oversight

HUD Subsidized More Than 106,000 Noncompliant Households

Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-02-13.

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

   Office of Public and Indian Housing,
             Washington, DC
        Monitoring of the Community Service and Self-
                  Sufficiency Requirement




Office of Audit, Region 7       Audit Report Number: 2015-KC-0001
Kansas City, MO                                  February 13, 2015
To:            Unabyrd Wadhams
               Deputy Assistant Secretary, Office of Field Operations, PQ

               Milan Ozdinec
               Deputy Assistant Secretary, Office of Public Housing and Voucher Programs, PE

               DJ LaVoy
               Deputy Assistant Secretary, Office of Real Estate Assessment Center, PX
               //signed//
From:          Ronald J. Hosking
               Regional Inspector General for Audit, 7AGA
Subject:       HUD Subsidized More Than 106,000 Noncompliant Households


Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of HUD’s monitoring 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.
                    Audit Report Number: 2015-KC-0001
                    Date: February 13, 2015

                    HUD Subsidized More Than 106,000 Noncompliant Households




Highlights

What We Audited and Why
We audited the U.S. Department of Housing and Urban Development’s (HUD) monitoring of the
community service and self-sufficiency requirement (CSSR). We initiated this audit based on
several media reports of housing authorities not enforcing CSSR or only recently stressing its
enforcement. This audit report is a follow-up to the audit report we issued in 2008, showing that
HUD did not have adequate controls to ensure that housing authorities properly administered
CSSR. Our audit objective was to determine the extent to which HUD subsidized units occupied
by noncompliant tenants and housing for tenants whose CSSR status was misreported.

What We Found
HUD subsidized housing for 106,000 units occupied by noncompliant tenants, out of nearly
550,000 potentially CSSR-eligible units nationwide. Out of the nearly 740,000 adult tenants
living in these units, HUD’s system contained incorrect CSSR status codes for 201,000 tenants.
This deficiency occurred because HUD did not have adequate controls to monitor compliance
with CSSR. As a result, HUD paid more than $37 million in monthly subsidies for public
housing units occupied by noncompliant tenants that otherwise could have housed compliant
households.

What We Recommend
We recommend that HUD develop and implement a written monitoring policy for CSSR to
ensure that public housing authorities comply with the Quality Housing and Work Responsibility
Act of 1998 so that more than $448.5 million in public housing operating subsidies will be put to
better use over the next year. We also recommend that HUD (1) create clarifying guidance for
housing authorities, (2) develop training, (3) apply penalties or sanctions against housing
authorities that house ineligible households, (4) produce improved monitoring reports for field
offices, and (5) fix the error codes resulting from Form HUD-50058 submissions.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................5
         Finding: HUD Subsidized More Than 106,000 Noncompliant Households ……….. 5

Scope and Methodology ...........................................................................................9

Internal Controls ....................................................................................................12

Appendixes ..............................................................................................................13
         A. Schedule of Funds To Be Put to Better Use ............................................................ 13

         B. Auditee Comments and OIG’s Evaluation ............................................................. 14

         C. Sample Design Table................................................................................................. 19

         D. Criteria ....................................................................................................................... 21




                                                                     2
Background and Objective
The U.S. Department of Housing and Urban Development (HUD) established its public housing
program to provide decent and safe rental housing for eligible low-income families, the elderly,
and persons with disabilities. There are approximately 1.2 million households living in public
housing units, managed by approximately 3,300 public housing authorities. HUD’s Public
Housing Operating Fund program provides operating subsidies to public housing authorities to
assist in funding their operating and maintenance expenses.
The Quality Housing and Work Responsibility Act of 1998, which amended Section 12 of the
U.S. Housing Act of 1937, established the community service and self-sufficiency requirement
(CSSR). It is intended to assist adult public housing residents in improving their own economic
and social well-being and 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.
Regulations for the requirement are provided in 24 CFR (Code of Federal Regulations) 960.600-
609. In addition, HUD’s Office of Public and Indian Housing (PIH) Notice PIH-2009-48, issued
November 25, 2009, helps public housing authorities understand and administer CSSR in
response to an audit report issued by the Office of Inspector General (OIG) 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 substantial change.
CSSR states that every nonexempt adult resident of public housing must 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
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.
At lease execution or reexamination, all adult members (age 18 or older) of a public housing
resident’s household must provide documentation showing that they qualify for an exemption if
they claim to be exempt from CSSR. At each annual reexamination, nonexempt tenants must



                                                  3
present documentation of activities 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 tenant is found to be noncompliant, the member and head
of household will sign an agreement with the public housing authority to make up the deficient
hours over the next 12-month period, or the lease will be terminated.
Based on Notice PIH-2009-48, HUD sends field offices a monthly community service
monitoring report generated by the PIH Information Center (PIC) system. This report alerts field
offices to potential issues of noncompliance with the requirement. Field offices contact and
advise those public housing authorities showing noncompliant public housing residents. This
remote monitoring provides information for onsite reviews and identifies potential issues,
problems, concerns, and negative trends regarding compliance with CSSR.
Section 6 of the U.S. Housing Act of 1937 provides sanctions against any public 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.
We issued audit report 2008-KC-0002, HUD Did Not Ensure That Housing Authorities Properly
Administered the Community Service and Self-Sufficiency Requirement, on March 24, 2008. In
that audit, we found that HUD did not have adequate controls to ensure that housing authorities
properly administered CSSR. Specifically, HUD did not have sufficient guidelines, adequate
data collection and reporting systems, or effective enforcement mechanisms. Of 68 statistically
selected households, 44 did not comply with CSSR and were, therefore, ineligible for continued
occupancy. Based on these results, we estimated that housing authorities improperly renewed or
extended the leases of at least 85,000 ineligible households, costing an estimated $21.5 million in
monthly operating subsidies.
In the 2008 report, we recommended that HUD improve controls to ensure that housing
authorities properly administer CSSR, resulting in more than $257 million put to better use
annually. We also recommended that HUD require housing authorities to take corrective action
against the 44 ineligible households identified as part of our statistical sample review. All
recommendations for that report are closed.
The audit objective for this current audit was to determine the extent to which HUD subsidized
units occupied by noncompliant tenants and housing for tenants whose CSSR status was
misreported.




                                                 4
Results of Audit

Finding: HUD Subsidized More Than 106,000 Noncompliant
Households
HUD subsidized housing for 106,000 units occupied by noncompliant tenants, out of nearly
550,000 potentially CSSR-eligible units nationwide. Out of the nearly 740,000 adult tenants
living in these units, HUD’s system contained incorrect CSSR status codes for 201,000 tenants.
This deficiency occurred because HUD did not have adequate controls to monitor compliance
with CSSR. As a result, HUD paid more than $37 million in monthly subsidies for public
housing units occupied by noncompliant tenants that otherwise could have housed compliant
households.
HUD Subsidized Housing for Improperly Reported and Noncompliant Tenants
We selected a nationwide statistical sample of 80 households made up of 154 tenants within the
age range that requires compliance with CSSR. We reviewed housing authority records for each
of the sample items to determine (1) whether the unit included a tenant allowed to remain in the
unit despite noncompliance with CSSR and (2) whether the CSSR status of the tenant was
properly reported. A tenant could be counted as an exception in our sample for either question or
both questions.
Noncompliant Tenants
HUD subsidized 23 households from our sample for which housing authorities improperly
renewed or extended the leases of noncompliant tenants without entering into a workout
agreement. Notice PIH-2009-48 requires housing authorities to enter into a written workout
agreement with noncompliant tenants (see appendix D).
In one example, HUD subsidized a household from our sample which was made up of tenants
who were improperly coded as “exempt” because the housing authority implemented its own
CSSR exemptions that were not provided in HUD’s regulations. The housing authority stated
that the whole household was exempt because a tenant received food stamps, when the receipt of
food stamps by a tenant does not automatically exempt an entire household.
Based on the noncompliant households identified in our sample of 80, we projected the results
and estimated that housing authorities renewed or extended the leases of at least 106,000
ineligible households.
Improperly Reported Tenants
HUD received incorrect tenant information from public housing authorities about tenant
compliance with CSSR. Housing authorities continued to code tenants as “pending” when the
proper code at annual reexamination was “compliant,” “noncompliant,” or “exempt.” In
addition, housing authorities sometimes coded tenants as “noncompliant” when they had
adequate employment documentation on file to support an “exempt” code. Further, housing
authorities coded tenants enrolled in college as “exempt” when the correct code for higher


                                                5
education is “compliant.” Lastly, noncompliant tenants were sometimes incorrectly coded as
“exempt.” Therefore, the tenants’ codes did not comply with CSSR in Notice PIH-2009-48 (see
appendix D). Based on 70 tenants within the sampled households whose CSSR status was
improperly reported, we projected the results and estimated that 201,000 tenants nationwide were
improperly reported to HUD. Some of these improperly reported noncompliant tenants are also
included in the 106,000 units discussed above.
HUD Had Inadequate Monitoring Controls
HUD did not have adequate controls for monitoring compliance with CSSR. Specifically, it did
not have sufficient monitoring guidelines, adequate reporting systems, or effective sanction
enforcement procedures.

Insufficient Monitoring Guidelines
HUD did not have written monitoring policies and procedures in place regarding CSSR. HUD
conducted a risk assessment each year to determine monitoring at the highest risk housing
authorities; however, CSSR did not factor into this risk assessment. In addition, HUD sent out a
letter each year to the field offices, communicating monitoring priorities, but CSSR compliance
was not included in the priorities.
HUD headquarters allowed the field offices the flexibility to choose how they monitored CSSR.
Of the 56 housing authorities reviewed, 11 indicated that HUD conducted reviews or monitoring
of CSSR at their authority, while 42 indicated that HUD did not, and 3 did not answer or
answered “unknown.”
Inadequate Reporting Systems
HUD did not have an adequate reporting system in place to track compliance and identify
problems. We reported the same problem in HUD OIG Audit Report 2008-KC-0002, issued
March 24, 2008, and as a result of that audit, HUD agreed to issue a monthly community service
monitoring report as noted in Notice PIH-2009-48. However, these reports were last run and
distributed in December 2012. A Real Estate Assessment Center contractor generated the
reports, and when the contract expired, HUD decided not to dedicate resources to renew it.
The community service monitoring reports were not an effective tool for monitoring housing
authorities’ compliance with CSSR. The purpose of the report was to alert field offices of
potential CSSR noncompliance issues. However, the report did not include all CSSR-eligible
tenants. For example, the report did not include tenants who received wages. Notice PIH-2009-
48 encouraged housing authorities to use 30 hours per week as full time for the work exemption.
Therefore, excluding all tenants who received wages made the report inaccurate. In addition, the
report excluded welfare recipients, even though receiving food stamps does not qualify tenants
for an exemption. The report also did not include disabled tenants. This exclusion conflicted
with the Notice since disabled tenants must certify that because of their disability they are unable
to perform community service and self-sufficiency activities.
HUD’s published fatal error codes relating to CSSR on Form HUD-50058 were not correct and
did not result in accurate CSSR reporting. A Form HUD-50058 fatal error stops the submission
process for that household. First, the fatal errors make a tenant exempt when the relationship
code is equal to F = foster child or foster adult. HUD requirements do not exempt all foster


                                                 6
adults. Second, fatal errors make a tenant exempt when the tenant is listed as disabled. All
disabled adults should not be coded as “exempt.” Only those whose disability makes them
unable to perform community service and self-sufficiency activities are exempt. However, the
fatal error codes require housing authorities to code all foster adults and all disabled adults as
“exempt.” Otherwise, the Form HUD-50058 submission will not be accepted by the system.
Ineffective Sanction Enforcement
HUD did not apply sanctions against housing authorities that failed to enforce CSSR compliance.
The U.S. Housing Act of 1937, as amended, indicates that HUD may terminate, withhold, or
reduce assistance payments to housing authorities that fail to comply with its requirements.
However, HUD noted that it usually issued sanctions only for more serious violations. HUD
lists these sanctions in Notice PIH-2009-48 as penalties/sanctions against housing authorities
housing ineligible households yet does not enforce them for CSSR noncompliance.
HUD also noted that some housing authorities wanted to take action, such as eviction, but certain
jurisdictions made it difficult to evict anyone for noncompliance with CSSR. HUD stated this
makes it very challenging for them to enforce the requirement. However, HUD must enforce the
Act by supporting housing authorities that follow CSSR by not renewing the leases of
noncompliant tenants.
HUD Subsidized Noncompliant Tenants
HUD paid more than $37 million in monthly subsidies for public housing units occupied by
noncompliant tenants that could have otherwise housed compliant tenants. Potential tenants
were kept on waiting lists, while tenants who were noncompliant with CSSR continued to live in
subsidized housing. Based on the ineligible 23 households in our sample, we projected the
results and estimated that HUD provided subsidies of more than $37 million per month for
ineligible households. If HUD strengthens its controls over CSSR, we estimate that at least $448
million will be better used to house compliant households over the next year.
Conclusion
HUD spent an estimated $37 million each month subsidizing at least 106,000 ineligible
households. In addition, HUD subsidized housing for 201,000 tenants whose CSSR status was
improperly reported. The Quality Housing and Work Responsibility Act of 1998, which
amended Section 12 of the U.S. Housing Act of 1937, established CSSR. It is intended to assist
adult public housing residents in improving their own economic and social well-being and give
these residents a greater stake in their communities. This congressionally mandated requirement
allows residents an opportunity to “give something back” to their communities and facilitates
upward mobility. If HUD does not strengthen its controls, it will pay at least $448 million over
the next year in subsidies for public housing units occupied by noncompliant tenants that
otherwise could house compliant households.
Recommendations
We recommend that the Deputy Assistant Secretary for Field Operations
       1A. Develop and implement a written monitoring policy for CSSR to ensure that public
           housing authorities comply with the Quality Housing and Work Responsibility Act



                                                  7
           of 1998 so that $448,580,654 in public housing operating subsidies will be put to
           better use.
We recommend that the Deputy Assistant Secretary for Public Housing and Voucher Programs
       1B. Create clarifying guidance for housing authorities to follow-up with noncompliant
           tenants to address the projected 106,000 ineligible households receiving subsidies
           from HUD and on proper CSSR coding to address the projected 201,000 tenants
           improperly reported to HUD.
       1C. Develop training to assist housing authorities in understanding and administering
           CSSR.
       1D. Apply penalties or sanctions established by the Act against housing authorities that
           house ineligible households.
We recommend that the Deputy Assistant Secretary for the Real Estate Assessment Center
       1E. Produce the monitoring reports again to assist field offices in monitoring CSSR
           eligibility updating them to include all CSSR-eligible tenants.
       1F. Fix the fatal error codes resulting from the housing authority submissions of Form
            HUD-50058 to allow accurate reporting of foster and disabled adults.




                                                8
Scope and Methodology
We performed our audit work between April and December 2014 at our office in St. Louis, MO.
Our audit period covered July 2012 through June 2014.
To accomplish our objective, we

      Reviewed relevant laws, regulations, and HUD guidance;
      Reviewed HUD monitoring reports and reviews;
      Interviewed HUD staff to gain an understanding of relevant monitoring controls;
      Selected and reviewed a statistical sample of households to determine their compliance,
       noncompliance, or exemption from CSSR; and
      Reviewed CSSR policies for the housing authorities included in our sample.
We relied in part on data maintained by HUD in its PIC system. Specifically, we relied on the
system to identify households occupying public housing units during our audit period. Although
we did not perform a detailed assessment of the reliability of the data, we determined that the
computer-processed data were sufficiently reliable for our purposes because we corroborated the
data with documentation provided by housing authorities in our sample.
Using data from PIC, we identified 547,711 households nationwide that had lived in public
housing for more than a year and had at least 1 tenant between 19 and 61 years of age as of June
30, 2014. These households were made up of 739,194 tenants within the age range that requires
compliance with CSSR.
We also relied on HUD’s Central Accounting and Program System (HUDCAPS), another
database maintained by HUD, to assess the impact on Federal dollars. Although we did not
perform a detailed assessment of the reliability of the data, we did review prior audits and
assessments from which we determined that the computer-processed data were sufficiently
reliable for our purposes. In HUDCAPS, we identified the amount of Federal dollars paid to
each housing authority between July 1, 2013, and June 30, 2014. We identified the number of
low-rent units at a housing authority by the greater of either the number of active low-rent units
listed in HUD’s housing authority reports as of August 31, 2014, or the total number of active
household records reported in HUDCAPS. With this information, we were able to compute the
amount of the Federal operating subsidy spent per unit per year by each housing authority.
The projected amount is a conservative estimate due not only to deducting a margin of error, but
also excluding several housing authorities with atypical data or unusual levels of expense. We
excluded 5 housing authorities containing 339 units because they had no units listed or HUD did
not fully fund them. We also did not include housing authorities with atypical funding streams
and administration. We omitted 142 housing authorities from the audit universe as outliers
because the Federal subsidy per unit from standard operating funds was unusually low at less
than $1,000 per year or unusually high at greater than $6,000. These limitations left a total of




                                                 9
2,903 housing authorities, of which 2,883 had households in our audit universe because they
contained tenants who had to comply with CSSR.
To accurately project both the number of households and number of tenants affected by CSSR,
we used a household as a base sampling unit. We stratified households into six groups according
to the amount of Federal subsidy and four subgroups according to the number of tenants who
may be required to perform community service based on their age. First, we ranked households
by subsidy amount and broke them up into six groups according to where their subsidy amount
fell within the percentile ranking of the universe. Because one housing authority owned 20.7
percent of the rental units and 27.6 percent of the dollars in this national universe, we needed to
assign it a separate cost grouping to control statistical variance and avoid unexpected
overestimates in the statistical projections. Within each cost grouping, we subdivided
households into four subgroups based on having one, two, three, or multiple (four or more)
tenants having to comply with CSSR. These two dimensions combine to create 24 total strata (6
× 4) shown in the sample design table in appendix C.
Using this stratification scheme, we tested the performance of several counts and sample designs
using replicated sampling. We selected a statistical sample of 80 households from these strata,
using the surveyselect procedure in SAS®. We then used these households for two separate types
of projections: (1) dollars going to noncompliant households and the number of households
affected and (2) total number of tenants who were incorrectly coded in PIC for CSSR.
We contacted the 56 housing authorities where the 80 households lived to obtain documentation
related to the tenants within the age range that requires compliance with CSSR. When
applicable, we asked for specific details about household circumstances and any enforcement
actions taken against the noncompliant households. We evaluated the compliance, exemption, or
noncompliance of all adult household tenants for the most recent annual recertification during
our audit period. We also requested each sampled housing authority’s CSSR policies and asked
whether HUD provided support or monitoring of the policy.
We projected the sample results of 23 units occupied by noncompliant tenants and 70 miscoded
tenants. For the first projection, we treated the sample of 80 households as a traditional,
stratified sample for projecting proportions and counts and for projecting the mean dollars spent
on households that should have contributed community service. For the second projection, we
took the 154 tenants within the age range that requires compliance with CSSR and treated this
larger group as a cluster sample, with each household being a separate cluster. Using these
clusters, we projected the total number of improperly classified tenants. Because the
stratification system groups households according to how many tenants are eligible, the differing
numbers of tenants had no bias. Also, because we reviewed all of the tenants within the age
range that requires compliance with CSSR, the variance within each cluster was zero, thereby
allowing for a tight margin of error in a cluster sample of this size.
We statistically estimated that HUD subsidized housing for 201,000 tenants whose CSSR status
was improperly reported and 106,000 units occupied by noncompliant tenants. As a result, HUD
paid more than $37 million in improper operating subsidy payments each month, or more than
$448 million annually. This estimate does not include offsetting costs for HUD to implement



                                                 10
our recommendations to strengthen monitoring controls because we were not able to reasonably
estimate these costs.
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.




                                                11
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 monitoring compliance with CSSR.
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 Deficiencies
Based on our review, we believe that the following items are significant deficiencies:

   HUD did not have written CSSR monitoring policies and procedures in place.
   HUD did not have adequate reporting systems in place to track CSSR compliance and
    identify problems.
   HUD did not have effective sanction enforcement procedures to ensure that housing
    authorities enforced CSSR.




                                                  12
Appendixes

Appendix A


                        Schedule of Funds to Be Put to Better Use
                          Recommendation Funds to be put
                              number          to better use 1/
                                  1A               448,580,654

                                Totals             448,580,654



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 instance, if HUD implements our recommendations, it will ensure that tenants who
     do not perform the required community service are not permitted to continue to reside in
     public housing. Housing authorities will no longer spend HUD’s operating subsidies for
     noncompliant households but will instead spend those funds to house compliant
     households. Our estimate reflects only the initial year of this benefit. These amounts do
     not include potential offsetting costs incurred by HUD to implement our
     recommendations to strengthen monitoring controls.




                                              13
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 1




                               14
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




Comment 2




Comment 3




                               15
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




                               16
Appendix B
             Auditee Comments and OIG’s Evaluation



Ref to OIG    Auditee Comments
Evaluation




                               17
                         OIG Evaluation of Auditee Comments


Comment 1   The two different numbers presented in the report represent two separate, but
            sometimes overlapping problems. The first problem is noncompliance, resulting
            in ineligibility to continue living in the unit. Units included in this count may or
            may not have been coded as noncompliant. The second problem is coding errors,
            which is an information issue for HUD and the housing authorities who cannot
            process tenants correctly if they make incorrect compliance determinations. Not
            all of the noncompliant households we found during our audit are also part of the
            improperly reported tenants. We added clarifying language in the audit report.
Comment 2   We used the local CSSR policies of the sampled public housing authorities when
            we reviewed for employment exemptions, so we did not overstate the degree of
            noncompliance by applying a more rigorous standard. There is a contradiction as
            to whether the CSSR Monitoring Report lists eligible tenants or eligible
            households. In the comments above HUD says “if we provide a report that
            includes any family with wages…” yet the CSSR Monitoring Report says
            “Residents in column G who do not have wages or welfare income listed in
            Section 7 of the Form HUD-50058.” It would not be appropriate to exclude an
            entire household due to wages as each adult must be evaluated for compliance
            individually. In addition, each adult should be evaluated for the 12 month period
            leading up to the reexamination date, whereas the wages listed on the form are
            prospective. Over 40 percent of the noncompliant units we reviewed would have
            been excluded from CSSR monitoring reports because the noncompliant tenants
            had wages or welfare listed on the 50058. These tenants were not exempt because
            some were not employed for enough hours to be exempt under the housing
            authority’s policy, some were currently employed but during the preceding year
            the tenant was not employed, and some received only food stamps which does not
            exempt a tenant from completing community service. Excluding all households
            with wages or welfare from the CSSR monitoring report is not going to be useful
            as it does not show a true picture of the noncompliance regarding CSSR.
Comment 3   We will work with HUD to reach a management decision as the current response
            does not state when it will fully implement each recommendation. We have
            renumbered our recommendations for the final report. The recommendations
            referred to as 1D, 1E, and 1F in the Auditee Comments have been renumbered to
            1E, 1F, and 1D, respectively, for the final report.




                                              18
Appendix C
                              Sample Design Table
                      Annual Federal     Sample      Population count Sampling
      Strata
                         subsidy        households Households Members weights

  0-10pct_1_CSSR      79,065,590.31         4       43,900    43,900    10975.00

  0-10pct_2_CSSR      20,908,042.88         2       11,494    22,988    5747.00

  0-10pct_3_CSSR       2,828,858.35         2        1,546     4,638     773.00

0-10pct_Multi_CSSR      723,935.85          2         399      1,673     199.50

 10-30pct_1_CSSR      222,244,938.52        9       83,752    83,752    9305.78

 10-30pct_2_CSSR      60,968,348.65         2       23,037    46,074    11518.50

 10-30pct_3_CSSR      10,574,911.15         2        3,963    11,889    1981.50

10-30pct_Multi_CSSR    2,790,300.93         2        1,038     4,396     519.00

 30-50pct_1_CSSR      306,665,304.56        10      89,671    89,671    8967.10

 30-50pct_2_CSSR      66,008,906.15         2       19,414    38,828    9707.00

 30-50pct_3_CSSR      10,773,565.23         2        3,164     9,492    1582.00

30-50pct_Multi_CSSR    2,413,844.46         2         703      2,940     351.50

 50-76pct_1_CSSR      424,478,158.07        12      100,996   100,996   8416.33

 50-76pct_2_CSSR      105,624,445.95        2       25,232    50,464    12616.00

 50-76pct_3_CSSR      22,122,541.57         2        5,281    15,843    2640.50

50-76pct_Multi_CSSR    5,542,912.70         2        1,322     5,550     661.00

 94-100pct_1_CSSR     82,764,461.16         2       15,597    15,597    7798.50

 94-100pct_2_CSSR     19,709,422.61         2        3,732     7,464    1866.00




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                           Annual Federal        Sample      Population count Sampling
        Strata
                              subsidy           households Households Members weights

 94-100pct_3_CSSR           3,952,175.77             2           752      2,256     376.00

        94-
                             960,419.72              2           182      768       91.00
 100pct_Multi_CSSR

  NYCHA_1_CSSR             316,711,059.80            7         64,480    64,480    9211.43

  NYCHA_2_CSSR             163,620,949.51            2         33,312    66,624    16656.00

  NYCHA_3_CSSR              54,171,933.60            2         11,029    33,087    5514.50

NYCHA_Multi_CSSR            18,247,233.05            2          3,715    15,824    1857.50

        Totals            2,003,872,260.57          80         547,711   739,194



Sample selection is explained in the Scope and Methodology section.




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Appendix D
                                            Criteria


HUD Notice PIH-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 an
      economic self-sufficiency program for 8 hours per month. The requirements 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. The public housing authority will determine whether to permit
      a deviation from the schedule.
      Housing authorities develop a local policy for administration of the CSSR for public
      housing residents within their Admissions and Continued Occupancy Policies (ACOP).
      Elements of the CSSR policy include, but are not limited to, the housing authority’s
      responsibility to administer the requirement, eligible and non-eligible activities,
      exemptions from the requirement, and compliance review standards.
      The ACOP presents how the housing authority determines if an individual is exempt
      from the CSSR and the documentation needed to support the exemption. 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. Housing authorities must describe in its policy the process to
      determine which tenants are exempt from the requirement, as well as the process for
      determining any changes to the exempt status of the tenant. Housing authorities provide
      the household a copy of the policy at initial application and secure certification of receipt.
      The housing authority makes the final determination whether to grant an exemption from
      the CSSR.
      At lease execution or reexamination, all adult members (18 or older) of a household must
      provide documentation that they qualify for an exemption if they claim to be exempt
      from the CSSR. Nonexempt members must present documentation of the community
      service and self-sufficiency activities performed over the previous year.



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If during reexamination a tenant is found to be noncompliant, then a written notice from
the housing authority to the tenant is provided. It states what the non-compliance with
CSSR is, states that lease renewal is contingent upon compliance or execution of a
written work-out agreement or that the noncompliant tenant must move out, that the
tenant may request a grievance hearing on the housing authorities determination, and that
the tenant may exercise any available judicial remedy. The tenant and the head of
household sign a work-out agreement with the housing authority to make up the deficient
hours over the next year or the lease will be terminated.
Section 6(j)(4)(A) of the United States 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 CSSR
requirement.




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