibility for the program. For the 24 household files reviewed, the Commission
                    generally ensured that it maintained the required eligibility documentation to
                    support the admission and continued occupancy of households.




2
    Our methodology for the statistical sample is explained in the Scope and Methodology section of this audit report.

                                                            4


                                                             
The Commission Generally
Ensured That Its Households
Did Not Have Unreported
Income

          We reviewed 21 of the Commission’s zero-income households and 10 households
          listed in HUD’s Enterprise Income Verification system as having an income
          discrepancy for the period January 1, 2012, through December 31, 2013, to
          determine whether the Commission appropriately verified the zero-income status
          and used the system reports to detect unreported income. Generally, the
          Commission appropriately used HUD’s Enterprise Income Verification system to
          (1) ensure that the 21 zero-income households did not have unreported income in
          the system and (2) determine that the 10 households with reported income
          discrepancies did not have unreported income at time of their annual
          reexamination; therefore, the reported income discrepancy for the households were
          not valid.

Recommendations

           This report contains no recommendations, and no further action is necessary with
           respect to this report.




                                           5


                                             
                         SCOPE AND METHODOLOGY

We performed our onsite audit work at the Commission’s office at 415 Withington Street,
Ferndale, MI, between February 4 and April 10, 2014. The audit covered the period January 1,
2012, through December 31, 2013, but was expanded as determined necessary.

To accomplish our objectives, we reviewed

              Applicable laws; regulations; HUD program requirements at 24 CFR (Code of
               Federal Regulations) 5 and 982; the annual contribution contract between HUD and
               the Commission; Public and Indian Housing Notices 2010-19, 2011-25, 2012-15,
               2012-22, and 2013-23; and HUD Guidebook 7420.10G.

              The Commission’s accounting records; bank statements; housing assistance
               payments register; independent auditors’ reports for fiscal years 2010, 2011, and
               2012; computerized databases; policies and procedures; board meeting minutes
               pertinent to the program; and organizational chart.

              HUD’s files for the Commission.

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

We statistically selected a stratified random sample of 85 housing assistance payments from the
Commission’s 16,424 disbursements to landlords from January 2012 through December 2013
(24 months). The 85 monthly payments were for 81 households. Two of the households in the
sample had two monthly housing assistance payments selected that occurred during the same
certification. In addition, two of the households in the sample had two monthly housing
assistance payments selected that occurred during different certifications. We reviewed the first
24 statistically selected housing assistance payments for 24 households of the 81 households to
determine whether the Commission correctly calculated housing assistance and utility allowance
payments and maintained the required documentation to support the households’ admission to
the program and continued occupancy. Our review was limited to the information maintained in
the Commission’s household files.

Using HUD’s Public and Indian Housing Information Center system, we determined that 24
households reported zero income on form HUD-50058 family reports. We reviewed 21 of the 24
zero-income households to determine whether the households had unreported income in HUD’s
system for the household’s most recent family report. Our review was limited to the information
maintained in the Commission’s household files.

Further, using HUD’s system, we determined that 82 households had nearly $686,000,
collectively, in income discrepancies. We selected and reviewed the top 10 households that had

                                                6


                                                  
the largest reported income discrepancy. The income discrepancies for these 10 households
totaled nearly $198,000. The income discrepancy report generated by HUD’s system lists
potential income discrepancies. HUD’s requires public housing agencies validate whether the
identified income discrepancies are valid.3 There are instances when the income discrepancy
listed in the report is not valid. These instances include but are not limited to the following:

          Income reported is before the household began participating in the program; and
          Income reported is for a minor or fulltime student.

We reviewed the income discrepancies to ensure that the Commission was following HUD’s and
its own requirements for using HUD’s system reports to detect unreported income. Our review
was limited to the information maintained by (1) HUD’s system and (2) the Commission in its
household files.

To achieve our audit objectives, we relied in part on computer-processed data in the
Commission’s database. We used computer-processed data to select a sample of household files
for review. Although we did not perform a detailed assessment of the reliability of the data, we
performed a minimal level of testing and found the data to be adequate for our purposes. We
provided our review results and supporting schedules to the Director of HUD’s Detroit Office of
Public Housing and the Commission’s executive director during the audit.

We provided our discussion draft audit report to HUD’s staff, Ferndale Housing Commission’s
executive director, and board on August 27, 2014. We asked the Commission’s executive
director to provide written comments on our discussion draft audit report by September 5,
2014. The executive director chose not to comment on the report.

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 provided a reasonable basis for our findings
and conclusions based on our audit objectives.




3
    HUD’s requirements at 24 Code of Federal Regulations 5.236.
                                                         7


                                                          
                              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:

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

                     Reliability of financial reporting – Policies and procedures that
                      management has implemented to reasonably ensure that valid and reliable
                      data are obtained, maintained, and fairly disclosed in reports.

                     Compliance with applicable laws and regulations – Policies and
                      procedures that management has implemented to reasonably ensure that
                      resource use is consistent with laws and regulations.

               We assessed the relevant controls identified above.

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


                                                 8


                                                   
           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 control structure as a whole. Accordingly, we do not express an opinion on
           the effectiveness of the Commission’s internal control.

Separate Communication of
Minor Deficiencies

           We informed the Commission’s executive director and the Director of HUD’s
           Detroit Office of Public Housing of minor deficiencies through a memorandum,
           dated September 11, 2014.




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