oversight

The Nevada, MO, Housing Authority Did Not Properly Classify Tenants as Exempt From the Community Service and Self-Sufficiency Requirement

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
REGION 7
KANSAS CITY, KS




               Nevada, MO, Housing Authority

           Community Service and Self-Sufficiency
                      Requirement




 

2014-KC-1004                               SEPTEMBER 11, 2014
                                                        Issue Date: September 11, 2014

                                                        Audit Report Number: 2014-KC-1004

                 

TO:            Frances M. Cleary, Director, Kansas City Office of Public Housing, 7APH

               //signed//
FROM:          Ronald J. Hosking, Regional Inspector General for Audit, 7AGA

SUBJECT:       The Nevada, MO, Housing Authority Did Not Properly Classify Tenants as
               Exempt From 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 Nevada, MO, Housing Authority’s
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.




                                                 
                                            September 11, 2014
                                            The Nevada, MO, Housing Authority Did Not Properly
                                            Classify Tenants as Exempt From the Community
                                            Service and Self-Sufficiency Requirement 
                   


Highlights
Audit Report 2014-KC-1004 

 What We Audited and Why                     What We Found

We audited the Nevada, MO, Housing          The Authority did not properly classify tenants as
Authority’s community service and           exempt from the requirement. It did not properly
self-sufficiency requirement. We            exempt 33 of the 35 households reviewed and did not
selected the Authority for review           provide any of the households a copy of the
because available reports indicated that    requirement policy at initial application. Also, it did
95.4 percent of the Authority’s public      not accurately complete the tenant recertification form
housing tenants were exempt from the        for 20 of the 35 households. This condition occurred
requirement, which was higher than the      because the Authority was not aware of HUD’s 2009
State’s average of 88.5 percent. Also,      requirement guidance. As a result, noncompliant
this audit will complement our              households used more than $33,000 in annual public
upcoming nationwide internal audit of       housing operating subsidies to occupy units that could
the requirement. Our audit objective        have housed compliant families.
was to determine whether the Authority
properly classified tenants as exempt
from the requirement.

 What We Recommend

We recommend that the Director of
HUD’s Kansas City Office of Public
Housing require the Authority to
develop and implement a more
comprehensive community service and
self-sufficiency requirement to ensure
that it complies with HUD’s
requirements. This measure will ensure
that $33,547 in public housing
operating subsidies will be put to better
use. Also, HUD should ensure that the
Authority’s staff receives training to
help prevent future recording errors.




                                                   
 

                                              
                            TABLE OF CONTENTS

Background and Objective                                                         3

Results of Audit
      Finding: The Authority Did Not Properly Classify Tenants as Exempt From   5
               the Community Service and Self-Sufficiency Requirement

Scope and Methodology                                                           8

Internal Controls                                                               10

Appendixes
A.    Schedule of Funds To Be Put to Better Use                                 11
B.    Auditee Comments and OIG’s Evaluation                                     12
C.    Criteria                                                                  14




                                            2 
                                                  


                      BACKGROUND AND OBJECTIVE

The Housing Authority of the City of Nevada, MO, was established in 1970 and manages three
significant U.S. Department of Housing and Urban Development (HUD) programs. These
programs include the low-rent housing program with 200 public housing units, the Public
Housing Capital Fund program, and the Housing Choice Voucher program. The Authority is
governed by a board of commissioners.

The Public Housing Operating Fund program provides operating subsidies to housing authorities
to assist in funding the operating and maintenance expenses of their own dwellings in accordance
with Section 9 of the U.S. Housing Act of 1937 as amended. The subsidies are required to help
maintain services and provide minimum operating reserves. In 2013, the Authority received
$229,000 in public housing operating subsidies and is projected to receive more than $353,000 in
2014.

The community service and self-sufficiency requirement is intended to assist adult public
housing residents in improving their own economic and social well-being and to give these
residents a greater stake in their communities. The requirement allows residents an opportunity
to “give something back” to their communities and facilitates upward mobility. Community
service is the performance of voluntary work or duties that provide a public benefit and serve to
improve the quality of life, enhance resident self-sufficiency, or increase resident self-
responsibility to the community.

The Quality Housing and Work Responsibility Act, 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. Section 432 of the fiscal year 2002 HUD-U.S. Department of Veterans
Affairs (VA) Appropriations Act temporarily suspended the requirement. However, the fiscal
year 2003 HUD-VA Appropriations Act reinstated this provision.

Regulations for the requirement are provided in 24 CFR (Code of Federal Regulations) 960.600-
609. In addition, HUD’s Public and Indian Housing (PIH) Notice 2003-17, issued June 20,
2003, notified housing authorities of the requirement. In response to an audit report issued by
the HUD Office of Inspector General (OIG) (2008-KC-0002), HUD issued PIH Notice 2009-48
to assist in the understanding and administration of the requirement. This notice superseded all
previous guidance and provided clarification guidance on the requirement.

The only 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 a primary caretaker of such individuals;
      Engaged in eligible work activities;
      Able to meet requirements under a State program funded under the Social Security Act or
       a State-administered welfare program; or

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      A member of a family receiving welfare assistance, benefits, or service under a State
       welfare program.

Housing authorities are encouraged to use 30 hours per week as the minimum number of hours
for a work activity. They must describe in their requirement policy the process for determining
which family members are exempt from the requirement and any changes to the exempt status of
the family members. In addition, the housing authority must provide the family a copy of the
requirement policy at initial application and secure its certification.

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
performed over the previous 12 months. Documentation will include signatures of supervisors,
instructors, or counselors certifying to the number of hours contributed. If during reexamination
a family member is found to be noncompliant, the member and head of household 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.

Section 6 of the U.S. Housing Act of 1937 provides sanctions against any housing authority
failing to comply substantially with any provision of the Act relating to the public housing
program. Sanctions include but are not limited to terminating, withholding, or reducing
assistance payments. These sanctions are applicable to housing authorities failing to
substantially comply with the requirement.

Our audit objective was to determine whether the Authority properly classified tenants as exempt
from the community service and self-sufficiency requirement. 




                                                4 
                                                  


                                RESULTS OF AUDIT


Finding 1: The Authority Did Not Properly Classify Tenants as Exempt
From the Community Service and Self-Sufficiency Requirement

The Authority did not properly classify tenants as exempt from the community service and self-
sufficiency requirement. It did not properly exempt 33 of the 35 households reviewed and did
not provide any of the households a copy of the requirement policy at initial application. Also,
the Authority did not accurately complete the tenant recertification form for 20 of the 35
households. This condition occurred because the Authority was not aware of HUD’s 2009
requirement guidance. As a result, noncompliant households used more than $33,000 in annual
public housing operating subsidies to occupy units that could have housed compliant families.


 The Authority Did Not Properly
 Classify 33 Households as
 Exempt From the Requirement

               The Authority did not properly classify tenants as exempt from the requirement in
               33 of the 35 households reviewed. Both HUD’s and the Authority’s local
               requirement policy required individuals to work a minimum of 30 hours per week.
               The table below shows the various categories of requirement errors observed
               during this review.

                         Requirement errors                              Number
                   Disabled head of household not                          15
                certifying that he or she was unable to
                       comply with requirement
                  Households not employed and not                            13
                    qualified for other exemptions
                Households with employed adults who                          7
                   did not work 30 hours per week
                                 Total                                      35*
               *Two households had multiple requirement errors.

 Households Did Not Receive the
 Requirement Policy

               The Authority did not provide the 35 households a copy of the requirement policy
               at initial application. PIH Notice 2009-48 requires each family to receive and
               review the requirement policy and certify that it received notice of this policy at
               the time of initial program participation.

                                                5 
                                              



Reporting Errors Were Found
in 20 Households

           The Authority did not accurately complete form HUD-50058 for 20 of the 35
           households. These reporting errors included listing the incorrect income code in
           block 7b on the form, listing the incorrect requirement code, listing the wrong
           income amount, and not properly identifying the head of household as disabled.

           According to PIH 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. The table below
           shows the various reporting errors observed. These errors are in addition to the
           requirement errors discussed in the previous section.

                       Reporting errors                              Number
           Incorrect income code listed in block 7b                    12
                  on the form HUD-50058
             Incorrect requirement code listed in                        9
              block 3q on the form HUD-50058
            Wrong income amount listed in block                          1
                 7d on the form HUD-50058
             Head of household not identified as                         1
              disabled on the form HUD-50058
                            Total                                       23*
           *Three households had multiple reporting errors.

The Authority Was Not Aware
of HUD’s Requirement
Guidance

           The Authority was not aware of HUD’s new requirement guidance outlined in
           PIH Notice 2009-48. It relied upon a local requirement policy approved in 2003.
           We asked Authority officials whether they knew about HUD’s 2009 guidance,
           and they stated that they did not. In addition, we asked Authority officials about
           the reporting errors, and they attributed the errors to a lack of training.

           As a result of our review, the Authority revised its requirement policy to
           strengthen its controls to help prevent households from being improperly
           classified as exempt from the requirement. In addition, the Authority developed
           various forms to help document tenants’ certification that they understood the
           requirement and to track each tenant’s participation.




                                            6 
                                             


Noncompliant Households
Occupied Units

           As a result of the requirement errors, noncompliant households occupied units
           that could have housed compliant families. Furthermore, by improperly
           classifying tenants as exempt from the requirement, the Authority failed to meet
           the public law’s intent for tenants to improve their own economic and social well-
           being and have a greater stake in their community. If the Authority strengthens
           its controls over the requirement, we estimate that more than $33,540 will be
           better spent to house compliant households over the next year.

Recommendations

           We recommend that the Director of the HUD Kansas City Office of Public
           Housing

           1A.    Require that the Authority develop and implement a more comprehensive
                  community service and self-sufficiency requirement to ensure that it
                  complies with HUD’s requirements. This measure will ensure that
                  $33,547 in public housing operating subsidies will be put to better use
                  annually.

           1B.    Ensure that the Authority staff receives form HUD-50058 training to help
                  prevent future recording errors.




                                            7 
                                                 


                        SCOPE AND METHODOLOGY

Our audit period was January 1, 2012, through June 30, 2014. We performed our onsite work
from May through July 2014 at the Authority’s offices located at 1117 North West Street,
Nevada, MO.

To accomplish our objective, we

      Interviewed the Authority’s staff;
      Interviewed HUD’s Office of Public Housing staff in Kansas City, KS;
      Reviewed data from HUD’s Inventory Management System-Public and Indian Housing
       Information Center;
      Reviewed the Authority’s policies and procedures, tenant files, and supporting
       documentation; and
      Reviewed Federal regulations and HUD requirements.

We used HUD’s Inventory Management System-Public and Indian Housing Information Center
to help identify our audit samples and as support that was corroborated by other evidence (forms
HUD-50058, requirement-related documents, etc.). We performed a low level of testing and
found the data to be sufficiently reliable for our purposes.

To perform our review, we obtained a head of household listing and the form HUD-50058
(Family Report) for each of the Authority’s public housing households. We identified 189
households who resided at the Authority. PIH Notice 2009-48 states that individuals who are 62
years of age or older or households receiving welfare benefits are exempt from the requirement.
Therefore, after eliminating the 47 households in which the sole family member or both family
members were 62 years of age or older and the 10 households receiving welfare, 132 households
remained in our sample universe. We initially reviewed a nonstatistical sample of 15 of the 132
households, but we expanded our testing to include 20 additional households. We selected every
ninth household (132/15) for our preliminary sample and every sixth household ((132-15)/20) to
complete our audit sample. Our results apply only to the sample items tested and cannot be
projected to the universe.

For each of the 35 households sampled, we reviewed relevant documentation for the adult
members of the households. This documentation included local requirement policies; pertinent
communication between the Authority and the household; documentation of household member
compliance, exemption, or noncompliance with the requirement; specific details about the
household; and documentation of any actions processed against the household. For disabled
family members, we verified that the disabled person properly certified that he or she was unable
to comply with the requirement. When we identified noncompliance in a household, we
coordinated with the Authority to obtain additional documentation and reach agreement on our
conclusions.




                                                8 
                                                 


To compute our funds to be put to better use estimate (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 $353,128 by the 200 public housing units, which equaled
approximately $1,765 per unit annually. Next, we excluded the 15 households in which the
disabled head of household did not certify that he or she was unable to comply with the
requirement, as that was mainly a documentation issue and less material in nature. Also, we
counted the household that had both a family member not working and another working less than
30 hours per week only once for our calculations. This left 19 households to include in our
calculations, so we multiplied the 19 households by the $1,765 annual public housing operating
subsidy cost per unit to obtain our funds to be put to better use amount, totaling $33,547.

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.




                                                9 
                                                   


                              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 over properly classifying tenants as exempt from the requirement.

               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 did not have a comprehensive requirement that complied with
                      HUD requirements.




                                                 10 
                                                 


                                     APPENDIXES

Appendix A

     SCHEDULE OF FUNDS TO BE PUT TO BETTER USE
                                                    Funds to be
                              Recommendation
                                                    put to better
                                  number
                                                       use 1/
                                     1A               $33,547


1/   Recommendations that funds be put to better use are estimates of amounts that could be
     used more efficiently if an OIG recommendation is implemented. These amounts include
     reductions in outlays, deobligation of funds, withdrawal of interest, costs not incurred by
     implementing recommended improvements, avoidance of unnecessary expenditures
     noted in preaward reviews, and any other savings that are specifically identified. In this
     case, if the Authority implements our recommendations, it will help to ensure that it has
     the capability to better manage its community service and self-sufficiency requirement,
     ensuring that $33,547 in annual public housing operating subsidies is 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.




                                              11 
                           


Appendix B

        AUDITEE COMMENTS AND OIG’S EVALUATION


Ref to OIG Evaluation   Auditee Comments




Comment 1




                                                 




                         12 
                                              




                         OIG Evaluation of Auditee Comments

Comment 1   The Authority agreed that it did not properly classify tenants according to the
            community service and self-sufficiency requirement. In addition, the Authority
            was responsive to our recommendations, but HUD should verify the Authority
            complies with the community service and self-sufficiency requirement.
  




                                            13 
                                                 


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) shall either contribute 8
      hours per month of community service within his or her 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 and 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, she or he is 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 authorities in meeting their reporting requirements in a timely manner.




                                               14 
                                                 


Nevada, MO Housing Authority Community Service and Self-Sufficiency Requirement
Policy

      Each adult resident who is not considered exempt shall contribute 8 hours of community
      service each and every month or participate in a self-sufficiency program for at least 8
      hours each month for the duration of the time that they reside in public housing. Each
      person completing community service or self-sufficiency will be required to provide
      documentation each month to stay in compliance.

      Those persons exempt would include but are not limited to those 62 or older; blind or
      disabled; the primary caretaker for a disabled person receiving social security disability;
      if the person is employed for at least 30 hours a week; doing some type of job training,
      job search, community service program, vocational training, job skill training, going to
      school; GED classes; satisfactory attendance; and/or secondary schooling.

      Residents are required to provide a signed written statement of the type of service they
      performed and have an authorized individual sign the statement. If a resident fails to
      comply with the community service requirement, the Authority shall notify the resident
      that their lease will not be renewed unless they enter into an agreement to correct the
      deficiency.




                                               15