OFFICE OF AUDIT DRAFT
REGION 7
For Discussion and Comment Only - Subject to Review and Revision
KANSAS CITY, KS
Wellston Housing Authority
Wellston, MO
Community Service and Self-Sufficiency
Requirement
2014-KC-0005 SEPTEMBER 24, 2014
Issue Date: September 24, 2014
Audit Report Number: 2014-KC-0005
TO: Lindsey Reames, Deputy Assistant Secretary for Field Operations (Acting), PQ
//signed//
FROM: Ronald J. Hosking, Regional Inspector General for Audit, 7AGA
SUBJECT: Wellston Housing Authority Improperly Administered the Community Service
and Self-Sufficiency Requirement
Attached is the U.S. Department of Housing and Urban Development (HUD), Office of
Inspector General’s (OIG) final results of our review of the Wellston Housing Authority’s
administration of the Community Service and Self-Sufficiency Requirement.
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
913-551-5870.
Office of Audit Region 7
400 State Avenue, Suite 501, Kansas City, KS 66101
Phone (913) 551-5870, Fax (913) 551-5877
Visit the Office of Inspector General Web site at www.hudoig.gov.
September 24, 2014
Wellston Housing Authority Improperly Administered the
Community Service and Self-Sufficiency Requirement
Highlights
Audit Report 2014-KC-0005
What We Audited and Why What We Found
We reviewed the Wellston Housing The Authority improperly administered the CSSR. It
Authority’s administration of the improperly determined whether 105 tenants complied
Community Service and Self- with the CSSR and reported incorrect compliance
Sufficiency Requirement (CSSR) due to status codes on the Family Report (Form 50058). The
its unusually low reported rate of Authority also improperly renewed leases for
compliance with the requirement. Also, noncompliant tenants in 78 units. As a result, HUD
this audit will complement our provided subsidies for noncompliant tenants, and
upcoming nationwide internal audit of noncompliant households occupied units that could
CSSR. Our audit objective was to have housed compliant families.
determine if Wellston Housing
Authority properly administered the
CSSR.
What We Recommend
We recommend that HUD require the
Wellston Housing Authority to develop
and implement procedures to address
noncompliance before lease renewal and
terminate a lease if noncompliance is not
corrected. This will put the Wellston
Housing Authority’s annual operating
subsidy for 78 units of $302,000 to better
use. Also, HUD should provide
guidance to the Authority staff for proper
CSSR coding and conduct follow up
monitoring to confirm the staff’s
understanding and ensure staff is
properly administering the CSSR
including properly determining CSSR
status and follow up action.
TABLE OF CONTENTS
Background and Objective 3
Results of Audit
Finding: Wellston Housing Authority Improperly Administered the Community
Service and Self-Sufficiency Requirement 5
Scope and Methodology 8
Internal Controls 9
Appendixes
A. Schedule of Questioned Costs and Funds to Be Put to Better Use 10
B. Auditee Comments and OIG’s Evaluation 11
C. Criteria 13
2
BACKGROUND AND OBJECTIVE
Wellston Housing Authority (Authority) operates 201 public housing units under the
Conventional Public Housing Program. Under this program, the Authority rents units that it
owns to low-income households. The Public Housing Program is operated under an Annual
Contributions Contract (ACC) with the U.S. Department of Housing and Urban Development
(HUD), and HUD provides operating subsidy and capital grant funding to enable the Authority
to provide the housing at a rent that is based on 30 percent of household income after deductions.
In 2013, the Authority received more than $593,000 in public housing operating subsidies and is
projected to receive more than $778,000 in 2014.
The Authority has been under Administrative Receivership since July 1996. Administrative
Receivership is a process where HUD declares a Public Housing Authority (PHA) in substantial
default of its ACC and takes control of the PHA under the powers granted to the HUD Secretary
under the Housing Act of 1937, as amended. In 2012, HUD appointed an employee from its
Kansas City office as receiver. This individual acts as the Authority’s board.
The Quality Housing and Work Responsibility Act of 1998, which amended Section 12 of the
U.S. Housing Act of 1937, established the requirement that every nonexempt adult resident of
public housing contribute 8 hours of community service each month or participate in an
economic self-sufficiency program. Community service is the performance of voluntary work or
duties that are a public benefit and that serve to improve the quality of life, enhance resident self-
sufficiency, or increase resident self-responsibility in the community. Self-sufficiency programs
include programs for job training, employment counseling, work placement, basic skills training,
and education.
Residents exempt from the requirement are those who are
• 62 years of age or older;
• Blind or disabled and who certify that, because of this disability, they are unable to
comply with the service provisions or primary caretakers of such individuals;
• Engaged in eligible work activities;
• Exempt from having to engage in a work activity under the State program funded under
the Social Security Act or a State-administered welfare-to-work program; or
• Members of a family receiving welfare assistance, benefits, or service under a State
welfare program.
Public and Indian Housing (PIH) Notice PIH-2009-48, was issued November 25, 2009 to help
PHAs understand and administer the mandated Community Service and Self-Sufficiency
Requirement (CSSR) and in response to an audit report issued by the Office of Inspector General
on March 24, 2008. This Notice was extended by Notice PIH-2011-11 and Notice PIH-2012-13
indefinitely, until amended, superseded, or rescinded and without any substantial change.
At lease execution or reexamination, all adult members (age 18 or older) of a public housing
resident family must provide documentation showing that they qualify for an exemption. At
each annual reexamination, nonexempt family members must present documentation of activities
3
performed over the previous 12 months. Documentation will include signatures of supervisors,
instructors, or counselors certifying the number of hours contributed. If during reexamination, a
family member is found to be non-compliant, the member and head of household will sign an
agreement with the housing authority to make up the deficient hours over the next 12-month
period or the lease will be terminated.
Our audit objective was to determine whether the Authority properly administered the CSSR.
4
RESULTS OF AUDIT
Finding: The Authority Improperly Administered the Community
Service and Self-Sufficiency Requirement
Wellston Housing Authority improperly determined whether 105 tenants complied with the
Community Service and Self-Sufficiency Requirement (CSSR) and improperly renewed leases
for noncompliant tenants in 78 units. The Authority staff did not understand the requirement and
did not have adequate procedures to address noncompliance. As a result, HUD provided
subsidies for noncompliant tenants, and noncompliant households occupied units that could have
otherwise housed compliant families.
Compliance Improperly
Determined
The Authority improperly determined whether 105 of the 176 tenants reviewed
complied with the CSSR. In addition, it improperly renewed leases for
noncompliant tenants in 78 of the 115 households reviewed.
Tenants Coded Exempt Without Proper Support
The Authority coded tenants exempt without proper supporting documentation.
The Authority’s CSSR policy requires residents to provide documentation if they
qualify for an exemption. The Authority improperly coded 14 tenants as exempt
without documentation supporting an exemption. In four additional instances,
tenants coded as exempt by the Authority provided documentation supporting
their compliance with the CSSR.
Tenants Improperly Coded Noncompliant
The Authority coded tenants noncompliant when support for their exemption was
documented in the tenant file. The Authority improperly coded 42 tenants
noncompliant despite documentation for their disability, work activities, or State
assistance entitling them to an exemption.
Tenants Coded Noncompliant at New Admission
The Authority coded tenants noncompliant at new admission. Notice PIH-2009-
48 states that, at the time of program admission, tenants are to be coded pending
or exempt. The Authority coded five tenants in our sample as noncompliant at
new admission.
Tenants Coded Pending After New Admission
The Authority coded tenants as pending after new admission. Notice 2009-48
states that, if a pending code is used after the year of program admission, this
means the housing authority is still in the process of verifying CSSR compliance
5
or that a lease renewal is pending. The Authority inappropriately coded 42
tenants as pending after new admission, when compliance could have been
determined and a lease renewal was not pending.
Noncompliant Tenants’ Leases Were Inappropriately Renewed
The Authority inappropriately renewed leases for noncompliant tenants in 78
units. Housing authorities review resident compliance with the CSSR at least 30
days prior to the end of the twelve-month lease. If a housing authority finds a
tenant is noncompliant with the CSSR, Notice PIH-2009-48 requires it to provide
written notice to the tenant stating the finding of noncompliance and that lease
renewal is contingent on compliance or execution of a written workout agreement.
This agreement with the housing authority presents the means through which
noncompliant family members will comply. Otherwise, the family must provide
written assurance to the housing authority that the tenant or other noncompliant
resident no longer resides in the unit. The Authority renewed the leases of
noncompliant tenants without entering workout agreements or obtaining written
assurance that the noncompliant resident no longer resided in the unit.
The Authority Made Other Administrative Errors
In addition, some tenants received notices of noncompliance with the CSSR when
they were exempt. Some exempt tenants signed a certificate of compliance with
the CSSR and not all leases executed by the Authority included a provision
requiring compliance with the CSSR.
Staff Did Not Understand
Requirements
The Authority staff did not understand the CSSR and did not have adequate
procedures to address noncompliance.
Authority staff was not aware that families receiving Temporary Assistance for
Needy Families (TANF) or State welfare are exempt from the CSSR. Staff was
also not aware that primary caretakers of disabled individuals are exempt from the
CSSR. Finally, Authority staff believed that workout agreements for
noncompliant tenants were only initiated at the request of the tenant.
The Authority did not have a procedure outlining the steps to be followed to
address noncompliant tenants. This procedure would have specified the actions to
be taken when a tenant was noncompliant before lease renewal, including how to
enter into a workout agreement and how to terminate the lease of a tenant who
failed to enter into a workout agreement.
6
Noncompliant Tenants
Received Subsidies
HUD provided subsidies for noncompliant tenants, and noncompliant households
occupied units that could have otherwise housed compliant families. Potential
tenants were kept on the waiting list while tenants who were noncompliant with
the CSSR continued to live in subsidized housing. If the Authority strengthens its
controls over the CSSR, we estimate that $302,000 (the annual operating subsidy
for 78 units) will be better used to house compliant households over the next year.
HUD also received incorrect information about the compliance with the CSSR.
HUD needed that information to determine whether the CSSR effectively
facilitated upward mobility for public housing residents.
Conclusion
The Authority improperly renewed leases for tenants who were not compliant
with the CSSR because management did not understand the requirement and did
not have adequate procedures to address the noncompliance. Without a full
understanding of the CSSR and procedures to address noncompliance before lease
renewals, potential tenants will stay on the waiting list while noncompliant
tenants continue to reside in subsidized housing.
Recommendations
We recommend that the Deputy Assistant Secretary for Field Operations:
1A. Provide guidance to the Authority on proper CSSR coding.
1B. Perform follow up monitoring of Form 50058 submissions to confirm staff’s
understanding and ensure staff is properly administering the CSSR including
properly determining CSSR status and taking follow up action.
1C. Require the Authority to develop and implement a procedure for addressing
noncompliance before lease renewal and terminating the lease if noncompliance
is not corrected in order to put $301,938 to better use.
7
SCOPE AND METHODOLOGY
Our audit period generally covered May 1, 2012, through April 30, 2014. We performed our audit
work from May through August 2014 at the Wellston Housing Authority office located at 6203
Cote Brilliante Avenue, Wellston, MO.
To accomplish our objective, we
• Reviewed applicable laws and regulations and HUD’s guidance,
• Interviewed housing authority staff regarding their administration of the community service
requirement,
• Reviewed the Authority’s policies and procedures,
• Analyzed computer-processed data from the HUD’s Public and Indian Housing Information
Center (PIC),
• Reviewed physical tenant files to determine whether the tenants were properly classified
regarding CSSR,
• Interviewed HUD’s staff regarding their roles in monitoring the requirements of CSSR.
To select our sample, we used the most recent annual reexamination or new admission Form 50058
available in the PIC system. We identified 189 households who resided in Wellston, MO public
housing units. Of these 189 households, we eliminated 30 newly admitted households; 30
households with heads of household 62 years of age or older and all other adults being disabled; and
14 households with disabled members who were coded exempt on Form 50058. After eliminating
these 74 households we selected a sample of 115 households (consisting of 176 tenants between the
ages of 18 and 61) for our review. We reviewed the sample tenant files for documentation
supporting the community service or self-sufficiency activities or exempt status of the tenants. Our
review found that the Authority improperly determined whether 105 of the 176 tenants complied
with the CSSR, and improperly renewed leases for noncompliant tenants in 78 of the 115
households reviewed.
To compute funds to be put to better use (see appendix A), we calculated the annual public housing
operating subsidy cost per household by dividing the Authority’s 2014 public housing operating
budget of $778,037 by the 201 public housing units. This equaled $3,871 per unit annually. We
multiplied the 78 households with noncompliant adult tenants from our sample by the $3,871 to
obtain our funds put to better use amount of $301,938.
We did not rely on computer-processed data to form our conclusions. Instead, we based our
conclusions on reviewing source documents contained within the physical tenant files. We used
information from the HUD’s PIC system for the sample selection and background purposes only.
We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence
to provide a reasonable basis for our findings and conclusions based on our audit objective. We
believe that the evidence obtained provides a reasonable basis for our findings and conclusions
based on our audit objective.
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:
Controls to ensure tenants’ CSSR status is properly determined and
appropriate follow-up actions are taken against non-compliant tenants.
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.
Significant Deficiency
Based on our review, we believe that the following item is a significant deficiency:
The Authority lacked a procedure to ensure noncompliance is addressed
before lease renewal and leases are not renewed unless noncompliance with
the CSSR is corrected.
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APPENDIXES
Appendix A
SCHEDULE OF
FUNDS TO BE PUT TO BETTER USE
Recommendation Funds to be put
number to better use 1/
1C $301,938
1/ 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. In this case, if the Authority implements our
recommendations, it will ensure it has the capability to better manage its CSSR, ensuring
$301,938 in annual public housing operating subsidies are used to house compliant
families. Once the Authority successfully implements our recommendations, this will be
a recurring benefit. Our estimate reflects only the initial year of this benefit.
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Appendix B
AUDITEE COMMENTS AND OIG’S EVALUATION
Ref to OIG Evaluation Auditee Comments
Comment 1
11
OIG Evaluation of Auditee Comments
Comment 1 The Authority is in agreement with our findings and recommendations. The
Authority stated that it is in the process of revising its procedures and
implementing policies to address our recommendations. HUD will need to obtain
these policies and procedures, evaluate their adequacy, and verify their
completion in order to satisfy recommendation 1C.
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Appendix C
CRITERIA
HUD Public and Indian Housing Notice 2009-48
Community service volunteer work and economic self-sufficiency requirements mandate
that each nonexempt adult household member (18 years or older) either contribute 8
hours per month of community service within their community, or participate in a self-
sufficiency program for 8 hours per month. The requirement can also be met by a
combination of 8 hours of community service and participation in an economic self-
sufficiency program. At least 8 hours of activity must be performed each month. An
individual may not skip a month and then double up the following month unless special
circumstances warrant it.
Exemptions for adult residents unable to participate include persons who are 62 years or
older; blind or disabled who certify that because of this disability, they are unable to
comply with the service provisions or is a primary caretaker of such individual; engaged
in work activities; able to meet requirements under a State program funded under part A
of title IV of the Social Security Act or under any welfare program of the State in which
the authority is located; or a member of the family receiving assistance, benefits, or
services under a State program funded under part A of title IV of the Social Security Act
or under any welfare program of the State in which the authority is located.
Authorities are encouraged to use 30 hours per week as the minimum number of hours
for a work activity. Authorities must describe in its requirement policy the process to
determine which family members are exempt from the requirement, as well as the process
for determining any changes to the exempt status of the family member. Authorities
provide the family a copy of the requirement policy at initial application and secure
certification of receipt. The authority makes the final determination whether to grant an
exemption from the community service requirement.
HUD Public and Indian Housing Notices 2011-65 and 2010-25
HUD relies on housing authorities to submit accurate, complete, and timely data to
administer, monitor, and report on the management of its rental assistance programs. In
order to fully justify its budget requests to Congress, HUD needs full cooperation from
all PHAs in meeting their reporting requirements in a timely manner.
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Wellston Housing Authority Community Service and Self-Sufficiency Requirement Policy
A. Background
The Quality Housing and Work Responsibility Act of 1998 requires that all non-exempt
public housing adult residents (18 or older) contribute eight (8) hours per month of
community service (volunteer work) or participate in eight (8) hours of training,
counseling, classes or other activities that help any individual toward self-sufficiency and
economic independence. This is a requirement of the dwelling lease of WHA.
B. Definitions
Community Service is volunteer work which includes, but is not limited:
Work at a local institution, including, but not limited to: school, child care center,
hospital hospice, recreation center, senior center, adult daycare center, homeless
shelter, indigent feeding program, cooperative food bank; etc.;
Work with a non-profit organization that serves WHA residents or their children
such as: Boy Scouts, Girl Scouts, Boys or Girls clubs, Community clean-up
programs, beautification programs, other youth or senior organizations;
Work at the WHA to help improve physical conditions;
Work at the WHA to help with children programs;
Work at the WHA to help with senior programs;
Helping neighborhood groups with special projects;
Working through resident organization to help other residents with problems,
serving as an officer in a Resident organization, serving on the Resident Advisory
Board; and
Caring for the children of other resident so they may volunteer.
NOTE: Political activity is excluded.
Self Sufficiency Activities- activities that include, but are not limited to:
Job readiness programs;
Job training programs;
GED classes;
Substance abuse or mental health counseling;
English proficiency or literacy (reading) classes;
Apprenticeships;
Budgeting and credit counseling;
Any kind of class that helps a person toward economic independence; and
Full-time student status at any school, college or vocational school.
Exempt Adult - an adult member of the family who
Is 62 years of age or older;
Has a disability that prevents him/her from being gainfully employed
Is the caretaker of a disabled person:
Is working at least 30 hours per week; or
Is participating in a welfare-to-work program.
14
C. Requirements of the program.
1. The eight (8) hours per month may be either volunteer work.
2. At least eight (8) hours of activity must be performed each month. An individual
may not skip a month and then double up the following month, unless special
circumstances warrant special consideration. The WHA will make the
determination of whether to allow or disallow a deviation from the schedule.
3. Activities must be performed within the community and not outside the
jurisdictional area of the WHA.
4. Family obligations
At least execution or re-examination after February 21, 2003, all adult
members (18 or older) of a public housing resident family must:
i. Provide documentation that they are exempt from Community Service
requirement if they qualify for an exemption, and
ii. Sign a certification that they have received and read this policy and
understand that if they are not exempt, failure to comply with the
Community Service requirement will result in non-renewal of their
lease.
At each annual re-examination, non-exempt family members must present a
completed documentation form (to be provided by the WHA) of activities
performed over the previous twelve (12) months. This form will include
places for signatures of supervisors, instructors, or counselors certifying to the
number of hours contributed.
If a family member is found to be noncompliant at re-examination, he/she and
the Head of Household will sign an agreement with the WHA to make up the
deficient hours over the next twelve (12) month period.
5. Change in exempt status
If, during the twelve (12) month period, a non-exempt person becomes
exempt, it is his/her responsibility to report this to WHA and provide
documentation of such.
If, during the twelve (12) month period, an exempt person becomes non-
exempt, it is his/her responsibility to report this to the WHA. WHA will
provide the person with the Recording /Certification documentation form and
a list of agencies in the community that provide volunteer and/or training
opportunities.
D. WHA obligations
1. To the greatest extent possible and practicable, the WHA will:
Provide names and contacts at agencies that can provide opportunities for
residents, including disabled, to fulfill their Community Service obligations.
(According to the Quality Housing and Work Responsibility Act, a disabled
15
person who is otherwise able to be gainfully employed is not necessarily
exempt from the Community Service requirement); and
Provide in-house opportunities for volunteer work.
2. WHA will provide the family with exemption verification forms,
Recording/Certification documentation forms, and a copy of this policy at initial
application and at lease execution.
3. WHA will make the final determination as to whether or not a family member is
exempt from the Community Service requirement. Residents may use WHA’s
Grievance Procedure if they disagree with WHA's determination.
4. Noncompliance of family member: At least thirty (30) days prior to annual re-
examination and or lease expiration, the WHA will begin reviewing the exempt or
nonexempt status and compliance of family members.
If WHA finds a family member to be noncompliant, WHA will enter into an
agreement with the noncompliant member and the Head of Household to
make up the deficient hours over the next twelve (12) month period;
If, at the next annual re-examination, the family member still is not compliant,
the lease will not be renewed and the entire family will have to vacate, unless
the noncompliant member agrees to move out of the unit;
The family may use WHA's Grievance Procedure to protest the lease
termination.
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Wellston Housing Authority Improperly Administered the Community Service and Self-Sufficiency Requirement
Published by the Department of Housing and Urban Development, Office of Inspector General on 2014-09-24.
Below is a raw (and likely hideous) rendition of the original report. (PDF)